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The 2011-2012 Marbella Property Market Report

An up-to-date report on how the worldwide economic crisis is affecting the property

market in Spain's most important resort city

By Christopher Clover, owner and Managing Director of Panorama, Marbella’s longest established Real Estate Agency.

November, 2011

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The Market, The Crisis

Our clients often refer to “the market” or“the crisis” in Spain in general andrelate it directly to the local real estatemarket in Marbella.

In our opinion, and from our perspectiveof having been through many peaks andlows in the market since we opened ouroffice in 1970, it is misleading toequate the market in Marbella with thereal estate market in Spain. This wouldbe an oversimplification of the marketfactors at play here: as in manysub-markets, there are some factorswhich are comparable and many otherswhich are not.

As you no doubt have read in the press,there are almost a million unsold,new properties in Spain due to the over-construction and speculation which tookplace up until 2008. These propertiesare located in almost every single townthroughout the country. Of these unsoldunits, 90% are priced between€100,000 and €200,000, and ofteninclude apartments in poor locationswith few local amenities; the typical“concrete jungle” of high-density buildingin coastal areas which become ghosttowns in winter; or apartment blocks inunconsolidated areas where there will befuture construction, noise and dust foryears. This scenario bears little or nocomparison with Marbella.

What makes Marbel la di fferentfrom the rest of S pain?

1 . There are far fewer new propertiesfor sale in Marbella: as a result of 24years during which our MunicipalGeneral Plan was not renewed, therewas a shortage of new land being zonedfor construction, hence causing a

It is misleading

to equate the market

in Marbella with

the real estate

market in Spain

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freeze in building activity. The GeneralPlan was only just renewed in themiddle of 2010.

2 . Marbella is, fortunately, a marketthat is not only a local market, andan active local market at that, butalso a regional market, a nationalmarket, and especially an internationalmarket… four markets in one.

3 . Marbella is known the world overas a “Quality Destination” and quality,consolidated markets have reacted farbetter to the general crisis in Spain andother countries in the sense that therehas been less price reduction andmore market movement. Qualitydestinations attract the more discer-ning tourists, and this summer hasbeen the best year for five-star hoteloccupancy in Marbella since 2007, aswell as a record monthly numberin August, of 7.64 million foreigntourists in Spain itself (Diario Sur23.09.11). There is a proven correlationbetween the increasing number oftourists and increasing number of realestate sales in the same area.

4 . As much as anything else, Marbellahas become a really glamorous place tolive again, with an efficient, honest local administration, and with a new

General Plan providing a legal securityfor property owners that was missingin the last decade.

Recent market movement

Despite the bad economic news, therehas been important market movementin the past several weeks. In the monthof August 2011, usually a low monthfor property enquiries, Panorama had ahistoric record number of 178 newclient enquiries from all sources. Also,we have received enquiries and madesales in the past several months frommany people and previous clients whohad sold their properties some yearsago and who wish to come back to the

“new” Marbella and buy again, takingadvantage of the great opportunitiesthere are in Marbella today.

Obviously some are deciding that thetime is right to purchase here: themarket appears to be getting a littlestronger, but why, and especially withsuch overall dismal economic news?There are three basic possible reasons:

1 . When the stock market goes downand a bear market is upon us like itis, many sell a good part of theirportfolios and invest in property as a“safe haven”. With interest rates athistoric lows, where else does one putone’s money?

2 . Printing money, as governmentshave done in the past three years,always results in inflation. Not justright now, maybe not for a few years,but it will come in the not-too-distantfuture – all the professionals predict it.The best hedge against inflation isinvestment in well located, wellbought real estate.

3 . Some buyers have been waitingthree years or more for prices to dropto their lowest levels and many havedecided that the time is right topurchase now. This means that there is

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Marbella is a market

that is not only a

local market, and an

active local market at that,

but also a regional

market, a national market

and especially an

international market

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unquestionably a “pent-up” demandfactor in the current market. We shouldnot forget that the major reason formost people buying property inMarbella is the very special“life-style” that can be enjoyed here:there are clearly a lot more thanpurely monetary and investmentconsiderations coming into play inpurchasing a residence in an incrediblearea such as ours.

