Engel & Völkers Madrid, Barcelona y Valencia - Market Report 2017

Market Report 2017 Madrid ¡ Barcelona ¡ Valencia

INDEX International review..................................................................... 04

Spanish economy

Macroeconomic situation.................................................... 08

Microeconomic situation ................................................... 10

Real Estate industry in Spain

Context ............................................................................... 12

Euribor development........................................................... 13

Price development............................................................... 14

Mortgages and sales............................................................ 16

Madrid

Director's Note.................................................................... 18

Madrid by area.................................................................... 19

New Development.............................................................. 27

Rental.................................................................................. 29

Barcelona

Director's Note.................................................................... 30

Barcelona by area............................................................... 31

Property Development........................................................ 36

Rental.................................................................................. 39

Commercial......................................................................... 40

Valencia

Director's Note.................................................................... 42

Valencia by area.................................................................. 43

Rental.................................................................................. 48

International review

and the presidential speech in the United States.

According to the Organisation for Economic Cooperation and Development (OECD), protectionist policies are damaging global trade, which is growing at rates of 1.7% per year when it can potentially reach 7%. This weakening effect will have a direct impact on employment levels since in most OECD countries, more than 25% of jobs depend on external demand.

In 2017, the world economy will gain traction although growth will continue to be moderate due to the result of slowdown in the globalisation process and world trade. The main international agencies are expecting a growth in the overall Gross Domestic Product (GDP) to 3.3% - 3.4%, compared to 3.1% in 2016. This is largely attributable to the emerging and developing markets, where less pressur is expected in countries that were in recession last year, such as Brazil, Nigeria and Russia. It is also necessary to take into account the growing weight of these markets, which will increase by an average of 4.5% in the world economy.

For advanced economies, the International Monetary Fund (IMF) forecasts a 1.9% growth, due to a stronger recovery in the United States and Canada and a rebound in Japan thanks to the recent fiscal stimulus. For the EU countries and the United Kingdom, a lower growth is estimated due to the macroeconomic repercussions of the uncertainty derived from the Brexit. In particular, growth in the United States is expected to accelerate to 2.3%, as the drag on energy price declines and the effect of the dollar appreciation dissipates. This will also help job creation, continuous improvement in the housing market and the notable increase in consumer spending.

In the United Kingdom, Brexit will affect growth, which will decline from 2% in 2016 to 1.5% this year, due to

4 | International review

the impact on investment and contracting decisions of companies as well as goods and property purchases by consumers. In the euro zone, low oil prices, modest fiscal expansion in 2016 and accommodative monetary policy will support growth, which will be around 1.6% - According to the European Central Bank (ECB) this could reach 1.7% - although uncertainty over Brexit will be a burden for economic activity.

If China's economy does not receive stimulus, its growth will decline from 6.6% in 2016 to 6.5% in 2017. In the case of Latin America, with heterogeneous growth, it is expected to reach 1.2%, although persistent vulnerabilities such as the high level of corporate debt, declining profitability, weak bank balance sheets, Mexico's situation and Donald Trump's policies exist.

Broadly speaking, there are upcoming risks related to political tensions, protectionist and isolationist policies as well as stagnation in advanced economies, which could suffer a prolonged lack of private demand and a low level of persistent inflation. Risks such as the latest financial turmoil and the retreat of capital flows from emerging economies may now seem less relevant, but they will continue nevertheless. Special mention should be made about the wave of protectionism that has been revealed by events such as the UK's exit from the European Union

In a context marked by uncertainties, international organisations are calling on countries to adopt fiscal and economic policies aimed at increasing productivity and growth. Nonetheless, there are positive factors such as sustained improvements in the US job market and rising commodity prices, which should alleviate some of the pressure on raw material exporters.

Growth of trade and GDP worldwide 10 %

8%

6%

4%

2%

0%

-2 % 1990 World trade (avg. 5 years)

1995

2000 World GDP

2005

2010

2015

Average world trade 1978-2007

Source: OECDE

International review | 5

Rising inflation

Foreign exchange

The rise in oil and raw material prices will generally cause inflation to increase in most countries in 2017.

This is a trend that has already started in the last few months of 2016. The forecasts point to a global inflation of 4.1% compared to 3.5% last year as a result of the increase in energy products. The absence of inflationary pressures and weak economic growth had led central banks to opt for over-reduced interest rate monetary policies and extreme liquidity measures. Although no major changes are anticipated during 2017, the new inflation scenario has already led central banks to revise their policies with increasing asymmetry between the United States and Europe. The Federal Reserve raised interest rates last December for the second time during the economic crisis and does not rule out at least three more increases this year, but this will depend on growth impact and the inflation measures adopted by Donald Trump. For its part, the ECB will cut asset purchases from next April, from the current 80 billion euros to 60 billion. However, it will extend the monetary stimulus programme until the end of the year. At the moment, interest rates in the euro area will remain at an historical low, at 0%. In the United Kingdom, at a time when inflation has reached two-year highs, the uncertainty stemming from Brexit and the plunge in pound currency oblige the Bank of England to keep up the expectations and to leave rates at the current 0.25%.

In the United Kingdom, inflation has started to rise due to the weakness in pound currency, making imports more expensive after Brexit. In 2017, the depreciation of the pound currency will continue, although in a smaller measure than last year, reaching 0.88-0.89 pound / euro.

The dollar, for its part, will continue to strengthen and could reach parity against the euro in the first half of the year in the face of growth expectations, inflation and higher interest rates in the United States. As the year progresses, the dollar should weaken and settle at around 1.08 once an increase in the government deficit for fiscal stimulus is agreed by Trump.

The current rise in prices is not the same in every country, unlike the boom at the beginning of the 21st century. In some countries, property appreciation occurs in some cities while this is not the case for others.

The improvement in the sector has not been driven by strong credit growth but, in many cases, by the scarcity of supply.

Countries are taking a more active role in the use of prudential policies aiming to avoid the formation of new real estate bubble.

World housing price index

Real estate 170

Oil price and inflation

150 140 130 120 110

1 1

1

6 1 0 2

2

0

1

2

T

1 2

0

0

8

T

1 T 4 0 0 2

0

0

T

1

100

0

However, prices in some developed economies have led organisations such as OECD and ECB to warn about the risk of further market overheat. Yet, as the IMF explains, there are several reasons that differentiate the current situation from that of a decade ago.

160

2

The recovery of the real estate sector after price collapses continues its course throughout the world.

According to the IMF's global housing price index – the average property prices in 57 countries - the real estate prices have almost returned to pre-crisis levels and expectations point to higher price appreciation in the coming months.

Source: IMF

10 %

60 $

9% 40 $

8% 7%

20 $

5% 0$

4% 3%

-20 $

2%

Oil price

Inflation

6%

1% -40 $

0% -1 %

-60 $

-2 % 1990

1995

Variation of oil prices

2000

2005

2010

2016

Inflation

Source: IMF

6 | International review

International review | 7

Spanish economy Macroeconomic situation The Spanish economy is immersed in a stable recovery, although in 2017 the pace of growth will slow to 2.4% -2.5% from 3.2% last year. The pillars of recovery are maintained: companies are in better financial and competitive conditions, allowing them to take advantage of investment and export opportunities; Families have a growing capacity to spend money and buy property thanks to their stable income and debt consolidation in the last 6 years. What’s more, the banking sector is able to fuel its growth by granting new loans.

This factor will have a negative impact on domestic demand, especially on private consumption, although public consumption and investment in capital goods will also grow less than they did in 2016. Export growth will also be lower, although it will still exceed the 3% which

6%

Domestic demand

4%

Foreign demand

2% 0% -2% -4% -6% -8%

6 0 1 2

5 0 1 2

4 0 1 2

3 0 1 2

2 0 1 2

1 0 1 2

0 0 1 2

9 0 0 2

8 0 0 2

0 0

7

-10 %

2

Nevertheless, there are both external and internal factors that explain the less expected dynamism: The external environment is more uncertain and there are risks to exports depending on the commercial policy decisions that the Donald Trump administration adopts; Oil is expected to continue rising which will lead to a rebound in inflation and a reduction in consumers' purchasing power; Monetary policy will tend to normalise from mid-2017.

But for the time being, the fall in loan interest rates is limited by the 0% rate barrier; Geopolitical uncertainty; and a moderately restrictive budget policy in Spain aims to meet public deficit targets.

Domestic and foreign demand (contribution to GDP growth)

Source: SSO

will allow the contribution of the foreign sector growth to remain positive and facilitate a better balance in the Spanish economy. Inflation will touch 2%, although it will exceed that level in the first half of the year due to higher oil prices and the depreciation of the euro against the dollar. The weak points in Spain will continue to be employment and public debt. Expectations of economic slowdown will affect the job market with a job creation of 2% -2.5%, which is lower than in 2016. The unemployment rate would be at 18.1% by the end of this year. Finally, the public debt will remain at 100% levels and the deficit may again exceed the target agreed with Brussels.

Consumer price index in Spain 2,0 % 1,5 %

Mounthly change

1,0 %

Annual change

0,5 % 0% -0,5 % -1,0 %

Evolution GDP in Spain -1,5 % 4,0 %

-2,0 %

3,5 %

12/15 Quarterly change

3,0 % 2,5 %

1,5 %

1,0

1,0 %

0,4 0,3

0,5 % 0%

08/16

12/16 Source: SSO

Annual change

2,0 %

-0,5 %

04/16

0,4

0,6

0,7

0,8

0,9

0,8

0,8

0,8

0,7

-0,1

-1,0 % -1,5 % -2,0 % Q 3/13

Q 3/14

Q 3/15

Q 3/16 Source: SSO

8|

Spanish economy

Spanish economy

|9

Microeconomic situation Households Job creation, lower taxation pressure, low inflation, an increase in family assets and net wealth driven mainly by property price appreciation, and interest rates at historical lows all favoured consumption in 2016.

The outlook for 2017 remains positive, although household consumption will slow down because of some of the previously mentioned factors such as real estate capital and wealth in real terms, as well as the increase in energy products and the impact that the new adjustment measures have on containing the deficit. In this context, forecasts point to a 2% increase in household consumption this year, compared to 3% in 2016.

Unemployment rate 28 % 26 % 24 % 22 % 20 % 18 % 16 % 14 %

The greater consumption explains the persistent savings rate decrease. According to the latest data available from the National Institute of Statistics (INE) at the end of this report, the savings rate of households and non-profit institutions stood at 1.8% disposable income in the third quarter of 2016, which was one point below that during the same period in 2015 (2.8%).

In the last four quarters, the rate stood at 8.2% of disposable income. At the same time, the level of household debt continues. In 2016, household debt fell by 12,459 million euros to 713,005 million, of which more than 70% corresponded to mortgages. Household debt remains the same as 2006 levels and well below the 912.9 billion recorded in 2008.

12 % 10 % 8% 6% 4% 2% 0% 2013

Spain

2014

France

2015

Germany

2016

Holland

Italy

Source: Banc of Spain

households for house purchases as a result of increased remortgages and changes to the fiscal and regulatory market. Its effects would have been offset in part by the general fall in interest rates and better prospects for the housing market. The central bank also noted a relaxation of criteria for loan approvals to households for house purchases and other purposes. In the euro zone, however, the request for mortgages by families to buy property continued to grow. This was primarily driven by lower rates, improved expectations in the real estate market and the recovery of consumer confidence.

