Marbella Property Market Report - 2016

Market Report 2016

Marbella—the Real Story

In general terms 2015 saw the consolidation of recovery into growth on a regional (Costa del Sol) level, accompanied by recovery in the national property market. Once again Marbella was a trendsetter in this regard, and once again it proved highly attractive to medium to high segment buyers from across Europe and beyond. In this report we look back at 2015 and forward to the coming year.

Tourism

On the Costa del Sol the fortunes of the real estate market are closely linked to those of the tourist sector. Indeed, an upturn in the latter usually precedes new growth in the former, and it has been no different this time round. The latest growth cycle began with an upsurge in tourist numbers on the Costa del Sol that started all the way back in 2011. At first visitor numbers were high but average spend was low, yet by last year those too had risen to set a new all-time record for total revenue.

Occupancy rates were high, driven by a reinvigorated European travel market, lots of new air routes and an attractively low Euro, but also importantly by the gradual demise of tourist destinations in Tunisia, Egypt and Turkey, due to the instability there. This has greatly added to enticements such as the better service levels and value now available on the Costa del Sol, and confirms Spain’s reputation as a safe and desirable holiday destination.

Marbella Direct - Market Report 2016

Demand

The latter also holds true for the residential market, which hit its low-point in Marbella in 2012 and began to recover the year after, with other parts of the Costa del Sol (such as Sotogrande, Estepona and Mijas) following about a year behind. Along with the Balearics, Marbella can therefore be said to have pioneered the Spanish property market recovery, and by 2015 recovery had become growth.

It has not yet become a seller’s market, but equally it is no longer a buyer’s market either. At the moment the property market is in fact quite balanced, with no more distressed properties and a solid demand for the lifestyle that Marbella and its surroundings offer. Demand has shifted from being mostly price-driven to focusing primarily on quality and lifestyle considerations.

It is as always strongest for prime beachside and golf fronting/country club locations, but a clear trend is the preference among many for contemporary villas and apartments that offer the latest architectural styles and technological features. Having said that, the level of demand is currently such that the resales market is also strong within a regional market that remains dominated by foreign buyers.

What has changed in recent times is the composition of such buyers, with 2015 seeing a significant drop in the Russian market and continued strength from Scandinavia, Belgium, France and the UK. The British market is finding its strong footing again amid good economic growth and a favourable exchange rate, with Middle East instability also fuelling sales from mostly middle class Arab buyers, while for now, the Golden Visa has failed to attract large numbers of Chinese investors to the region.


We are not in the midst of a frenzied boom, when everyone seems intent on getting in on the act, so the strong flows of investment into the region are considered and qualified, certainly not random and reckless. It has therefore been highly encouraging to see the return of Spanish, British and other European investors and property developers, with their Asian and American counterparts providing a further vote of confidence.

2015 was the year when investment projects broadly made the transition from the regeneration of previously unsold developments completed around the time of the financial crash to the launching of entirely new ones. The centre point of demand is for such new homes, which offer 21st century comforts in Marbella’s glamorous sunshine setting. For now the projects are medium-sized and predominantly upmarket, with Taylor Wimpey reaping the benefits of being one of the first promoters to return to the market in force.

New properties are selling fast and off-plan sales have returned in force, with new projects often selling out before construction begins, as seen in places such as Nueva Alcántara. Service is another aspect that is becoming important, along with modern design and luxuries, and as a result some of the new developments feature clubhouses with reception areas, lounges and gyms, while the overall tendency has been for slightly more compact villas and there has been a cry for more three-bedroom apartments in a market previously heavily slanted towards two.

In addition to individual projects of this kind there have also been large-scale investments involving sizeable tracts of land acquired for the development of new residential areas, as well as the purchase of entire resorts. The latter includes the €225 million take-over of Sotogrande S.A. from Barceló by the American and European investment funds Cerberus Capital Management and Orion Capital. In January 2016 it was announced that La Zagaleta S.L. had completed the acquisition of the Valderrama golf course and adjacent development land for €40 million.

The new luxury residential area, Valderrama 2, which will arise there (representing an investment of €200 million over the coming ten years) will add to Sotogrande S.A.’s own ambitious plans for the La Reserva country club. In Marbella there has been talk of a similar take-over of Puerto Banús by new owners, while Urbania International is developing the first phase of luxury new Icon Signature Villas in Santa Clara and Platinum Estates has acquired 170.000m2 of beachside land adjacent to Los Monteros, where a new hotel and village-style residential development will arise, representing a total investment of €200 million.


