House Hunter: 'I love Madrid's open-all-hours lifestyle'

THE PROBLEM

THE PROBLEM

Sarah Thompson writes: "I'm a total fan of Spanish cities and, while Grenada, Barcelona and Seville are all wonderful in their own ways, for me you just can't beat Madrid. It has the most beautiful architecture, and I enjoy the museums and old quarter so much. It's also a great base for getting out into the countryside. I love the vibrancy of the place, especially at night as everything stays open so late.

"In the last 18 months I've been thinking of buying a property abroad and it seems logical to buy in Madrid, but all stories seem to be focused on the Costas. Whenever I go there I tend to stay in the same hotel, but having my own apartment would be better and I hope that I could let it out to other visitors. There always seem to be tons of Americans there so perhaps they are a good potential market?

"I'd like to know more about prices, and whether this would be a safe bet financially. I'm really keen to make a good investment as well as find somewhere I love. I am more interested in long-term capital growth than short-term income.

"I've heard that the Madrid property market is quite fast-moving, so am not sure how to go about house hunting there. At this stage, I can't afford to spend too long away from the UK and haven't had much luck so far in getting estate agents to take me seriously.

"I have an inheritance that I'm going to use, so my budget is around £200,000 although I can release some equity if this isn't enough. I am wondering if new build might be an option so that I don't have maintenance worries, but am unsure if Madrid has much of this."

THE ADVICE

Rita Fryer responds: "Madrid is a fantastic city. It has wonderful museums and art galleries and it's great for going out at night. You can also get out to the surrounding countryside and places of interest such as Toledo and Segovia.

"Like the market in Barcelona, where I also source property, the market is slowing down, which is good news for buyers. It is very much local-led - also good news in case you decide to sell. Traditionally, there's not that much interest from the British in Madrid. Unless they are relocating there for business, the focus is much more on the tourist resorts. But the trend for people going there to rent apartments on a short-term basis is a massive boom area, many people now prefer this to staying in hotels, they enjoy having more space and also not feeling so hassled allowing them to enjoy their leisure more.

"So, yes, it is possible to buy in Madrid and let your apartment on a short-term basis during the periods you are not there. There are some very reputable agencies who deal with this type of accommodation, which is very popular for people attending conferences, as well as for tourists, so Sarah should be able to get a 60-65 per cent occupancy rate.

"But a good rental property does need to be centrally located and within easy reach of the main attractions. Sarah's budget of £200,000 sounds a little modest for Madrid, but she has the option of taking out equity in her UK property or taking out a mortgage in Spain. While interest rates are lower in Spain than the UK, you are exposed to fluctuations in currency exchange for your monthly payment. A good option for foreign buyers is to form a Spanish company to purchase the property. You would then be able to offset interest, taxes, repairs, etc against your income from rental.

"It is possible to buy new build in Madrid, and one of the advantages of using a buying agent is that we can get our client's foot in the door with off-plan projects. These are normally sold direct and it would be difficult for a non-local to know about them. They generally have the advantage of a lower price because you contract to buy at the planning or construction phase.

"Properties two and three are very interesting projects: Avenida de Portugal, Madrid's ring road, is being covered in strategic places, creating new parks and open spaces and bringing sectors of Madrid that used to be 'on the wrong side of the tracks' now firmly into the centre."

Rita Fryer is a search agent for The Property Finders: 0871 218 0500, www.thepropertyfinders.com

THE SOLUTION

Property one: Calle de la Princesa.

Price: €420,000 (£292,000).

Agent's details: This period apartment measures around 97sqm and is in the Calle de la Princesa, right in the heart of Madrid. The building is turn-of-the-century and has been renovated. There are two bedrooms, two bathrooms, parquet floors and two balconies.

Property two: New build near Casa de Campo.

Price: €404,000 for two-bedroom apartment.

Agent's details: On the edge of the huge Casa de Campo park, Vallehermosa is constructing a development that will have views of the royal palace. It is a 10-minute walk to the historical centre in one direction and the exhibition centre in the other. Communal gardens, pool, gym and sauna. Completion due autumn 2005.

Property three: New apartment in Pozuelo.

Price: From €393,500 for a two-bed apartment.

Agent's details: Pozuelo de Alarcon is one of the chicest suburbs of Madrid, where many diplomats and directors live. Grupo Labaro is building a development of 43 apartments with communal pool and gym near the Town Hall. Prices include garage, parking space and store room.

THE VERDICT

"This detailed advice from Rita is much more than I've been able to get from local agents, despite repeated phone calls and visits. I'm particularly interested in her advice on forming a Spanish company to get a Spanish mortgage and will definitely do some further research into this as the financial advantages sound so good.

"It's also reassuring to see that it is possible to buy new property and these developments sound extremely central so would be perfect for my needs. I'm not too worried about buying off plan and especially into developments that come recommended. When people think of Madrid they think of the period buildings, but I prefer to buy something that won't involve continuous updating and renovation. This would eat into my profits and be a worry when I'm not there."

If you would like House Hunter's help, write to The Independent, 191 Marsh Wall, London E14 9RS, or e-mail: househunter@independent.co.uk