Survey about bank lendings. Variation in demand

Household saving rate and ISFLSH (mobile year)

Credit to households for property aquisition 40 %

20 % Percentage on available income

Credit The deleveraging effort by households and companies goes hand in hand with the recovery of financial saving flows thanks to the macroeconomic situation and financial conditions. Although the debt repayment weighs on the economy even more than new loans, borrowing by households, SMEs and large companies has grown in recent years, however, this is still far from the 2010 figures. This was the case in 2016, but it began to a gradual slow down. According to the latest survey on bank loans from Bank of Spain (October 2016), in the third quarter of the year there was a slight slowdown of demand from

18 %

20 %

16 % 0%

13,4

14 %

11,9

12 %

9,6

10 %

7,9

9,3

8%

- 20 %

9,4

8,5

9,8 8,6

8,2

7,9

- 40 %

6%

5,8

4%

- 60 %

2%

2011

2010

2013

2014

2015

2016

6 0 1

5

Spain Source: SSO

10 | Spanish economy

Prevision Spain

EUM

Prevision EUM

2

0 1 2

4 0 1 2

3 0 1 2

2 0 1 2

1

0

0 1 2

9

0 1 2

8

0 0 2

7

0 0 2

6

0 0 2

5

0 0 2

0 0 2

4 0 0 2

3 0 0 2

2 0 0 2

1 0 0 2

2

0 0

0

0%

Source: Banc of Spain

Spanish economy | 11

Real estate industry in Spain Context The improvement of the economy, favourable loan conditions, normalisation of prices and investment demand in a low interest rate environment have set a positive scenario in the last two years for the real estate sector. In 2017 it will consolidate its recovery and maintain the upward trend, although the forecasts for a slowdown in the growth of the economy are confirmed, due to other factors.

In particular, the favourable financial conditions will encourage the implementation of residential projects, and the positive outlook in prices eliminates uncertainty about the market. The market will continue to rely on the strength of residential property demand. The investment

in construction in residential areas continues to show dynamism as proven by new build permits and the increase in the sale of homes, especially re-sale homes.

Having said that, the bulk of transactions are still unclear so in 2017, there will also be a rebound in new build constructions. Similarly, the rental and property renovations will also be on the up. If until now the normalisation of the real estate sector had occurred in a geographically unequal way, one of the characteristics of the expected development for this year is the increase in the number of purchases and price increases in most cities.

Refurbishment and restauration building permits NÂş of buildings. Total national 45.000 40.000 35.000 30.000 25.000 20.000 15.000 10.000

New building permits (residential use)

5.000

700.000

For housing

6 1 0 2

5 1 0 2

4 1 0 2

3 1 0 2

2 1 0 2

1 1 0 2

0 2

0

1

9 2

0

0

8 2

0

0

7 0 0 2

2

0

0

5 0 0 2

500.000

6

0 600.000

Other uses

400.000 300.000

Euribor development

200.000 100.000

* 6

5

2

2

0

0

1

1

4 2

0

1

3 2

0

1

2 2

0

1

1 2

0

1

0 2

0

1

9 2

0

0

8 0 0 2

2

0

0

7

0

*Data until October. Ministry of Development

New building, extension and/or refurbishment permits Number of households in major cities 30.000

One of the factors that most influences the positive development of the real estate market is the favourable financing conditions, closely linked to the monetary policy. With interest rates at a low record, the 12-month Euribor, the most used indicator to calculate mortgages in Spain, closed 2016 at -0.08%, a new historical low and a far cry from the 5.5% maximum registered In September 2008. The fall in the index, which in February 2016 closed in negative figures for the first time in its history, has allowed for cheaper mortgages.

For a mortgage of 100,000 euros at 20 years repayment period with a rate of 1% in December, the saving was 6.2 euros per month, 74.4 euros per year.

The forecasts suggest that there will be no substantial changes in ECB ‘s monetary policy so the Euribor is expected to remain at around current levels this year.

Nevertheless, it will be necessary to wait and see whether the Euribor will be changed in 2017 and how it affects the new methodology for its calculation.

Euribor 12 months loans

25.000

6%

20.000 5% 15.000 4% 10.000 3%

5.000

2% * 6 1 2 0

5 1 2 0

4 1 2 0

3 1 2 0

2

0

1

6

4 1

2 1

2 0

2 0

8

1 0 0 2

0 0 2

6 0 2 0

4 0

0

0 2

0 0

12 | Real estate industry in Spain

2

*Data until october. Source: Ministry of Development

2

0%

Valencia

2 0

2 1 2 0

1 1 2 0

0 1 2 0

9 0 2 0

8 0

7 0

2 0

Barcelona

1%

0

Madrid

2 0

6 0 2 0

2 0

0

5

0

Real estate industry in Spain | 13

Price development Looking at the actual sales rather than valuations, based on the Instituto Nacional de Estadística (INE) the annual price increase on the Índice de Precios de Vivienda (IPV) during the third quarter of 2016 stood at 4%. By typologies, the annual rate of new build property prices stood at 7.3%, compared to 3.5% re-sale homes. Madrid, Catalonia and the Balearic Islands have repeatedly experienced the highest price increases.

In 2017, forecasts point to price increases of between 3% and 5%. A rising trend will be sustained by job creation, rising salaries and greater access to low interest loans.

The normalisation of the sector will once again stimulate investments in the face of renewed interest in new build properties, and the recovery, centred so far in large cities such as Madrid and Barcelona, will extend to other points in the Spanish geography.

Evolution sqm of private housing in Spain 2.500

2.000

on average. The patterns in prices were uneven from the geographical point of view, with decreases still observed in some areas. Catalonia, Madrid and the Balearic Islands - where Engel & Völkers has a greater presence in – led to these increases, with price appreciation of over 4%, according to the Ministerio de Fomento. On the flip side was La Rioja, down by 5.1%, followed by Cantabria, País Vasco, Aragón and Castilla León, with declines above 1%. Large populations, mainly in the provincial capitals continue to act as the engine of recovery for prices.

1.500

1.000

500

6 1 2 0

5 1 2 0

4 2 0

1

3 2 0

1

2 1 2 0

1 2 0

1

0 2 0

1

9 0 2 0

8 2 0

0

7 0 2 0

2 0

0

5 0

6

0

The 10 municipalities with more than 25,000 inhabitants that recorded the highest prices per square metre are:

2 0

The development of prices during last year has confirmed the real estate market’s recovery, which began in 2015. The development of prices does not reflect the increase in volume. According to data from the Ministry of Development (Ministerio de Fomento) for the third quarter of the year, which is available at the end of this report and is based on appraisals, the trend towards stability resulted in an increase in the average property prices in 2016, from 1.6%, to 1,499.7 euros per square metre. This is the highest level in four years. The Valuation Company, (La Sociedad de Tasación) for its part, estimates that properties - new and resale - increased 1.1%, to 1,447 euros per square metre. In particular, the revival of apartment sales has led to an increase in new housing prices of 3.3%, to 2,120 euros per square metre

Data in Euro at year-end closing (except third quarter 2016). Source: Ministry of Development

Annual evolution of housing prices

2.548,8

Majadahonda

2.530,5

Calvià

2.369,8

14 | Real estate industry in Spain

3,2

3,5

4,0

Residential Properties

1,5

M R T 3

R T 2

R M T

M

1,1

0%

1

Closing data of third quarter of 2016. Source: Ministry of Development

4,5

3,8

4,0

M

Santa Eulalia del Río

4%

3,9

R

2.565,5

4,0

T

Madrid

4,2

3

2.574,7

4,0

6,1

4,5 4,5

M

Pozuelo de Alarcón

4,9

General Index New Building

6,4

R

2.607,5

6,3

T

Sant Cugat del Vallès

5,8

2

2.658,4

M

Getxo

7,3

R

2.662,5

8,4 8%

T

Ibiza

2016

1

2.714,4

2015

M

Barcelona

General Index, new Building and residential Properties

R

3.242,2

T

San Sebastián

4

The most expensive municipalities of Spain (€/sqm)

Source: SSO

Real estate industry in Spain | 15

Mortgages and sales The dynamism of the real estate sector is also reflected in the increase of mortgages and purchases due to strong demand. With respect to mortgage approvals, more than 260,500 applications were signed in 2016 ( this is the latest data available from the INE until November), which in the absence of December figures allows to believe that it could be the highest since 2011, although still far from the 1.3 million mortgage approvals signed in 2006. The average amount at the end of 2016 was 109,785 euros, with an annual increase of 1.8%. In the mortgage market, the strong increase in fixed rate mortgages in recent months, unlike variable rates, is worth highlighting, given the prospects for upcoming interest rate hikes. According to the INE, 68.2% of mortgages signed in November were a variable interest rate and 31.8% were fixed rate interest. These figures have more than tripled since 2015 which stood at 9.7%.

Number of registred housesales by buyer’s nationalty. Quarterly 3rd Q 2016

Type of mortages

2016 *

Nationalities

32 %

68 %

Catalonia, AragĂłn, PaĂ­s Vasco and Madrid, with an annual increase of 20.5%, 18.7%, 18.5%, 12.4%, 12.3 % and 11.1%, respectively.

At variable rate

Out of the total sales and purchases, the majority of transactions relate to resale homes. 18.7% of the homes purchased or sold in 2016 were new and 81.3% were resale. The number of completions on new homes declined by 1.7% while resale homes increased by 17.8% compared to 2015. A key factor that contributed to this demand relates to purchases by foreigners. These represent 13.3% of the total number of purchases, which are close to record highs. According to the College of Registrars (Colegio de Registradores), the British still take the lead at 17.7% of purchases made by foreigners (19.7% in the second quarter, for the third consecutive year). They are followed by the French with 8.9%, German with 7.3%, Swedish with 7.1%, Belgian with 6.2% and Italian clients with 5.4%.

2015 10 % *Data of November 2016

In terms of completions, 403,866 homes were sold last year, 13.6% more than in 2015 and a level not seen since 2010. For this year, the forecasts indicate that we could approach or even exceed half a million homes sold. This is something that has not happened since 2008, when 552,080 were sold (INE). According to the Ministerio de Fomento, in the 12 months between the third quarter of 2015 and the same period in 2016, property completions that were carried out before a notary amounted to 444,276. This was an increase of 11.5% compared to the previous twelve months. All the regions registered a positive trend, including the Balearic Islands, Asturias,

At fixed rate

90 %

At variable rate

At fixed rate

Approved mortgages on housing in Spain

%without

%

foreigners

United Kingdom

2,35

17,66

France

1,19

8,91

Germany

0,97

7,32

Sweden

0,95

7,14

Belgium

0,83

6,20

Italy

0,72

5,44

Rumania

0,62

4,63

China

0,57

4,26

Marocco

0,41

3,11

Russia

0,36

2,74

Holland

0,31

2,35

Norway

0,29

2,15

Ukraine

0,24

1,80

Ireland

0,18

1,32

Poland

0,17

1,28

Algeria

0,17

1,28

Denmark

0,15

1,13

Switzerland

0,15

1,12

Bulgaria

0,14

1,02

Rest

2,55

19,13

Foreigners

13,31

100,00

Spanish Total

86,69 100,00

Source: SSO

Source: College of Registrars

Number of registred houses

140.000

120.000

90.000 80.000

100.000

70.000 60.000

80.000

50.000 60.000

40.000 30.000

40.000

20.000 20.000

10.000

Second hand

6 0 1 2

5 0 1 2

4 0 1 2

3 0 1 2

2 0 1 2

1 0 1 2

0 0 1 2

0 0 2

2

0 0

8

7 0

16 | Real estate industry in Spain

2 0

* 6 0 1 2

1 5 0 2

1 4 0 2

1 3 0 2

1 2 0 2

1 1 0 2

1 0 0 2

0 9 0 2

0 8 0 2

0 7 0 2

0 6 0 2

0 5 0 2

0 4 0 2

*Until November. Source: SSO

Total

9

0 0

New building Source: SSO

Real estate industry in Spain | 17

Madrid Director's Note

Madrid by area forecasts of increases between 4% -5%. The confidence indexes have reopened the gap in the growth of areas with different income per capita. The interesting thing was that if in 2015, the most premium districts were the main players, in 2016 the highest increases have occurred in the middle-class districts. This is a very positive sign that indicates a sustainable recovery. Neighbourhoods like Universidad, Delicias, Lista and Ciudad Jardín have had double-digit price rises. The profile of the buyer has also changed compared to 2015. With the arrival of political stabilisation, households who have reduced their debt in the last six years and rely more on the job market have now started to buy. Homes around 500,000 euros with 3-4 rooms have been the most in demand as small investors are purchasing these types of properties in order to rent out.

Paloma Pérez Bravo

General Direcor of Engel & Völkers MMC Madrid

2016 has had its fair share of ups and downs. Although we started with very positive signals such as job creation, lower fiscal pressure, low inflation and historically low interest rates, during the year the real estate sector's expectations slowed down in the face of prolonged political uncertainty in Spain due to a wave of international protectionism and deficit. Nevertheless, prices have followed the upward trend before ending with an increase of 3.6%, one point below the initial

The forecasts for 2017 are favourable. The reduction in property supply will cause further price increases in the capital by around 4% in sales and 7% in the rental segment. The return of the new build properties, which already started in 2016 will consolidate throughout this year with major offers in the sought-after areas of Madrid.

