Hedge fund billionaires George Soros and John Paulson have taken major stakes in Spanish property investment -- the very industry that had brought the country's economy to its knees five years ago. But this time around, analysts and new data suggest that this could be a bet that's worth a closer look.
Hispania, which is set to list on the Madrid Stock Exchange as a real estate investment trust (REIT), has raised 314 million euros ($433 million) from investors including Paulson and Soros according to a regulatory filing last week.
(Read more: Spain upgrade welcome but more work needed: Minister)
New data from global real estate advisor Savills shows total turnover in the investment market for property in Spain's retail sector increased three-fold in 2013, to 850 million euros in 2013 from 320 million euros in 2012.
The rise is mainly down to interest from international funds, suggesting that many institutional investors believe it is the right time to invest in the Spanish market, particularly in Madrid and Barcelona said Savills.
(Read more: Spain upgrade welcome but more work needed: Minister)
"Various international operators have or are currently preparing to enter the Spanish market due to the improved mid-term economic outlook. Some have been waiting for years for the right moment, others have pre-tested the market via online stores," said head of research Savills Spain, Gema de la Fuente.
In separate research, Savills also found occupancy in the Madrid office market is up 35 percent in 2013 from the previous year.
After Spain joined the euro, the country experienced a long boom, underpinned by a housing bubble, financed by cheap loans to builders and home buyers.
During the height of Spain's real estate boom, house prices rose 44 percent from 2004 to 2008, before slumping by over a third after the bubble burst. Spanish banks were also devastated by the housing crisis, as they had racked up billions in bad real estate loans.
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Investors have also had reason to eye the country more closely following it government bond upgrade from ratings agency Moody's from Baa3 to Baa2 in February, citing a "rebalancing of the Spanish economy towards a more sustainable growth model".
Spanish government yields fell to the lowest in eight years on Monday, with the yield on 10-year bonds falling to 3.3 percent, the lowest since January 2006.
(Read more: Spanish economy grows 0.3% in fourth quarter)
Moody's said the fall in Spain's borrowing costs reflects the combined effects of the European Central Bank's (ECB) policy announcements and actions, and the evident improvements in the Spanish economy at the time of the upgrade.
Corporate bond fund manager at M&G Investments, Matthew Russell has been snapping up Spanish residential mortgage backed securities (RMBS), which he says offer features that will be beneficial to investors even if the Spanish housing market begins to weaken again.
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"As fund managers it's our job to take risk when and where we are being paid (preferably overpaid) to do so. One area where I feel that this is currently the case is European residential mortgage backed securities, particularly Spanish RMBS," he said.
—By CNBC's Jenny Cosgrave: Follow her onTwitter @jenny_cosgrave