The retired 54-year-old Wales international goalkeeper believes that his fellow countryman would be ideally suited to the demands of playing for Jose Mourinho's Spanish giant.
As exclusively revealed by Goal.com, Bale is ready to test himself abroad and tell Tottenham he wants to move to Madrid, and Southall believes he would slot in well at the club alongside Cristiano Ronaldo.
"Well if you had Cristiano Ronaldo on the right wing and Bale on the left wing that would be some team for Real Madrid, wouldn't it?" Southall told Goal.com.
"Hopefully though he'll just stay in Britain, and Welsh players tend to stay at home a lot, at your Manchester Uniteds and Man Citys -- that would probably be better [for him]."
On the topic of whether Bale will be able to secure a move to La Liga in the near future, Southall argued that Bale needs to remain patient for the time being, even if Southall agreed that eventually a time will come when he will need to seek a move to a bigger club.
"That's a tough one to answer but I think eventually Gareth will leave Tottenham," he added. "How much they need the money and how close they come to winning anything, that might be the only reason Gareth would consider leaving Tottenham, because he wants to start winning things.
"He might actually prefer to stay in Britain, whether that be Manchester United or Manchester City, which is obviously closer to Cardiff than Barcelona and Real Madrid, and we know that he's a home boy."
After an indifferent start to the new campaign for Andre Villas-Boas' side, though, many have questioned whether Bale is good enough to make the step up of playing for one of the biggest clubs in the world, but the 52-year-old has no doubt that he is capable of making the grade at either Real Madrid or Barcelona.
"Yes, he's been playing at that level already and when you play with better players it becomes easier to perform," he added. "It's always easier to play with good players than bad players, and I speak from experience, because you don't know what they're going to do.
"He's got that bit of pace that he could add to Barcelona and he'd be quality for them, but it's just if he wants to go there."
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