It will be important to observe how international protectionist policies as well as inflation and deficit will evolve during 2017. All these factors may lead to a slowdown in growth by the middle of the year. In any case, we predict a very favourable 2017 for the real estate sector in Madrid and, especially for Engel & Völkers as we are expecting a growth of around 40%.

Working areas in Metropolitan Market Centre (MMC) Madrid

San Sebastian de los Reyes

Norte-Barajas

Las Rozas Moncloa-Aravaca Pozuelo

Tetuán Chamartín Chamberí Centro

Boadilla del Monte

Ciudad SalamancaLineal Retiro

Arganzuela

Villaviciosa de Odón

Arganzuela Formed by the following districts: Imperial, Acacias, Chopera, Legazpi, Delicias, Palos de Moguer and Atocha, Arganzuela has begun to compete with Centro for the same buyer profile. With a clear predominance of a national client who knows the area well and appreciates the proximity to places such as Madrid Río, Matadero or Atocha station, during last year there has been a less familiar and younger buyer profile looking for a well-located residence.

Pozuelo de Alarcón. The company will move this year to their new offices of 12,000 square metres.

The interest aroused by this district, especially among professionals from the world of communication and arts, has pushed prices up in the district to an average growth of 10% in 2016. Delicias, with a price increase of 15% at 7,700 euros / sqm, is known as the most expensive neighbourhood followed very closely by Imperial, Legazpi and Acacias, which have reached in excess of 5,000 euros / sqm in 2016.

All these neighbourhoods have set the trend as the top multinational location in the capital.

The most popular type of property in this district is an apartment with more than two bedrooms, distributed in about 100 square metres, and within an urbanisation that offers communal grounds including garden, swimming pool, garage, gym as well as private security.

The district chosen by Google and Amazon When Google chose an old factory in Imperial to host Campus Madrid, the fourth headquarters of the Internet giant, after installing one in London, Seoul and Tel Aviv, Amazon has also decided to choose Mendez Álvaro as the perfect place to relocate its Spanish headquarters from

18 | Madrid

Hortaleza

Events as fashionable as the Mercado de Motores, the projection of new shopping malls in the district and, in general, the possibility of living in an area surrounded by greenery within the centre of Madrid all contribute to an unstoppable growth for Arganzuela in the coming months.

Prices per sqm in Arganzuela (€)

Acacias Chopera Delicias Imperial Legazpi Palos de Moguer

Min. 1.999 1.284 1.040 1.342 2.181 1.155

Max. 5.610 5.000 7.722 7.415 6.017 4.929

Avg.* 3.193 2.649 3.025 2.920 3.395 2.976

* Corresponds to avg. price of properties offered in the area

Madrid | 19

Centro pite of the difficulty in finding renovated fincas in the most central areas.

Buyer profile The historical centre is the preferred area to live in by young professionals from the world of arts and communication.

The profile consists of young professionals looking for two-bedroom and two-bath properties or international investors who choose a 'pied a terre' as an investment and as a place to stay in for short visits to the city.

“Justicia remains as the most expensive district with prices that exceed € 8,000 / sqm”

boom experienced throughout 2016 by Costillares, where prices have reached a maximum of 5,000 euros / sqm.

In this district, there are historic areas characterised by small 2-3 bedroom flats and four-bedroom apartments in newly built buildings and complete facilities.

This causes the house price hike in Ciudad Lineal, even in busy streets. A good example of this is the neighbourhood of San Juan Bautista, where you can find apartments with prices at 2,000 euros / sqm and 3-4 bedroom houses, pool, garage and garden areas at 6,000 euros / sqm. Less common are the chalets, which can be found in Atalaya and Colina.

Prices per sqm in Ciudad Lineal (€)

Costillares Colina Atalaya San Juan Bautista San Pascual Concepción Quintana Ventas Pueblo Nuevo Rosas

Min. 1.500 2.000 2.600 2.000 1.900 900 1.300 1.100 900 1.700

Max. 5.000 5.000 4.300 6.000 5.700 4.900 4.300 4.000 4.000 4.200

Avg.* 3.570 3.400 3.400 3.964 3.128 2.700 2.400 2.050 2.050 2750

* Corresponds to avg. price of properties offered in the area

Formed by the neighbourhoods: Palacio, Embajadores, Cortes, Justicia, Universidad and Sol, Centro is the district that's home to the most important monuments in the capital. The architectural gems in Madrid de los Austrias such as Palacio Real, la Plaza Mayor, la Almudena Cathedral and Colegiata de San Isidro join the other tourist, cultural and leisure epicentres of the capital such as Puerta del Sol and la Gran Vía. The privileged location is the main attraction for both national and international investors who buy properties in the historic centre for medium and long-term profitability.

In 2016, the average price per square metre in Centro rose by 5.9% at 3,779 euros. This was an increase that exceeded Universidad (+ 10.9%), Justicia (+7.7%) and Embajadores(+ 7.3%). The prospects for 2017 are of an increase in property sales by around 6% with a slight increase in prices. A moderate but constant growth des-

Although the strong and growing demand re-positions Justicia as the most expensive area in Centro with prices that reach 8,332 euros / sqm, the lack of supply, especially in Salesas, encourages investors to look to other areas. For this reason, the most accessible neighbourhood in the area - Embajadores - has become the top district in 2016 with property sales growing by 150%. This is an area that has experienced greater profitability.

Prices per sqm Centro (€)

Justicia Universidad Sol Cortes Palacio Lavapiés-Embajadores

Min. 3.743 2.609 2.401 3.241 2.778 2.397

Max. 8.332 4.980 4.846 5.635 6.113 4.649

Avg.* 5.180 4.223 4.100 3.777 4.032 3.442

* Corresponds to avg. price of properties offered in the area

Ciudad Lineal Nine very different neighbourhoods make up the Ciudad Lineal district: Ventas, Pueblo Nuevo, Quintana, Concepción, San Pascual, Atalaya, Costillares, Colina and San Juan Bautista. In the first and last on the list are the cheapest prices while being the most prestigious communities.

Although all the neighbourhoods are well-positioned and maintain a stable demand by middle-class Spanish families with 2-3 children, it is remarkable to see the

20 | Madrid

Chamartín Located north of the capital, Madrid's most expensive district combines the prestige of the most coveted residential areas of the city centre with the financial axis of Paseo de la Castellana that leads to Cuatro Torres Business Area.

Composed of El Viso, Nueva España, Hispanoamérica, Castilla, Prosperidad and Ciudad Jardín, Chamartín is one of the main economic centres of the city as well as boasting a high offer of services and public transportation. The presence of educational institutions and prestigious health centres, ample green and leisure areas, high quality catering establishments and excellent connection to the airport and Chamartín station, make it one of the prime areas of Madrid for investors.

80% are national buyers In Chamartín, the national customer prevails over the international one since they make up 80% of purchases. Families with two or three children who have high purchasing power and value the excellent services of the area are a smaller, but very select group of foreign clients. The prestige of the area and the proximity to a large number of embassies and multinational communities are the most valued by foreigners who invest in the district to reside in or buy to let. In this sense, it is possible to emphasise the increasing interest in new built houses and restored fincas.

The houses in the most emblematic area of El Viso district are larger than in other areas of the capital. Single-family properties of more than 300 sqm or exclusive penthouses between 200 sqm and 300 sqm make up the most premium

offer that reaches prices of up to 15,000 euros / sqm. The average price in this prestigious neighbourhood has risen in 2016 to 6,000 euros / sqm, which is an increase of 7% compared to 2015.

“In El Viso, there are properties between one and 10 million euros” In Hispanoamérica and Nueva España, which together with El Viso are the highest standing districts, customers are attracted towards 200-300 sqm apartments within a wide range of prices from 2,500 euros / sqm to 8,500 euros / sqm.

Prosperidad, where the search focuses on three-bedroom apartments between 100 sqm and 150 sqm, has registered the highest price increase in 2016 next to the popular neighbourhood of Ciudad Jardín. With increases of 10%, average prices have reached 3,500 euros / sqm and 3,900 euros / sqm, respectively.

Prices per sqm in Chamartín (€)

El Viso Nueva España Hispanoamérica Castilla Prosperidad Ciudad Jardín

Min. 2.800 2.500 2.200 1.700 1.900 1.500

Max. 15.000 8.500 8.500 7.400 5.300 7.000

Avg.* 6.000 4.900 4.400 3.600 3.500 3.900

* Corresponds to avg. price of properties offered in the area

Madrid | 21

Chamberí looking for unrenovated homes between 250 sqm and 750 sqm so they can customise them according to their needs. In the rest of Chamberí neighbourhoods, the resale residential typology consists of apartments between two and four bedrooms with an average price of around 4,000 euros / sqm, except in Trafalgar, where the increase in demand has caused price rises by up to € 4,500/sqm.

The most beautiful part of Madrid is formed by Trafalgar, Arapiles, Gaztambide, Vallehermoso, Ríos Rosas and Almagro. The district is home to the largest number of palaces in the capital. These are unique buildings that used to be the residence of the aristocracy during the nineteenth and twentieth centuries, and which today offer fincas that can easily be converted into homes.

The profile of the buyer for this type of property is very varied and ranges from national middle-upper-class families who are interested in moving to foreign citizens who are looking for a home for a job transfer or to make a good investment. The renowned ICADE (Universidad Pontificia de Comillas), as well as the proximity to the prestigious CUNEF and Ciudad Universitaria, is an attraction for investors who buy homes to renovate before renting them to students.

A different audience for every neighbourhood The Golden Triangle consists of Almagro, Génova and Castellana streets and houses some of the most elegant buildings in Madrid. The embassies and art galleries are located in Almagro, the most popular and expensive district. With prices reaching 12,800 euros / sqm, customers who are interested in this prime area are

New built homes have also experienced price rises. A small newly built apartment complex in the area, with good finishes and between 75 sqm and 105 sqm goes on the market in a range between 400,000 and 695,000 euros.

Almagro Arapiles Gaztambide Ríos Rosas Trafalgar Vallehermoso

Min. 2.950 2.100 2.000 2.400 2.600 2.500

Apostol Santiago Pinar del Rey Canillas Piovera / Conde Orgaz Palomas

Min. 1.200 1.200 1.200 1.800 1.600

Max. 5.000 4.900 5.400 10.500 7.200

Avg.* 2.700 2.400 2.800 4.000 3.200

* Corresponds to avg. price of properties offered in the area

Moncloa - Aravaca

Max. 12.800 4.000 9.000 9.250 8.300 8.700

Avg.* 5.600 4.100 3.800 4.200 4.500 4.000

Argüelles and Aravaca are considered as the most premium areas of the district with prices that exceed 7,500 euros / sqm, followed closely by El Plantío-La Florida and Valdemarín, which are sought-after locations offering many leisure services. The buyers' profile in these areas are medium-high-income families that can comfortably afford single-family homes between 200400 square metres with a minimum of four bedrooms, swimming pool and garden in estates that offer a high level of security.

* Corresponds to avg. price of properties offered in the area

Hortaleza One of the districts with the highest contrast is Hortaleza. Not only for the wide range of housing typology and prices but also for the buyer profile.

Divided into six districts: Apóstol Santiago, Pinar del Rey, Canillas, Palomas, Valdefuentes and Piovera, the last one includes the prestigious Conde Orgaz Park composed of both national and international families with high purchasing power, mainly French, who choose this area for its proximity to the French Lyceum (Liceo Francés).

In Conde Orgaz, there are the most exclusive single-

22 | Madrid

Prices per sqm in Hortaleza (€)

Out of the seven neighbourhoods in Moncloa, Engel & Völkers focuses its operations on five of them: Argüelles, Ciudad Universitaria, Valdemarín, El Plantío and Aravaca where international clients value their location and high level of services. The 3-4 bedroom apartments are distributed in about 180 sqm and renovation properties are the most popular in Argüelles. The buyer profile consists of 80% national customer seeking a family residence, while the remaining 20% are clients from Venezuela, the United States, Luxembourg, France, Germany and even China. They have two reasons to buy: make an investment in a property to rent out or to keep as a second home.