Where are the prices today?

As we all know, the speculative highprices throughout Spain and much ofEurope peaked in 2006 and 2007 andthen the “bubble” burst. Marbella is noexception to this. Actual selling priceshave easily descended by 30% or more,especially in properties priced under€1,000,000. Imagine a property locatedin one of Marbella’s many greatresidential areas, priced in 2007 atbetween €500,000 and €800,000 – youcan buy one today for somewherebetween €300,000 and €500,000! Andon the mountain side of the Golden Mile,between Marbella and Puerto Banús,there are apartments available from€250,000 up to several million Euros.

The more expensive properties havealso come down in price, but onlymuch more recently. Sellers of theseproperties are finally accepting thefact that their properties are simplynot worth, in today´s market, whatthey thought they were, and most arenow adjusting their prices accordingly.Hence, many of the previous passivesellers have now become active sellerswho simply want to “close and moveon”. Even some of the higher priced,up-market properties over €3,000,000have started to move, with somewherebetween 25 and 30 having been soldso far this year, a sign not only ofmore flexibility in the asking pricesbut also a re-emergence in themarketplace of the high-end Spanishand international buyer clients.

In the under €2,000,000 price rangethere are also plenty of opportunitiesto purchase older properties forrefurbishment. These properties areusually very keenly priced as theowners simply wish to move on andnot invest further in the home, andthey are usually a lot cheaper thanbuying a plot of land (if you can find agood one) and building on it.

S ome properties are simply notbeing replaced

Because of the limited supply, we arebeginning to notice that thoseproperties being sold in the moreexclusive, high-demand residentialareas are not always being replacedwith similar properties at similarprices. For example, last winter therewere five or six sales of apartments inthe highly sought-after apartmentcomplex “Marina Puente Romano”,situated next to the Puente RomanoHotel, with real, after negotiationselling prices from €550,000 to€625,000, in the rear of the complexwhere the least expensive units arelocated. Right now we have nothingon our books in this price range in this

The more expensive

properties have also

come down in price,

but only much

more recently

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particular development, and we havejust received a new instruction at anasking price of €700,000. Why are theprices holding up there? Quality oflocation, limited supply, sellers whodo not really need to sell and can holdout for a better price, and higherdemand for these quality areas.

Unrealistic offers are not gettingserious consideration from sellers

As a buyer, the key to a potentiallyeffective negotiation is to offer a price(if you believe the property is worth it,based on your research and agent’sguidance) which will sound out theseller as to his bottom price but which,at the same time, will engage hisinterest and not be so low as to annoyhim. A good agent is invaluablein this process.

We continually get “offers” fromclients who view properties whichmight have already been reduced intheir asking prices by around 30% oreven more, with more room fornegotiation, which are along the linesof “offer them half of their presentasking price”. In fact, these are notreally offers, nor have those tryingto make this sort of offer reallyresearched the market carefully, nor dowe know of any who have succeeded.It is true that “cash is king” today, butreal selling prices have not descended65% from prior asking prices, as somewould like to believe, nor will theyever reach these levels. Real sellingprices have descended, however, closeto levels of 8 to 10 years ago in manyareas, less in the very prime areaswhere properties are not reproducibleand where there are very fewproperties for sale.

In a Nutshel l…

Despite recent activity, the essentialtruth of today’s market is that nopro perty is selling which is notperceived by the buyer as a very gooddeal. Owners who are successful inselling are pricing their propertiesvery aggressively, with a margin fornegotiation. The good news is thatthere are a surprising number of buyers

Owners who are

successful in selling

are pricing

their properties

very aggressively, with

a margin for negotiation

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out there looking for the “special”property at a great price. And sales arebeing made in all price categories,every single day.

