Low interest rates lead to Madrid boom

PUBLISHED : Wednesday, 27 October, 1999, 12:00am
UPDATED : Wednesday, 27 October, 1999, 12:00am

The residential market in Madrid has been extremely active during the past year, with oversupply now replaced by a shortage of homes, says a Knight Frank report.

The property consultant's recent Lifestyles Around the Globe surveyshows prices have risen by 3 to 4 per cent in second-hand housing and by 7 per cent in new developments over the past six months.

Record low interest rates were fuelling the boom, it said.

Investors seeking higher returns in the property market, as opposed to the unstable stock market, had influenced the trend.

'These conditions are forecast to continue for some time yet, although a slowing down in the levels of activity is anticipated, particularly in the second-hand market,' the report said.

International buyers formed about 15 per cent of the market with the split between family and singles/couples being 65 per cent to 35 per cent, it said.

The city had an open market for purchase with no restrictions. On new housing, value-added tax (VAT) was charged at 7 per cent and on second-hand property 6 per cent, it said.

In central Madrid, the prime residential locations were the Jeronimos and Salamanca districts, together with part of the Chamberi closest to Madrid's main avenue, Paseo de la Castellana.

Villas were mostly in suburban areas. The most luxurious apartments were in the city centre with easy access to shops, public transports and restaurants.

The most popular penthouse apartments were those with views over Madrid's central parks such as the Retiro and Parque de Oeste.

Knight Frank also said in the report that the Paris residential property market continued to be buoyant with prices increasing on strong demand.

This trend was expected to continue over the coming months with further increases of 5 to 10 per cent expected, it said. Popular locations included the 6th, 7th, 16th and 17th arrondissements.

According to the consultant, local buyers still form the lion's share of the market, with only about 10 per cent being international buyers.

The split between family and singles/couples purchases is 70 per cent to 30 per cent.