Prices per sqm in Chamberí (€)

euros.

family homes that can reach prices of up to 10,500 euros / sqm. But there are also semi-detached and terraced houses that cost less even though they are close to this park at 4,000 euros / sqm. These are contrasting prices with just over 2,500 euros / sqm compared to the rest of the district. Buyers from other neighbourhoods are Spanish middle-class families looking to buy simple but modern 2-3-bedroom homes in Apóstol Santiago, Pinar del Rey and Canillas with basic amenities such as a pool, landscaped areas and garages.

Prices per sqm in Moncloa-Aravaca (€)

This district is not only attractive for young people thanks to the proximity of the university campuses and colleges in Ciudad Universitaria, but also for senior buyers who do not want to leave the neighbourhood so they sell their home and downsize within Moncloa area.

Ciudad Universitaria Arguelles Aravaca El Plantío - La Florida Valdemarín

Min. 2.000 2.686 1.089 1.116 1.625

Max. 5.000 7.799 7.760 7.000 7.073

Avg.* 3.400 3.735 3.199 2.594 4.157

* Corresponds to avg. price of properties offered in the area

Madrid | 23

Retiro

The six districts that make up the Retiro Park neighbourhood are: Pacifico, Adelfas, Estrella, Ibiza, Jeronimos and Niño Jesús. Being close to the green lung of the city, Retiro is similar to its neighbouring district of Salamanca, where the boulevards in Ibiza and Mayor Sainz de Baranda streets stand out.

These elegant areas are among the preferred options for the wealthiest Spanish families who wish to buy their main home. It is a mutual interest shared by international clients and investors. The most sought-after neighbourhood by foreigners is the majestic Jerónimos. Customers are mainly Europeans and Latin Americans who, because of job transfer or as a second residence to spend long holidays in, want to enjoy an area with unique buildings and the most emblematic monuments of Madrid such as Puerta de Alcalá, Plaza de la Cibeles and the Prado Museum.

Although Jerónimos has become one of the most expensive neighbourhoods in Madrid, these customers consider it a good buying opportunity when comparing prices with other cities like Miami, New York, Paris or London.

Salamanca, one of its neighbourhoods has blossomed like an oasis for artists.

“Highly sought by the wealthiest foreigners and Spanish families, Jerónimos has been placed in one of the most expensive neighbourhoods of the capital” In these areas, where the typical client is made up of families looking for their first residence, there is a wide range of flats between 85 sqm and 120 sqm that don't exceed any more than 500,000 euros.

Fuente del Berro, the Notting Hill of Madrid Large and bright houses form the historic colony of Fuente del Berro built at the beginning of the last century. The 184 semi-detached houses hidden behind O'Donnell and Doctor Esquerdo streets, close to the city centre, but within a safe and quiet neighbourhood, are increasingly coveted by families, young people and professionals. The demand for these single-family 200300 sqm homes and prices of around 1 million euros could push up prices by 15% in 2017 after the 7% rebound already experienced in 2016.

Types of properties and prices There are various types of properties in different districts. From large houses in Recoletos and Castellana, with land areas ranging from 200 sqm to 400 sqm that reach prices of 8,000 euros / sqm, to Goya and Lista, where there are plenty of flats between 100 sqm and

200 sqm priced at around 4,000 euros / sqm. Finally, in Guindalera, where there is a wide range of apartments from 40 sqm to 160 sqm, there is a small paradise of 200-250 sqm properties in Parque de las Avenidas with an average price of around 2,950 euros / sqm. The prime properties in the district are sought by Latin American clients coming from Venezuela, Colombia, Mexico and Europeans coming mainly from United Kingdom, France and Switzerland.

Prices per sqm in Salamanca (€)

Recoletos Castellana Goya Lista Guindalera Fuente del Berro

Min. 3.000 2.900 2.500 2.700 2.300 2.100

Max. 8.000 7.500 6.500 6.000 3.500 3.400

Avg.* 5.600 4.900 3.900 4.000 2.950 2.950

* Corresponds to avg. price of properties offered in the area

Prices per sqm in Retiro (€)

A price increase of 5% for 2017 The high profitability factor for foreign investors will be maintained throughout 2017, an exercise in which a price increase of 5% in Retiro is expected. While Jerónimos will remain in the vicinity of 8,000 euros / sqm, other neighbourhoods such as Pacífico, Estrella and Adelfas will offer homes for just over 2,000 euros / sqm.

Jerónimos Estrella Niño Jesús Ibiza Pacífico Adelfas

Min. 3.000 2.000 2.100 2.500 2.000

Max. 8.000 4.000 5.500 6.500 3.200

Avg.* 5.246 3.000 3.586 3.939 3.084

2.100

3.350

3.180

Northern Zone – Barajas Throughout 2016, Madrid's Metropolitan Market Centre (MMC) has begun to reveal to its customers a very sought-after area in the north of the capital, where three very different regions are distinguished.

* Corresponds to avg. price of properties offered in the area

Salamanca The numerous original constructions from the late nineteenth century are characterised by the bourgeois and seigneurial models which are characteristic of Madrid's restorative architecture. Thus, in the six districts of the capital - Recoletos, Castellana, Goya, Lista, Guindalera and Fuente del Berro - many elegant buildings are abound. In addition to its architectural appeal, the political and economic elite who choose to live in the district value the proximity to the socalled Golden Mile. Located around Ortega and Gasset streets, Serrano and Claudio Coello are one of the main bastions for the great International luxury brands.

Although these streets maintain their lead as the most expensive addresses in Spain, Salamanca begins to share prominence in the capital followed by other prestigious districts that have incorporated a certain bohemian touch like Centro and Chamberí. Even within 24 | Madrid

children. The other unique offer is from municipalities such as San Sebastián de los Reyes and Algete, where middle-class Spanish families can find small homes in an urban area at 700 euros / sqm as well as new build properties and townhouses, at prices around 3.500 euros / sqm. These include garage, swimming pool and communal areas. In the middle part are Alameda, Corralejos and Paracuellos del Jarama, where there is a wide range of properties with common areas and price ranges from 1,700 euros / sqm in Paracuellos to 7,000 euros / sqm in Corralejos.

Prices per sqm in Zona Norte - Barajas (€)

The first, located around the National I (Fuente del Fresno, Ciudalcampo and Santo Domingo) is formed by single-family homes in luxury residential developments that can reach prices of up to 6,500 euros / sqm. The buyer profile is drawn by Spanish and foreign families with high purchasing power and 3-5

San Sebastián de los Reyes Algete / Cobeña Ciudalcampo / Santo Domingo / Valdelagua Paracuellos Alameda Corralejos

Min.

Max.

Avg.*

900

4.000

2.300

700

3.500

1.450

970

6.500

2.100

800 1.600 1.550

3.300 4.600 7.000

1.700 2.600 3.200

* Corresponds to avg. price of properties offered in the area

Madrid | 25

Northwest Zone Other municipalities that have been integrated in 2016 under the umbrella of Madrid MMC of Engel & Völkers have been Pozuelo de Alarcón and Las Rozas, thus joining the existing areas such as Boadilla del Monte and Villaviciosa de Odón.

Pozuelo's property type and buyer profile is in line with its status as the richest municipality in Spain. According to data from the Tax Agency, the average income per resident stands at 61,643 euros so they seek exclusive properties that are close to prestigious educational institutions. The average price in Pozuelo in 2016 was 2,876 euros / sqm, which was the highest in the northwest area of Madrid, although there is a significant gap between the ten areas in which Engel & Völkers operates. In this sense, properties reach up to 7,500 euros / sqm and fincas are valued at more than 1,000 euros / sqm same as a villa in La Cabaña, Montegancedo or Prado Largo.

The apartments in urbanised complexes with swimming pool and large green areas of around 200 sqm are 3,200 euros / sqm. This is an average price that can be found in Prado de Somosaguas or Avenida de Europa with 2,500 euros / sqm being close to the station or town.

Prices per sqm in Boadilla del Monte (€)

Parque Boadilla Las Lomas BonanzaValdecabaña ValdepastoresLas Encinas Viñas Viejas El Olivar Sector B Sector S Centro Monteprincipe

Montealina La Cabaña - Prado Largo - Montegancedo Monteclaro - Urb. Las Encinas La Finca Prado de Somosaguas Somosaguas Zona Norte Zona Estacion Zona Pueblo Zona Avda. de Europa

Min. 560 777

Max. 3.500 4.500

Avg.* 1.639 1.887

1.151

3.284

2.027

755

6.000

2.181

1.148 1.072 590 1.406 1.109 1.038

3.735 5.049 4.054 3.167 3.667 4.251

2.123 1.936 2.508 2.123 2.028 2.144

Single Family Homes in Developments The type of property offered in these areas are mostly detached chalets, townhouses and semi-detached homes in urbanisations with large green areas, private security and where residents value the variety of quality schools.

In addition to Spanish businessmen and executives, this is a very popular area among international clients, mainly

Prices per sqm in Villaviciosa de Odón (€)

Min. 1.643

Max. 6.167

Avg.* 2.765

1.121

4.352

2.127

1.410

2.387

2.881

1.527 1.778 864 1.255 888 982 1.744

7.519 5.212 7.664 6.633 6.500 4.820 5.417

3.459 3.151 2.915 2.667 2.327 2.472 3.257

El Bosque Centro Campodon

Min.

Max.

Avg.*

706 875 636

3.750 8.929 7.250

1.667 2.032 5.669

* Corresponds to avg. price of properties offered in the area

* Corresponds to avg. price of properties offered in the area

Venezuelans, Mexicans, Colombians and Chinese who are looking for single-family homes of between 200400 sqm with a minimum of four bedrooms, swimming pool, garden and a high level of services.

Prices per sqm in Las Rozas (€)

* Corresponds to avg. price of properties offered in the area

26 | Madrid

Prices per sqm in Pozuelo de Alarcón (€)

Min.

Max.

Avg.*

661

3.947

1.725

1.279

4.182

2.113

El Cantizal

764

4.713

2.533

El Pinar Punta Galea

624

3.580

2.170

Europolis

827

4.000

2.587

Montecillo

798

2.372

1.640

La Chopera

806

3.950

2.745

1.031

4.000

1.706

779

3.667

1.989

Molino De La Hoz

1.154

3.000

1.673

Monte Rozas

1.738

4.062

1.799

Parque EmpresarialHeron City

1.915

4.115

2.860

Rozas Centro

1.089

4.417

2.273

Yucatan Las Cornisas El Torreon

948

3.440

2.133

Club De Golf El Burgo - El Abajon

Las Matas Los Peñascales Marazuela

* Corresponds to avg. price of properties offered in the area

New Developments 2016 has been the year of new property constructions with many real estate projects in Spanish cities. Permits to build new homes have been granted for the last three consecutive years and just in Madrid alone, there has been a record increase of 38.77% in the first ten months of the year. This is based on the latest data available from the Ministerio de Fomento and can be obtained at the end of this report.

From the 2,570 permits granted in the capital, 1,267 have been allocated to the construction of single-family semi-detached houses, 810 to single-family homes and 484 to block of flats, which represent increases of 67%, 18% and 20%, respectively, same as 2015. This data, together with the 44.37% increase in off-plan properties, which reached 3,635,516 sqm in the first ten months, translates into 15,391 new homes, of which 14,111 will be new build and 1,280 will be renovated buildings. This indicates a growth of 56.77% for new constructions and 11.10% for restoration projects.

Funding and investment in renovation properties Although real estate renovation grows in double digits, the current supply still does not satisfy the high demand for housing in prime areas. This in turn pushes up borrowing for the renovation project due to the strong demand for this type of property by developers.

The Americans, English and German investors have been particularly active in the last two years and together with the wealthy Latin Americans, they are the main purchasers of renovation properties.

These investors have the support of local developers with whom they have constituted several long-term joint ventures. Aside from the developers, the end customers who have purchased renovated homes in the most premium areas have mostly been foreigners. This profile group has been joined by national buyers in the last six months of 2016 as they are also seeking luxury properties.