Big Investments are returningto Marbel la

Highly illustrative of the renovatedimage and renewed popularity ofMarbella is the tremendous vote ofconfidence given to the city by therecently announced €400+ millioninvestment in an amazing portcomplex, to be made by a consortiumheaded by Sheikh Abdullah ben NasserAl Thani of Qatar. This new facilitywill be located in the place of thecurrent fishing port and marina of LaBajadilla, just below the USP clinic and

within the Marbella city limits. It willbe the most significant tourist facilityof its kind built in the MediterraneanBasin in the last 40 years. Thearchitects’ preliminary planning canbe seen on the following link:http://jetcommunication.net/

Construction is said to begin in 2012and the first phase should be operativewithin three to four years. Thisamazing, high tech port will comprisesome 858 berths, two berths for cruiseships up to 175 meters in length,leisure, restaurant and shopping areas,a five-star hotel and undergroundparking for 450 cars. Good competitionfor Puerto Banús, and a magnificentaddition to the splendor of ourbeautiful city!

In addition, according to press reports,an agreement for a further project toestablish an International BusinessSchool in Marbella has just beensigned between the Mayoress and thecompany Nest Investments Ltd. ,headed by Jordanian Ghazi Abu Nahl(Diario Sur 11.10.2011)

Highly illustrative of the

renovated image of

Marbella is the tremendous

vote of confidence given to

the city by the recently

announced €400 million

investment in an amazing

port complex

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Average number of propertybuyers in 2011

Big money is in good company. Manypeople are buying homes in Marbellaevery single day. So far in 2011, therehas been an average of 214 propertybuyers in the Marbella area (includingBenahavis) every single month thisyear, according to the Ministry ofPublic Works published statistics.(http://www.fomento.gob.es/)

Why choose Marbel la?

I personally chose Marbella not onlybecause it is a great place to live, toraise my children and to exercise myfamily profession but also because ofthe phenomenal mix of cultures thatco-exist here. There are many alternativeresidential resort locations around theworld, and Marbella is certainly not foreveryone. However, the importantquestions one should reflect upon whenconsidering buying a second orretirement home abroad today are:

• Does it offer a 12-month season, witha wide variety of year-round cultural,leisure and sporting activities,including a wide range of golf courseswithin easy reach? Or is it seasonaland totally dependent on its “high-season” climate?

• Does it provide a high level of publicand private services, includinghospitals and health care centres?

• Infrastructures: are there goodnational and international transportnetworks? Are electricity, gas, watersupplies reliable and sanitationsystems efficient?

• If you have children and are thinkingof residing permanently, are thereinternational schools at hand? Doesthe country have any prestigiousuniversities?

• Is it safe? Can you walk or drivearound at any time of the day or nightwithout fear? Do police support andapply civil government laws andprinciples which protect nationals andforeigners in the same way?

• Is there political stability to ensurethat civil rights are respected no matterwho is in government? Is there respectfor human rights, regardless of race,creed, or gender? Does it enjoy theprotection of the European Union?

• Are there other towns and cities ofcultural interest within a comfortabledriving distance such as we have here inMarbella, for example: Gibraltar,Málaga, Seville, Granada, Córdoba,Puerto de Santa María, Ronda, theAndalusian white villages, and the totalculture change of the incredible andbeautiful country of Morocco, just a ferryride away? And snow skiing in thewinter, two and a half hours distance?

• Are there over 40 golf courses withina 45-minute drive?

• Are there frequent direct flights fromother major cities in Europe? Do youhave a long journey by secondaryroads after you arrive at the airport?

• What is the social life like? Are therepublic events, concerts, glamorousgala nights, “buzz” if you feel like it?

Think about it. Marbella offers all thecorrect answers to the above questions,and offers much more besides. Howmany places in the world can match theMarbella of today with respect to theabove criteria?

The present municipal government isgetting increasingly acknowledged ascompetent and efficient, with excellentlocal services and infrastructure, newimportant investment and extremecare given to environmental issuescompared with the past. All thesefactors are clear harbingers of abrilliant future for our city. It is clearthat Marbella is no longer the townthat it was in the early 70’s, but whatcity is? Evolution is inevitable andthere will be good things accompaniedby the not so good. On a balance,however, few would deny thatMarbella remains today among thehighest quality resort cities in Europe,and looks to remain so for sometime to come.

Copyright © 2011 Panorama Properties

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