Latin Americans Fuel Luxury Rebound in Madrid

Madrid is seeing a surge of buyers from Latin America, marking the start of a recovery in the Spanish capital’s luxury home market. “Around 30% of those buying prime properties in Madrid are international buyers,” said Alberto Costillo, head of prime residential at Knight Frank, a global real estate consultancy. That number hovered around 10% during the peak of the housing market in 2007. Wealthy Latin Americans from Venezuela, Mexico, Colombia and Argentina are among the leading foreign buyers, added Costillo. The price of luxury properties in Madrid relative to other European capitals remains a significant factor in drawing buyers. According to Knight Frank’s 2015 Wealth Report, $1 million will get you roughly 215 square feet of residential property in London, 538 square feet in Paris and 730 square feet in Rome, but in Madrid you can acquire 1,430 square feet. Trade relations as well as historic and linguistic ties with Spain have long fueled interest from Latin American home buyers, but its location also serves as a point of entry to Europe. “Spain for some Latinos is like their motherland, but they also see it as a point of reference, as a gateway to Europe,” said Jordi Bernadó, CEO of Bernadó, a boutique luxury real estate firm based in Madrid. “Miami and Madrid are cities where every Latin American wants to have a home,” said Samuel Alvarado, a Honduras-born property consultant with Bernadó. The majority of foreign home buyers in Madrid seek out luxury homes in the upscale Salamanca district, along with Jerónimos and Almagro. Compared with other parts of Madrid where prices plummeted, high-end property values in central Madrid declined only about 15% during the height of the economic crisis, bolstered in part by the limited inventory of homes on the market, lack of space for new developments and the wealth of potential buyers. Latin America has seen a fairly steady growth of big fortunes in recent years, but political stability and safety are concerns in countries like Venezuela. Wealthy Latin Americans seeking a safe haven for their millions have increasingly turned to holding their wealth in luxury real estate abroad. They may also be looking for a home for children attending school in Spain. Raimundo Orta Poleo, national coordinator of the Association of Urban Real Estate Owners of Venezuela, says Venezuelans’ interest in Spain has grown following government measures that have discouraged property investment in their home market. Spain, on the other hand, offers attractive real estate prices and a shared language and culture. Knight Frank’s wealth report predicts that Venezuela’s ultra-high-net-worth-individual population will increase by 115% over the next 10 years, while the number of billionaires in Latin America (currently at 105) is expected to go up by 50% in the same period. The improved perception of the Spanish economy and the possibility of obtaining returns on investments have helped Madrid’s luxury housing post a 5% year-on-year increase in prices, according to Knight Frank’s calculations for 2014. The International Monetary Fund, meanwhile, improved its growth forecast for Spain for the seventh time in a row in April predicting that the economy would expand 2.5% in 2015. The new figures are welcome news in a country that was among the worst hit during the global economic crisis that began in 2008. The Spanish real estate bubble led Spain into a deep recession. Emboldened by property prices nearly doubling in the early 2000s, Spain started building 800,000 new homes in 2006 -– more than Germany, Italy, France and U.K. combined. The spree ended disastrously, leading to a glut of unsold villas and doomed developments across Spain, particularly along the Costa del Sol. Average home prices have posted an over 40% decline from the market’s peak in 2007. A recent PricewaterhouseCoopers report highlighting emerging trends in European real estate ranks Madrid at No. 3 for investment prospects in 2015. But the economic crisis has not been forgotten, says Costillo, “no one is suddenly losing their mind.” Andrea López Cruzado (@lopezcruzado) contributed to this article.