Madrid | 27

Rentals Change in the national buyer profile If during the years of the so-called property bubble the client profile was led by a young buyer looking for his or her first home - those who were born in the last years of the baby boom -, they are now mainly national clients who are looking for a new home. This new demand, called the senior boom, is generated by couples whose children have grown up and left the family home. These senior buyers are looking for smaller high quality properties in good locations. Some of the more premium properties can be purchased thanks to the current mortgage facilities and the encouraging situation in economic recovery. The gradual recovery of the Spanish real estate market and, specifically, the strength of Madrid, now is an excellent time to invest in new projects with the guarantee of a good return. This increase in demand for new construction has resulted in an increase in prices by up to 7.8% year-onyear through the third quarter of 2016 in Madrid. This is a trend that will continue in 2017 according to the predictions from the Engel & Völkers New Development division since the second quarter of 2016.

Significant promotions of new developments marketed by Engel & Völkers in Madrid

Residential Project

General Oraá Recoletos Lagasca Manuel González Longoria Velázquez Arapiles Abedul Modesto Lafuente General Aranaz Jardines de Arturo Soria Gustavo Fernández Balbuena Goiri Residencial Monteboadilla Los Olivares de Villaviciosa

District- Area Bº Salamanca Bº Salamanca Bº Salamanca Chamberí Bº Salamanca Chamberí Chamartín Chamberí Alameda Ciudad Lineal Chamartín Tetuán Boadilla del Monte Villaviciosa de Odón

The northwest area of the capital as the most active region Engel & Völkers concentrates in Boadilla, Las Rozas, Pozuelo, Aravaca and Villaviciosa de Odón where most of the new construction supply is, while the renovation projects are mainly in the central part of the city.

28 | Madrid

Neighbourhood Castellana Recoletos Recoletos Trafalgar Lista Arapiles Nueva España Ríos Rosas San Pascual Colina Ciudad Jardín Bellas Vistas El Pastel Castillo - Campodón

Avg. Price (euro/sqm) 11.390 9.735 8.090 8.085 7.930 7.920 5.805 4.765 4.090 3.670 3.605 3.515 2.170 1.280

Within the prime areas. The districts of Salamanca, Retiro, Chamberí, Centro and Chamartín maintain the first ranking position in the number of high-quality real estate developments.

The rental market has become one of the engines of the real estate recovery in Madrid. The flexibility granted by some legislative changes in leases, the change of mentality and the high profitability offered to the owner have led to the rental market having a greater weight in the real estate sector.

Despite the good prospects for property sales, rentals will continue to gain ground among both tenants and investors. Regarding the former, for an important part of the population purchasing a property is still inaccessible so they opt to rent as it allows them greater flexibility and freedom. On the part of investors, buying a flat to rent out in the most demanded areas of big cities means a return of around 5%, levels that have not been seen since the real estate boom a few years ago. In fact, buy to let has more profitability than other financial schemes. The years of economic crisis have changed the profile of the tenant. Not only do students and low-profile citizens opt for rent, but executives or people with high purchasing power with changing situations also choose a less compromised option.

The most sought-after areas Engel & Völkers focuses its rental operations in the four most sought after districts of the capital: Centro, Chamartín, Chamberí and Salamanca.

Centro: Families, young couples and tourists form the tenant profile in a district where they have incorporated the small, renovated and furnished apartments for tourist rental. The rest of the demand is concentrated in studios or one-bedroom apartments, preferably furnished, located in the neighbourhoods of

Justicia and Palacio. The wide cultural and gastronomic offer in the area,l as well as good connection that the district offers is the most valued.

Chamartín: Large flats of about 150-250 sqm, with gardens are the most sought after properties by families with children, both Spanish and foreign, who are attracted by the wide educational offer that exists in the district. With a clear preference for the neighbourhoods of Hispanoamérica and Nueva España, 90% of rentals stem from flats, while the remaining 10% is monopolised by single-family homes.

Chamberí: The district of Almagro is preferred by the executives and independent professionals who choose this district to live in. The choice is usually older flats of about 100-150 sqm with a good commercial, leisure and public transport service.

Salamanca: The prestige of the district, its proximity to Retiro Park and the good transport, service and commercial infrastructures are the strengths of an area where 100-150 sqm apartments are sought. These flats must be in good condition and unfurnished. Recoletos is the most popular neighbourhood by tenants today as they are mostly singles and young families who rent in Salamanca, where a high number of foreigners who are mainly Europeans can be seen in this district..

Prices per sqm (€)

Min.

Max.

Avg.*

Salamanca Chamartín Chamberí

7,41 6,00 7,14

50,00 37,49 49,00

19,21 15,55 19,49

Centro

8,00

66,00

16,50

* Corresponds to avg. price of properties offered in the area

Madrid | 29

Barcelona Director's Note

Barcelona by area

General Director of Engel & Völkers MMC Barcelona

This situation is similar to that of the rental market, which continues to grow mainly by tourism demand and local customers who, for flexibility reasons, prefer this option. In order to cover this wide and varied offer, in 2016, we have built a division that specialises in temporary rentals as well as the division that's exclusively dedicated to long-term rentals. Barcelona maintains the attractiveness among international buyers for two reasons besides the medium and long term capital appreciation: to enjoy a second residence and to obtain rental income when they are not using the property. European customers continue to lead purchases with 53%, led by the French (16%), Germans (8%) and Italians (6%); Although a strong increase is seen in customers from the Middle East (12%) and China (12%) who are attracted by the Golden Visa.

Although the international demand maintains its strength intact, in the last year the proportion of local demand has increased, from 50% to 60%. This is a trend that we expect to continue seeing throughout this year.

Barcelona is a city with the most dynamic real estate market in Spain. Based on Ministerio de Fomento's data, real estate sales and purchases have grown by 14% and prices have reached double digits in the rental segment (14%). At Engel & Völkers, we have been highly active participants of this dynamism and throughout 2016 we have intermediated more than 700 purchase cases and surpassed the 1,000 rental cases.

We have also created a specialised division in Property Development before the boom of new constructions and renovations with more than 60 offers for sale. This rebound in new offers, however significant, is still less than demand, causing upward pressure on prices.

In the second year of Engel & Völkers Commercial activities, the division that specialises in sale, transfer and leasing premises, buildings, offices, hotels, industrial buildings and land, has quadrupled their operations carried out in Barcelona during 2015.

The forecast for this year is to quadruple this volume again. Faced with this scenario, at Engel & Völkers we expect to increase the number of transactions by 20% in 2017, an exercise where the Barcelona real estate market will lead to a sustained increase in transactions and prices. Increases that, in the long term, will be more accentuated in peripheral regions with greater potential.

Oriol Canal

Working areas in Metropolitan Market Centre (MMC ) Barcelona

Sabadell Sant Cugat del Vallès

Nou Barris Sant Andreu Badalona

Horta-Guinardo Baix Llobregat

Sarria / Sant Gervasi Gracia

Sant Martí / Diagonal Mar

Eixample Les Corts

Ciutat Vella Sants-Montjuic

Zona Alta Zona Alta is the residential nucleus home to the most exclusive properties in Barcelona. Composed of SarriàSant Gervasi, Pedralbes, Bonanova and Tres Torres, Zona Alta retains all its noble charm of the palaces and modernist houses that were once the residence of the bourgeoisie from the nineteenth century. It is very well connected and has ample green areas. Highly valued for its proximity to prestigious international schools, business

schools such as IESE and ESADE, and sports clubs for polo and tennis, foreign buyers focus on Pedralbes neighbourhood, especially on Pearson Avenue. For its part, the local customer mostly prefers Sarria-Sant Gervasi (Turo Parc, Tres Torres) where they seek apartments from 150 square metres with terrace and garden areas that include swimming pool and tennis or paddle courts.

A wide range of properties and prices In Zona Alta, where there is a varied offer of large-scale flats and single-family homes with gardens and highquality services, the most sought after property is a 200 sqm apartment with a garage. With an average price of € 4,500 / sqm, the price range in this area is also varied and in Pearson Avenue, it can reach up to € 10,700 / sqm. Higher prices are for new builds, which, although are very scarce in the area, have begun to fulfil demands over the last year, reaching 12,000 € / sqm. The international buyers' preference in new build properties in order to avoid renovation allows a rise prediction for 2017, a year in which a rebound in the number of offers is expected.

30 | Barcelona

Barcelona | 31

Ciutat Vella In Les Corts, the quiet and elegant area near Pedralbes with the most bustling commercial, business and scientific activity in Avenida Diagonal, Camp Nou and the universities of Barcelona and Polytechnic exist.

The district, marked with a residential character, is the favourite place to live by the Catalan upper middle class who demands 150-300 sqm property with garden priced at 6,500€ / sqm next to Plaza Concordia.

"The most popular type of property in les Corts is 100-130 sqm home with terrace"

In this sense, the types of properties sold in the district during last year are distributed between 80% flats and 20% single-family houses for a profile of mainly national client. Special mention should be made about the rental market boom between university students and foreigners, which make this neighbourhood the second most expensive in Barcelona with average prices of 15.7 € / sqm (see the rental section).

As a cultural centre, this district boasts a high number of monuments like the Cathedral of Barcelona, the Basilica of Santa Maria del Mar, the Liceo Theatre, the Picasso Museum and Boquería Market.

Ciutat Vella is composed of four districts: Gótico; The medieval district of Sant Pere, Santa Caterina and La Ribera where we can find the cosmopolitan Born; Raval and the seaside resort of Barceloneta.

Prices per sqm in Zona Alta (€)

Eixample

Just like Eixample, it is an area that is much sought after by foreign clients, who account for 64% of the purchases in the district, compared to 36% local buyers. The proximity to the sea and the great cultural offer by Gótico, Borne, Barceloneta and Raval make it a fashionable area among international buyers. The property sales in the area have registered a 23% increase during 2016 which make Engel & Völkers as the leader in the luxury real estate market in Eixample and Ciutat Vella. All this allows us to predict a 15% growth in 2017.

Divided into six neighbourhoods that, despite their similarity, have their own character, Eixample is composed of Paseo de Gracia, La Rambla de Cataluña, Plaza de la Universidad and buildings as important as Casa Batlló or Casa Milà, better known as La Pedrera. Such is the importance of the first two streets that Engel & Völkers' customers usually request to live in the proximity to Paseo de Gracia and Rambla de Cataluña or at most be seven blocks away from Avenida Diagonal.

Property renovation boom Since the early nineteenth century, Ciutat Vella has been offering restored mansions and small renovated apartments with original details that are perfect for a pied a terre type of foreign client. Let us not forget to mention the penthouses overlooking the sea in Barceloneta or the properties with architectural features. Both in Eixample and in Ciutat Vella there is a significant shortage of empty plots because they

But there are also families who seek smaller two or three bedroom flats at prices of just over € 3,000 / sqm.

Middle East, China and France double their presence The highly elegant Eixample is very much sought after by senior and high socio-cultural and economic foreign couples who value having a home in the centre in order to enjoy the property or let their friends and family stay there. If they don't use it themselves, they will resort to renting out the property as a way of making profits on their investment. The location in the city's nerve centre places the district in the spotlight for international clients who prefer to travel by foot or by public transport as well as having access to a wide range of commercial, catering and leisure activities. Last year alone, clients from more than 30 different countries have been interested in the area. 60% are Europeans and 40% from the rest of the world. The increase in customers from the Middle East and China is also outstanding. While the former choose luxury properties in the best locations in Eixample Dreta, Asians prefer new homes. European buyers include the French, British, Italian and German, followed by the Scandinavians and Swiss. All these people appreciate the

32 | Barcelona

Pedralbes Sarrià-San Gervasi Les Corts

Mín.

Máx.

Medio*

4.500 3.900 3.100

10.700 8.000 6.500

5.450 4.850 4.100

* Corresponds to avg. price of properties offered in the area

have been urbanised for many years. However, in 2016 there has been a greater presence of renovation projects in the area compared to new constructions.

In any case, the demand for new flats in the centre of Barcelona far exceeds supply, which causes prices to increase.

Prices per sqm in Eixample - Ciutat Vella (€)

Ciutat Vella Eixample

Mín.

Máx.