Investment


Year

Yearly % change

Total number of residential sales transactions in Marbella

Source: Spanish Ministry of Public Workswww.fomento.gob.es

2006

1,000

2,000

3,000

4,000

5,000

6,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Sales

-19%

-41%4% 9% 12%

24%

28%

-5%

Prices

The upshot of the rising demand for property by homebuyers and for building land by developers and investors is that prices have been rising. While most figures released in this region are for the province of Málaga as a whole – and therefore not reflective of its Marbella and Costa del Sol components – the general estimation is that property prices have risen by as much as 10% (4.2% in Málaga province overall).

The increase has been strongest in the most sought-after beachside and country club areas, such as the Golden Mile, Sierra Blanca, Puerto Banús, Los Monteros and La Zagaleta, but above all focuses on new-build villas and apartments. The increase in values has therefore been much smaller in older homes and outlying residential areas, while the competition for building land is in places driving prices up well beyond the average rate.


Looking ahead

Within the uncertainty of the international geopolitical situation, the Costa del Sol remains an attractive, stable and secure destination. Added to this is an economy that is showing strong recuperative growth (3% in 2015), with falling unemployment, rising investment flows and a growing number of new enterprises and greater focus on exports alongside traditional staples such as tourism, construction, manufacturing and retail.

Productivity gains are being made and though it will take a little while for wages to begin to rise again consumer demand has been growing. The relatively stable position of the country’s banking sector is reflected not only in ECB stress tests but also in a gradually normalised lending market in which mortgages are once again available. It is the latter that will drive the recovery of the domestic property market that began in 2015.

The top performers in this national recovery are Madrid, Barcelona, the Balearics and Marbella/Costa del Sol, where the process of growth is by now well under way. Some rural inland areas have not quite come out of the shadows yet, but even in areas such as the Costa Blanca previously unsold bank stock has been bought en masse by mostly American investment funds, and construction has begun again.

For 2016 some 50,000 new homes are expected, soon estimated to reach sustainable levels of 200,000, with the Costa del Sol leading the way in terms of quality. The growth in prices will slow down a little as more new homes are delivered, but competition for building land is expected to remain pretty intense, and overall property prices in Marbella remain around 20% below their pre-crisis highs. This against the background of the 2010 PGOU planning directive for Marbella that was rejected by the Supreme Court in Q4 of 2015.



The latter has made the 1986 PGOU valid again until a new Plan General de Ordenación Urbanística is drawn up and ratified – which could take around four years. In practical terms it is creating a divide between those properties and tracts of land that are once again surrounded by uncertainty, and those covered (and rendered legal) under the 1986 jurisdiction. It cannot be denied that the resurfacing of the PGOU issue has taken the wind slightly out of Marbella’s sails, and the market is looking to the town hall to provide a pragmatic solution for the interim.

This said, the status of the great majority of properties in Marbella remains perfectly legal and unambiguous, while the likes of La Mairena, Mijas, Benahavis and Estepona will certainly benefit and pick up some of the slack left by Marbella. They are generally well-run and solvent municipalities, with Estepona having impressed with a mayor that has led a major beautification programme, which has revived the town as a tourist and residential destination.

Estepona now features prominently as a residential hotspot, and its attractive coastal flanks are already attracting a high end cluster of luxury homes and new developments, such as Le Mirage, Estepona Golf, Sunset Bay Village and Casares Beach Villas. Indeed, the revival of this part of Southern Spain is such that more and more people are once again looking for country properties in inland Andalucía too. There they will find attractively priced country homes that are either ready to move into or make appealing refurbishment projects or income-generating country properties in the form of boutique hotels. There now exists a sophisticated support industry for those wishing to modernise such homes.

Overall, therefore, the region is expecting continued growth in 2016, with growing prices and more new modern quality developments being launched – along with a strengthening resales market that reflects the recovery of the national property market. What’s more, prices remain attractive and rental income from both holiday and long-term lets make this a good year in which to purchase property on the Costa del Sol at a time when growth is far from exhausted.

TONY CASSIDY

(+34) 637 939 359

[email protected]

FRANK WALSH

(+34) 678 974 454

[email protected]

Marbella Property Market Report - 2016

Real Estate

Transcript of Marbella Property Market Report - 2016