It is a really great place. Compared to London it is such a safe city and has a really nice feeling to it. I lived there 4 years ago for a few months and just loved it.
Living is reasonably cheap, depends where abouts you are...I was in Callao which is off the main shopping street (Gran Via) and it was pretty cheap. But areas such as Salamanca and Prado area get expensive.
Night life is great, most people go to bars rather than clubs, drinks are cheap and look out for the street parties....well worth visiting.
People are generally very nice, but if you can speak a bit it is useful, I moved there knowing no spanish and it was really hard at first. I went to a language school for a bit and then worked in spanish bar in evening to practise.
Happy to answer more questions!