Medio*

2.100 2.500

5.800 11.000

4.100 4.900

* Corresponds to avg. price of properties offered in the area

Nova Esquerra de L'Eixample / Sants - Montjuic

classic architecture of modernist flats “finca regia” style, with high ceilings, hydraulic mosaic floors and large ornate windows. On the contrast side, the Asians prefer new-build fincas. For the majority of foreign clients, it doesn't matter if the property has no parking. In this sense, 75% of the sales made by Engel & Völkers in the area have been flats to live in and 25% of properties required renovation. In the centre of Eixample, the average price in 2016 increased by 12% to 4,900 euros / sqm. However, in this district can find properties from 2,500 euros / sqm to 11,000 euros / sqm.

L'Eixample's “Nueva Izquierda” offers a wide range of services, including Urgell and Golferichs civic centres, several libraries and one of the largest parks in the city, Joan Miró, where the Catalan artist's Mujer and Pájaro sculpture stands out. At one end is the old bullring of Las Arenas, now converted into a shopping mall, and it should be noted that the renewed Avenida de Roma has become a link between the old part of the Neighbourhood and the new one, where trains pass through.

Poble Sec and Sant Antoni are the latest chic areas Surrounding this neighbourhood is the district of SantsMonjuïc, where there are areas as heterogeneous as the residential Poble Sec, which houses the Fira de Barcelona, or Sants, known for its high-speed train station. Poble Sec,

Sant Antoni and the left side of Eixample are the prime areas. With prices reaching up to € 5,000 / sqm in the best locations, they have become one of the most favourite places to live by young couples, singles and international clients.

Prices per sqm in Nova Esquerra de L'Eixample / Sants - Montjuic (€)

N.E. Eixample Sants Badal Poble Sec Sant Antoni

Mín.

2.700

Máx.

5.000

Medio* 3.300

2.000 2.200

3.200 3.400

2.800 3.200

2.500 2.900

5.000 4.000

3.050 3.600

* Corresponds to avg. price of properties offered in the area

Barcelona | 33

Gràcia, Horta-Guinardó and Sagrada Familia

Baix Llobregat

In spite of the contrasts between the 6th and 7th districts of Barcelona, there is a nexus between the two districts that makes them the true real estate area of the City of Barcelona where prices are lower. Only 2,000 euros separate the minimum price at which some homes in Guinardó are sold for with maximum prices that can be found in Gràcia or in Font d'en Fargues. While the bohemian Gràcia is the favourite place for intellectuals, artists and students, Horta-Guinardó is a residential area made up of families who value their spacious green areas and outdoor leisure. There are also completely renovated luxury homes in Font d'en Fargues.

The Baix Llobregat region is an amazing oasis just a few minutes away from the centre of Barcelona. This is an eminently residential area where urban facilities are found including all the educational, healthcare, commercial and leisure services in tranquil settings where one can enjoy open spaces and feel close to nature.

One of the most emblematic places is the “Miniatura de Cataluña” Museum. Very close by and of great cultural importance is the “Cripta de la Colonia Güell”, which is recognised as the patrimony of Humanity by UNESCO.

Property type The 2 and 3 bedroom lofts and apartments are most sought in Gràcia. The floor layout and footage that extends to three and four bedroom flats in the rest of the neighbourhoods in the area where there is also a greater percentage of domestic clients that make up 80% of purchases. The profile of the foreign client who buys property in these neighbourhoods is 60% European - French, German, Italian, Swiss, Dutch and British - while 40% have very diverse nationalities. Latin Americans and Chinese have an increasing presence in this area, considering that the investment made here is much more profitable than in other more expensive areas of the city. This perception on the part of customers with regards to obtaining greater

profitability together with a location that's very close to the centre of Barcelona and privileged views of the capital have allowed Engel & Völkers to increase sales by 64% throughout 2016.

Prices per sqm in Gracia, Horta-Guinardó y Sagrada Familia(€)

Gracia Sagrada Familia Horta Guinardó Font d'en Fargues Vall d'Hebron

Mín.

2.900 2.900 2.700 2.600 3.000 1.900

Máx.

5.200 4.750 4.500 4.000 5.000 3.600

Medio* 4.100 3.900 3.750 3.400 4.100 2.900

“During last year, Molins de Rei has captured the prominence of this area with its unique residential character” With a very varied portfolio of properties, Engel & Völkers has doubled its turnover in this area in 2016 and forecasts that for the current year there will be a price increase of around 3%.

An open space for families The client profile in Baix Llobregat is made up of families with children whose search for property is distributed between the urban centres and the more open spaces. While in the first, they seek 100 sqm apartments with communal

areas, swimming pool and parking on new properties, in the most residential areas the demand for single-family homes predominates. 80% of the buyers are nationals, compared to 20% of foreigners, most notably those of Asian origin.

Prices per sqm in Baix Llobregat (€)

Baix Llobregat

The most modern district of Barcelona has transformed from an industrial area into one of the most premium areas of the city. High-end residential complexes share space with luxury hotels, office buildings, congress centres and museums as well as with one of the largest shopping centres in Spain. Next to the Llevant beach and well connected to the city centre via public transport, Diagonal Mar's properties are spacious and bright with modern facilities and spectacular sea views as well as some being surrounded by large green parks.

Among the cities in the metropolitan area of Barcelona, Engel & Völkers focuses on the most requested ones by its customers, with Sant Cugat at the top. The common characteristic of all of them is the client profile: young couples looking for flats with community areas and executives who value being close to the multiple companies located in the surroundings. The progressive increase in the number of sales in Sant Cugat has joined the growing demand for flats in the centre of Sabadell and single-family homes with garden and pool in Vallés Oriental, where prices drop to 1,750 euros / sqm and 1,400 euros / sqm, respectively.

price in Diagonal Mar ranges from 6,500 to 12,000 euros / sqm, tripling the price in areas such as Poblenou or Villa Olímpica.

These neighbourhoods, where international buyers are highly focused on obtaining the Golden Visa, offer a wide variety of property types: three-bedroom flats with two bathrooms in pre-owned fincas with garage at prices around 450,000 - 500,000 euros.

Prices per sqm in Sant Martí - Diagonal Mar (€)

34 | Barcelona

Medio*

1.046

2.844

1.810

* Corresponds to avg. price of properties offered in the area

Vallés oriental and occidental

Highly sought by foreign families from all nationalities - Russians, French, Bulgarians, Argentines and Americans, - which account for 60% of purchases, the

Máx.

* Corresponds to avg. price of properties offered in the area

Diagonal Mar and Sant Martí

"The foreigners make up 60% of the purchases that are completed in the newest district of Barcelona"

Mín.

Mín.

Máx.

Medio*

Villa Olímpica

3.200

4.000

3.750

Sant Martí

1.800

2.500

2.200

Poblenou

3.800

5.000

4.650

Diagonal Mar

6.500

12.000

10.500

* Corresponds to avg. price of properties offered in the area

Sant Cugat is the most premium area, with an average price of 3,100 euros / sqm. 12 kilometres from Barcelona, but very well connected, the town has comfortable infrastructures available to its residents and is home to one of the most sought after international schools in Barcelona, healthcare centres, shopping malls, golf courses, and a varied gastronomic offer.

Prices per sqm in Vallés oriental and occidental (€)

Sant Cugat Sabadell Vallés Oriental

Mín.

2.500 1.200 1.100

Máx.

4.500 2.900 2.100

Medio* 3.100 1.750 1.400

* Corresponds to avg. price of properties offered in the area

Barcelona | 35

New Developments 2016 has been a top year for real estate construction with many large projects in the big Spanish cities. 2017 will represent yet another real estate boom. This is due to the fact that Barcelona is seen as the ideal European capital to invest in. It is precisely why strong demand for developers has joined with the growing interest from international real estate investors to invest in new-build properties as currently, the economic situation is at its best and there is greater access to loans. All of this coupled with a new guarantee scheme for off-plan property buyers, replacing the previous system that was based on the criteria of carrying out collective policies and insurance certificates.

"Engel & Völkers expects to quadruple new build and renovation property sales in 2017 compared to 2016" The shortage of supply in the centre of Barcelona due to lack of land has moved the new developments to the surrounding areas of Eixample. In this sense, the neighborhoods in the centre of Barcelona are where the greatest number of small developments in need of extensive renovation can be found, while the big projects are taking place in the peripheral areas of the metropolitan area such as Badalona, L'Hospitalet de Llobregat and Cornellá. Engel & Völkers already participates in the commercialisation of 60 new-build offers and renovation projects.

"To achieve success in marketing properties, it is imperative to adapt to the most sought products, both in concept and in architectural design" The success of marketing depends directly on the project that's being tailored to the most-demanded products. Engel & Völkers has been focusing this year on the sale of new build properties and those apartments in need of major renovation. It has developed new marketing strategies to convince future buyers that property development is the most suitable project as an investment.

Buyer profile The national customer profile is a small investor who buys a home to rent out and generate an income whereas the international customer seeks property to be able to live in during his stays in Barcelona. They look for stately or modernist fincas in the city centre, although more and more are buying new build properties as an investment; these are mostly French, Americans, Swiss and Chinese, followed by Central Europeans and the Middle East. By areas, it should be noted that Eixample and Ciutat Vella account for the majority of purchases from international customers where 75% of purchases stem from foreigners compared to 20% from local buyers. The remaining 5% comes from the rest of Spain.

Prices of new developments marketed by Engel & Völkers Barcelona

Maximum price €/sqm

Minimum price €/sqm

Avg. price €/sqm

Eixample Dret

10.000

6.500

8.250

Diagonal Mar

12.000

5.100

8.000

Les Corts

11.000

4.000

7.500

Sant Gervasi Sarrià

10.500

6.000

7.500

Born

8.500

6.500

7.500

Barceloneta

8.000

5.500

6.750

Les Corts

7.000

5.750

6.375

Gòtic

6.500

5.500

6.000

Eixample Esquerra

6.000

5.300

5.650

Gracia

8.000

3.500

5.500

Raval

5.250

4.250

4.750

Sants

4.750

3.750

4.250

Sant Andreu

5.250

2.750

4.000

Horta-Guinardó

4.000

3.500

3.750

Neighbourhood

On the contrary, in Zona Alta, the percentage of foreigners is reduced to 25% - most expatriates are interested in the nearby schools - while in Gracia, international and national clients are equally distributed. Although they do not need to get a loan, most of them do ask for financing in order to purchase a property, taking advantage of the low interest rates, which is one of the great differences from the property boom years when the conditions were not so favourable then.

In this sense, the latest data published by the General Council of Notaries show that mortgage loans for the purchase of real estate grew in August by 21.3% yearon-year. The resurgence of the new build properties in the city is outlined in all its neighbourhoods, although it highlights the east half of the city including Glòries, Sagrada Familia, Nueva Diagonal and Sagrera, with great emphasis on renovations. Just as relevant is the district of Sarrià-Sant Gervasi, especially in the neighbourhoods of Pedralbes and Galvany.

according to the demand of the buyer who also prefers to include a storage room and parking space, something that is difficult to find in large renovation projects. There are less and less developments found that include a swimming pool. A common feature in most of the complexes is that the price of penthouses is 20% more than the other flats.

Apartment type: 84 sqm with two bedrooms The type of apartment sold in Barcelona, both in old and new building, has two or three bedrooms in an area of about 84 square metres with a price of 460,000 euros.

The request is to have fewer rooms, but more spacious

36 | Barcelona

Barcelona | 37

Rental

Benefits:

1 Investment The new built and renovation properties are the most advantageous real estate investment of the moment.

Determining the success aspects of this type of investment: Buying a property in an upmarket area Property value appreciation High profitability through property rental Possibility of short term rental Lower maintenance of the property More efficient appliances 2 Design

The high quality of the materials used, the integration of the kitchen into the noble spaces of the house, the comfort of the rooms, the spaciousness of the bathrooms and the advanced technology of the appliances and telecommunications equipment. All these contribute to the new build properties on offer and the great technological and comfort aspects place this type of investment as the most exclusive of all in the residential market.

3 Comfort The new build property typically offers a parking space, storage room, lift, sensor lighting systems, alarm, individual climate control, low consumption appliances, optimised materials and spaces that provide easier access to the property, thus increasing the quality of life for the occupants. In some cases, depending on the area, there are also fincas with swimming pool

and communal spaces with excellent services for their owners and tenants.

4 Sustainability and consumption The current requirements in terms of construction and design as well as compliance with safety regulations on evacuation, access, ventilation, natural lighting and emissions control as well as energy consumption contribute to creating new spaces that are more respectful with the environment. This characteristic is seen in new built properties which results in significant energy savings for the owner and the tenants.

5 Guarantee In addition to the ten-year insurance guarantee that proves the building's structural stability, the new build developers also guarantee for a certain period of time the correct functioning of the installations, appliances, fixtures and fittings used in the building project.

6 Typologies The new build properties are associated with a greater choice between different typologies, more adapted to the needs of each buyer, from a garden flat to a penthouse with swimming pool, passing through different number of rooms per house and other characteristics. Also the different options within each house are possible and you have to take into account that there are even some developers who offer à la carte apartments and houses.

The rental market has accelerated in recent months having maintained its pace of sustained growth in Barcelona since 2007. The flexibility granted by some legislative changes in lease agreements, the change of mentality and the high profitability offered to the property owner have all led to the increase in buy to lets.

The rental contracts that were drawn up in 2016 by Engel & Völkers have risen by 60%, which suggests an increase, albeit a moderate one, in rentals in relation to the current year. The years of the economic crisis have changed the profile of the tenant. Not only do students and low-profile citizens opt for renting, but executives or people with high purchasing power with changing situations also prefer a less compromised option.

Sought after Areas Engel & Völkers focuses its rental operations in the most sought after districts of Barcelona: Sarrià-Sant Gervasi, Eixample, Ciutat Vella and Les Corts. However, last year there has been an increasing demand in Gracia and Diagonal Mar. Sarrià-Sant Gervasi: Foreign families looking for properties of more than 150 square metres in the most exclusive areas make up the profile of tenants in a district where the proximity to the exclusive international schools is especially valued. The average rental price exceeds 3,000 euros Eixample: Furnished and well located properties in the most emblematic streets of the city, with special interest in the fincas with modernist architecture and charm, are the most sought after in a district where the average price stands at 14.3 euros / sqm. The average rent paid by tenants in the area is around 2,000 euros per month.

Ciutat Vella: The incessant demand for rental property in the old part of the city has placed the average price up to 16 € / sqm, which is the highest in Barcelona, closely followed by Les Corts, which comes as 15,7 euros / sqm.

The most sought after are well located flats between 80100 sqm.

Customer profile The demand for rental property in Barcelona is shared equally among local and international customers. The latter are 80% European, mainly English, German and northern Europeans. Foreigners who choose to rent in Barcelona are families with high purchasing power interested in prime locations or students who prefer the more central areas. Although the contracts are usually for periods ranging from six months to two years, Engel & Völkers has created a new temporary rental division for executives, students or prospective buyers who need temporary accommodation before they begin their property search. On the supply side, it is worth highlighting the increase in international clients who buy properties to rent them out and obtain a gross annual return of around 5% and that, when added to the appreciation value of the property, can reach 10%.

Rental prices in prime areas

Ciutat Vella Eixample Les Corts Sarria-Sant Gervasi Gracia

Avg. price €/sqm 16,00 14,30 15,70 14,74 12,50

* Corresponds to avg. Price of properties offered in the area

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Barcelona | 39

Commercial Buyer profile - Buildings

National companies

International Companies (private capital and investment fonds)

10% 20%

20% 15%

30%

30%

20%

30%

25%

Socimis

Family Offices

Israel

USA

Developer

Investment fonds

France

Others

Great Britain

2017 will be the year of investment in real estate assets for the commercial sector. During the first nine months of 2016, transactions in Spain totaled 6,200 million euros, of which 40% was concentrated in Barcelona. Out of the 2,495 million invested in the City of Barcelona, only the purchase of the Diagonal Mar Shopping Centre by Deutsche Bank accounted for 20% (495 million euros). Of the total investment made in Spain, only 9% went to the residential area (buildings and land). The 43 transactions carried out throughout the national territory amounted to 540 million euros, of which 220 million (40%) corresponded to Barcelona.

Quadrupling business year after year In its second year of activity, Engel & Völkers Commercial, a division specialised in buildings, premises, offices, hotels, industrial buildings and land sales, has quadrupled operations in Barcelona during 2015 and the forecast for this year is to quadruple the 2016 volume. If revenues from the sales have accounted for about 70% compared to the remaining 30% from rentals, predictions for throughout 2017 point to a slight increase that should reach 65% and 35% respectively. Regarding prices, it should be noted that despite the increases of between 10% and 20% in individual properties and buildings, Barcelona is still between 3040% cheaper than other European capitals, which makes the city even more appealing for international investors.

40 | Barcelona

The most sought after assets and their prices 1. Residential buildings in need of renovation Over the past year, the price ranges of residential buildings have increased proportionally to the increase in house prices, and in some cases, like Eixample and Ciutat Vella, even proportionally higher.

The investment in residential buildings that require renovation is distributed evenly among national and international buyers. Among the latter, it is worth highlighting the significant increase in British investors. During the second half of 2016 the British made 10% of total foreign investment in this type of asset.

2. Commercial premises The investment in commercial premises remains very active mainly due to higher business operations, especially those premises in need of restoration. The new plan approved by the Barcelona City Council, which restricts license permits in the old town, has led to increases of 20% in both this type of transfer and in licensing costs.

The rentals in the prime areas are between 200-270 euros / sqm per month, with an increase in Diagonal-Paseo de Gracia-Francesc Macià by 15-20% after the renovation completion in the area.

Nationality and type of investor

50%

Spanish

50%

Foreigners

Price per sqm (€)

Buildings for sale

Minimum

Maximum

Eixample

2.600

3.500

Zona Alta

2.500

3.500

Borne

2.500

3.000

Barrio Gótico

2.150

2.900

Gràcia

1.900

2.200

Raval

1.550

2.000

* Corresponds to avg. price of properties offered in the area

Barcelona | 41

Valencia Director's Note

Valencia by area a home in Spain very appealing indeed. We started 2017 with a general increase in the average price, which rose 4.6% compared to 2015, and we are still 46% below pre-crisis prices. The areas most in demand are those closest to the old Turia River and the beach as they have experienced the largest increases.

Cuatre Carreres has had a 10% increase, Algirós 11% and Poblats Maritims, which has experienced a 6.5% rise in the last quarter of 2016, is contrast to the price decline of 5.8% registered in Eixample at the end of 2016.

Our customers are divided between 60% national and 40% international - mainly, German, Italian, British and French, while in the rental market, where there has been a rise of 4% in prices, foreigners make up 54% of the customers, led by French, Americans, Italians and English.

Miguel Ángel Cantos

General Director of Engel & Völkers MMC Valencia

It's all good news for Engel & Völkers Valencia. After our successful experience we can confirm a solid recovery in the city's real estate market. The Valencia MMC and its professional sales team members have been growing exponentially throughout the city and surroundings year after year, achieving its goals until reaching a figure of 398 transactions in 2016. A new economic expansion booming cycle, low mortgage rates, high rental profitability and a progressive reactivation of new construction projects, make buying

We face 2017 with new challenges in staging new build projects and major building renovations in the city centre. Our renovation portfolio mainly consists of historic buildings located primarily in Ciutat Vella, Eixample and Extramurs, while for the fully completed buildings that are in use, we contemplate locations with maximum profitability throughout the city as long as there is demand. As for the new building projects in the city, we will offer our customers the best as soon as they are available for sale.

Valencia is back in fashion according to both national and international investors' opinion, and the strong demand confirms this.

Working areas in Metropolitan Market Centre (MMC) Valencia

Alameda - Costa Alrededores

Centro

The city of Valencia is administratively distributed in 19 districts, which are subdivided in 89 neighbourhoods and communities. Engel & Völkers covers the best locations in the capital and the surroundings, grouping them into three large areas: 1. Centro The area that encompasses the most central neighbourhoods of the city encompasses four major locations: Ciutat Vella, Eixample, Extramurs and Marxalenes.

2. Alameda, Coast The properties that are within this area of the city for first-time buyers range from houses and apartments on the beach in urbanisations or towns to second residences. Some examples of the most influential neighbourhoods or areas are: Pla del Real, Ciudad de las Artes and las Ciencias, Patacona, Malvarrosa, Alboraya, Puig, El Saler as well as the municipalities of Puzol and Cullera, among others.

3. Alrededores The largest area covered by Valencia's MMC focuses on the residential areas located in the inner part close to the city, such as Paterna, Rocafort, Godella, El Vedat, Bosque, La Eliana and Bétera.

42 | Valencia

The price range varies widely among different areas, but a range between 1,500 euros / sqm and 4,000 euros / sqm can be established for renovated properties.

If the properties need renovation, the price range is reduced by an average of about 600 euros / sqm at both ends.

The most popular areas are the beach, Eixample and the properties overlooking the river and Ciudad de las Artes and las Ciencias (the city of Arts and Sciences). However, the profile of the buyer and tenant is very different. While the former seeks penthouses with views, the second seeks properties in residential areas close to elite colleges, such as Monasteries or Puzol.

Finally, it should be noted that Valencia has very attractive prices compared to the real estate in other large cities. This unique advantage together with the good climate, the quality of life, public safety and the excellent cuisine, have resulted in UNESCO's recognition of the Fallas festival as an intangible heritage.

Valencia | 43

Centro more than 150 square metres located around the Ruzafa market and Gran Via. Two types of buildings make up the offer. On the one hand, buildings from the last century with stately homes and high ceilings where you can find a property over 200 square metres and, on the other, modernist buildings from the 60s and 70s where the footage is reduced to 130-150 square metres on average.

The main attraction of this area, as sought by both national and international clients, is the quality of life offered. Centro is surrounded by all the necessary amenities and a large amount of catering and leisure services. National families with high purchasing power with children live here along with investors from Norway, Sweden, Holland, Belgium, Germany, Italy, France, Russia and China.

While the Chinese are looking for stately high-ceilinged homes that are well located in the most central area of the city, the French prefer a property of about 100 square metres with 2-3 bedrooms and terrace. Last year, there was a growing demand among Americans with very high purchasing power who started buying properties located in stately buildings in the area. The foreign client usually pays in cash, although some are starting to get loans due to the low mortgage rates offered by Spanish banks today

"The great attraction of the area, coupled with demand, point to a price increase of between 5% and 10% in 2017" Eixample is Valencia's most exclusive district With average prices ranging from 1,800 euros / sqm to 3,600 euros / sqm, the most sought-after properties tend to be flats with more than three bedrooms and an area of

44 | Valencia

The old town is the district known as Ciutat Vella Characterised by its excellent transport facilities and all kinds of services such as administrative, commercial and catering, it is the historical, cultural and political centre of the city. Being able to live next to the main architectural jewels of the city like the Cathedral, Plaza de la Reina and Miguelete, the Town Hall Square and Lonja de Valencia, means it will cost you almost the same as the neighbouring Eixample. Buyers are looking for three-bedroom homes in about 140 square metres.

The average price ranges from 1,200 euros / sqm to 3,500 euros / sqm.

Extramurs and Marxalenes, the cheapest neighbourhoods in the centre The district of Extramurs, which is composed of El Botànic, La Roqueta, La Petxina and Arrancapins is, together with its neighbouring district, Marxalentes in La

Saïdia, are the cheapest areas in the centre of Valencia.

With an average price of around 1,500 euros / sqm, the most sought properties are three-bedroom apartments distributed in 100-120 square metres.

New building construction and renovation New-build properties are very sparse in the centre of Valencia. Currently there are a couple of flats that are between 50 and 100 square metres for sale at prices above their market value. The reason for this is because more and more clients seek spacious properties in renovated fincas with their interiors done up in minimalist style.

These features do not come with new build properties.

In this sense, the sale of emblematic buildings in the centre of Valencia has increased not only by the great demand from buyers who want to live in a well located stately building with many benefits, but also by the high profitability that can be generated in the future.

Unique jewels with high cultural and heritage value that are located in the centre of Valencia are the most sought by the Engel & Völkers' customers. That is why the real estate agency focuses its portfolio on historic buildings that require renovation in the districts of Ciutat Vella, Eixample and Extramurs.

Buildings with high ceilings, large balconies and unique ornamental facades from the early twentieth century or earlier are the perfect enclave to renovate. This is because the buyer can easily transform these types of buildings into high-quality homes, boutique hotels, or holiday apartments. Buyers interested in this type of building are generally professionals with experience in renovation projects who do not need loans or mortgages in order to buy the property and are distributed almost equally between national and international clients.

While the local or national client is usually a professional in the real estate sector who after the economic crisis wishes to increase the volume of business, the foreigner focuses his interest in Valencia for its tourist attraction and to find prices that are more competitive than those in Madrid or Barcelona. The average price of a historic building that requires renovation in Valencia is around 900 euros / sqm, although some of the Engel & Völkers' clients have paid up to 2,800 euros / sqm this year for renovated properties in the city.

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Alameda . Costa In this wide and heterogeneous zone, city apartments and houses on the beachfront are highly sought by buyers.

Despite the disparity, the whole area has three common elements: high security and excellent amenities, better quality of life and good transport connection between different neighbourhoods.

Neighbourhoods near the coast Engel & Völkers has put together three groups of neighbourhoods in the city, which are closest to the coastline according to the singularity of each one of them.

1. The first group distinguishes the prime areas like Pla del Real, Ciudad de las Artes y las Ciencias and Patacona, where the foreign client accounts for 35%. With a price range starting from 2,700-3,500 euros / sqm, the most sought-after properties are three-bedroom apartments or penthouses with a minimum size of 120 square metres, located in new buildings - under 30 years old - and with communal areas such as swimming pool and gardens.

The proximity of Pla del Real to the city centre as well as the University of Valencia campus, the Mestalla stadium, the Exhibition Palace and the City Hall (Ayuntamiento), are the most valued aspects of this neighbourhood. The residential areas of Ciencias and Patacona also offer a wide range of high quality services and large green areas.

However, connection by public transport to the city centre is more limited in the mentioned districts.

2. Albors, Algirós and Vega Baixa are residential neighbourhoods that are a little further away from the city centre, but nevertheless enjoy all the necessary educational, healthcare and leisure services. The properties that are sought in these districts have two or three bedrooms in buildings and were constructed more than 30 years ago so they require renovation. This type of real estate offered in the area is priced between between 1.800 and 2.200 euros / sqm.

The Surroundings

3. Finally, Trinitat, Torrefiel, Cabanyal and Ayora are the cheapest districts in the area. With prices around 1.000 euros / sqm, you can find two or three bedroom apartments in older complexes. The increasing demand in the districts of Cabanyal / Canyamelar and Poblados marítimos stands out the most, but this was prior to the renovation plan that is taking place in the neighbourhood.

With a wide range of services, sports facilities, and children's playgrounds together with the liveliest nightlife in the city, the rest of Valencia's coastline consists of Las Arenas, Malvarrosa and Patacona.

Property between 150,000 and 300,000 euros represents 68% of real estate for sale, although it is the segment in which Engel & Völkers is least involved.

Seaside population Perellonet, El Perelló, El Mareny Blau and El Saler make up a sequence of fishing towns with paradise beaches which are about 25 kilometres away from Valencia.

Located in a unique enclave, next to the Albufera Natural Park, which is included in the list of the most important wetlands in Spain, they count on innumerable urbanisations that are very different from one another.

You can find apartments between 80-120 square metres from 1,000 euros / sqm, to single-family homes with areas between 200-350 square metres at an average price of 3,000 euros / sqm in Cullera, Alfinach-Monasterios and Pobla de Farnals.

Buyer profile Meanwhile in Ciencias, Patacona and Pla del Real regions are sought by the managers and officials who have high purchasing power. The buyer profile in the beach area is focused on entrepreneurs and families, where the percentage of national client rises up to 75%, 25% of whom are foreigners. Nevertheless, the international client maintains the interest already seen in 2015, when Russians were the biggest investors followed by demand from other clients who come from Eastern Europe, mainly from Ukraine, and the Middle East (Egypt, Syria, United Arab Emirates...).

Property purchase by foreigners stems to three main reasons: Advantageous (profitability / opportunity) Comfort ( new or refurbished ready to move into properties) Exclusivity (prestige, quality and privacy) The demand in these areas is mostly focused on well-located apartments, but we are witnessing a rebound in the search for houses and plots, especially on the beachfront and in prestigious and private urbanisations led by monasteries.

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The metropolitan belt of the city is a very wide and disparate area with a supply excess in many of the populations that integrate it. Currently, about 8,300 houses are commercialised, of which Engel & Völkers has 446 in its portfolio. With a market share of 5.3% in the area, the Valencia MMC has divided their real estate portfolio into three types of properties based on price:

25% of the residences are located in the intermediate range between 300,000 and 600,000 euros, a section where there is greater interest from the foreign buyer.

In 2016, the international client who settled in Valencia for professional reasons or to settle in his pre-retirement period has captured 65% of the sales made in this segment.

The properties that are valued for more than 600,000 euros, which represent the remaining 7% of the sales offers in the area, are located in prime areas that can be summarised in five locations: Bétera, La Eliana, Campolivar, Rocafort and Santa Apolonia-El Bosque. All of these are regions where the Engel & Völkers team is most active in together with Campanar, Godella, La Cañada and Vedat-Torrent.

Demand in this area focuses on single-family homes with more than three bedrooms, swimming pool, garden and are well connected with public transport to the city. The search for modern buildings and the proximity to international schools is one of the characteristics that has dominated during the past year.

Rocafort, Campanar y Godella. The areas most in demand in 2016 have reached prices close to 3,000 euros / sqm. National buyers are usually residents who want to move into a larger property without leaving the area, while international buyers are looking for a second home to spend long periods in Spain or even for tax-exemption purposes through buying a property abroad.

Torrent-Vedat, El Bosque, Eliana y La Cañada make up the residential areas where independent villas predominate. The profile of the sellers consists of owners within a particular age range who purchased their properties many years ago and are currently looking for smaller residences in these regions or even, to return to the great city. Average prices in these areas are around 1,400-1,800 euros / sqm.

In the municipalities close to the city or even in wellconnected residential areas, demand still does not cover the bulk supply of real estate, so we do not expect a price increase for 2017.

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Sales Price of properties in the different areas of Valencia (€)

Minimum

Maximum

Averige

Alboraya-Patacona

1.112

3.800

1.991

Algirós-Ayora

1.286

1.987

1.637

Benimaclet

1.125

1.975

1.550

937

2.051

1.494

Campanar

1.800

2.200

2.000

Ciudad de las Ciencias

1.375

3.890

Ciutat Vella

1.200

3.500

2.350

Eixample

1.800

3.600

2.700

El Bosque

1.800

2.100

1.800

Extramurs

1.100

2.200

1.643

Godella - Campolivar

2.200

2.600

2.500

La Eliana

1.400

2.000

1.700

La Cañada

1.300

1.900

1.400

L´horta Nord

728

1.670

1.199

Orriols-Torrefiel

815

2.465

1.640

Pla del Real

1.380

3.480

2.430

Playas del Norte de Valencia

1.276

2.154

1.715

Playas del Sur de Valencia-Cullera

912

2.080

1.496

Puzol (Monasterios-Alfinach)

978

1.860

1.419

Quatre Carreres

954

2.800

1.662

Rocafort - Santa Bárbara

1.800

2.800

2.300

Torrent - Vedat

1.100

2.400

2.000

Bétera Cabanyal- Malvarrosa

1.500

The rental market has become one of the engines of recovery for the real estate sector in Valencia. The flexibility provided by some legislative changes in lease contracts, the change of mentality and the high profitability offered to the property owner have all led to the preference for renting rather than buying.

Despite the good prospects for real estate sales market, rentals will continue to gain ground among both tenants and investors. Regarding the former, for an important part of the population buying is still inaccessible so they opt to rent as it provides them greater freedom. As far as investors are concerned, buying a flat to rent out in the most sought after locations in big cities means a return of around 5%, levels that have not been recorded since the years of the real estate boom and that surpass the profitability of other assets.

The preferred type of property varies depending on the area. While in the most central neighbourhoods like Campanar, Ciutat Vella, Pla del Real and Benimaclet, the most sought after properties are flats, in areas such as Betera, Godella, Puzol, La Eliana or El Bosque are villas or single-family homes.

Rental price of properties in Valencia (€)

Rental

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The most popular areas The district of Eixample, specifically the area around Colón market, remains as the most sought after area of the city after the rebound experienced in 2015 by tenants who are looking for penthouses in one of the fashionable neighbourhoods of Valencia.

"In 2017 we expect rental prices in Valencia to rise between 5% and 10%" Tenant Profile The years of the real estate crisis have changed the profile of the tenant so it's not only students or citizens with medium low profile. In Valencia, most of the tenants are executives with family or people with high purchasing power who choose this option because of their greater flexibility. Engel & Völkers' customers in this division are, on the part of the owners, Spanish in 95% of cases.

However, as far as the tenants are concerned, 55% are foreigners arriving from France, the United Kingdom, Italy and the United States. These people are mainly looking for properties to live in all year round.

Minimum

Maximum

Property type

Benimaclet - Zaidia - Alfahuir

6

9

Apartment

Bétera (Mas Camarena - Torre de Conill)

5

6

Villa or semi-dettached

Campanar - Cortes Valencianas

6

9

Apartment or penthouse

Ciudad de las Ciencias

7

10

Apartment or penthouse

Ciutat Vella

6

12

Apartment

Eixample

7

12

Apartment or penthouse

El Bosque

5

7

Villa

Extramurs

6

10

Apartment

Godella - Campolivar

5

7

Villa or semi-dettached

La Eliana

4

8

Villa

Paterna (La Cañada - Valterna)

5

7

Apartment or penthouse

Pla del Real

7

10

Apartment

Playa de Valencia Puzol (Urbanización Monasterios)

6

8 7

Apartment Villa

5

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Engel & Völkers Contact Details

Madrid Central Office Madrid Génova, 27, 5ª planta 28004 Madrid Tel: +34 91 277 45 00

Barcelona Central Office Barcelona Av. Diagonal 640, 6ª Planta 08017 Barcelona, España Tel: +34 93 515 44 44

Valencia Central Office Valencia (Opening May 2017) Calle Luis Vives, 6, 2º pta 4 46003 Valencia

Property Lounge Aravaca Avenida Valdemarín 167, local 2 28023 Madrid Tel: +34 91 047 16 91

Property Lounge Diagonal Avda. Diagonal 640, PB, 08017 Barcelona Tel: +34 93 515 44 44

Property Lounge Gran Vía Gran Vía Marqués del Turia, 61 46005 Valencia Tel: +34 96 351 78 97

Property Lounge Alameda de Osuna Tampico, 40 28027 Madrid Tel: +34 91 277 45 00

Property Lounge Paseo de Gracia Passeig de Gràcia, 120, 08008 Barcelona Tel: +34 932 18 28 48

Property Lounge La Paz Calle de la Paz, 8 46003 Valencia Tel: +34 96 206 71 10

Property Lounge Pozuelo de Alarcón Avenida de Europa, 9 28224 Madrid Tel: +34 91 047 16 91

Property Lounge Ganduxer Carrer de Ganduxer, 30, 08021 Barcelona Tel: +34 933 62 00 16

PropertyLounge Las Rozas Londres, 32 A 28232 Madrid Tel: +34 91 047 16 91

Property Lounge Sant Cugat Calle Rius i Taulet, 55, 08173 Sant Cugat del Vallès Tel: +34 935 83 19 17

Publisher Engel & Völkers MMC Madrid Calle Génova, 27 - 5ª planta . E-28004 Madrid Tel: + 34 91 277 45 00 Madrid@engelvoelkers.com www.engelvoelkers.com/madrid Engel & Völkers MMC Barcelona Av. Diagonal, 640 · 6ª planta · 08017 Barcelona Tel.: + 34 93 515 44 44 Barcelona@engelvoelkers.com www.engelvoelkers.com/barcelona Engel & Völkers MMC Valencia Gran Vía Marqués del Turia, 61 · E-46005 Valencia Phone: + 34 96 351 78 97 Valencia@engelvoelkers.com www.engelvoelkers.com/valencia