Luxury Real Estate Market Marbella, Spain.

Limited inventory, strong international buyer demand, and high net worth individual’s increased appreciation for world class lifestyle offerings have pushed prices for luxury homes toward historic highs, a new study shows. The research from Christie’s International Real Estate compares the world’s top property markets including London, New York, Hong Kong, Paris, San Francisco, the Cote d’Azur, Toronto, Marbella, Los Angeles, and Miami, to produce the firm’s first global indicator for luxury residential real estate.

Costa del Sol Real Luxury Estate Market outlook.

Luxury property market driven by scarcity and foreigners.

KEY MARKET INDICATORS: Market demand, supply and prices The 2022 sales boom of properties in all price ranges in Marbella, Estepona and Benahavís – the “Golden Triangle” – broke all previous records with a 20% year-on-year increase in sales volume. The same happened throughout the country, with overall real estate investment in Spain up by one third compared to 2021 to reach €17.5 billion, a figure never before seen in Spain.

Sales of luxury properties in Marbella grew by up to 20% in the highest segment of the market during the last year. This trend was reflected across the Costa del Sol, Spain, where real estate investment increased by a third from the previous year, reaching more than 17.5 billion euros.

Unfortunately, official statistics simply do not provide all the information which would be helpful in compiling this report, such as numbers of sales in different  price categories, or even purchases off-plan or under construction. In these cases, we have to analyze the market more by tendencies, trends and informal interviews with other local agencies. Sharp increases in interest rates in Spain and throughout the western world in the fourth quarter of 2022, as well as the preceding months’ record market highs, led to a peak in sales volumes on a national level, as well as in the Marbella area. But while the increase in interest rates has made buying homes more expensive overall, fewer than 10% of property purchases are made with a mortgage in Marbella’s luxury end of market – which we define as those properties with selling prices in excess of €2 million. In fact, in 2023 so far, we are observing that the sale of luxury properties is even stronger than in 2022, with some agencies reporting an increase in sales of up to 20% in the highest-end of the market. We observe a similar continuing surge in prime and ultra prime real estate in London, Dubai and Miami.

In the chart above, we have compared first quarter sales statistics of the last several years, where the sales in the first quarter of 2023 still exceed those of pre-pandemic levels by 18%, clear evidence of a continuing strong market.

A shortage in Supply.

According to the most important Spanish real estate portal, Idealista, the number of properties for sale on their portal has dropped on average 6% in the province
of Málaga during the last year. A study performed by Idealista found that the stock of properties for sale in Marbella dropped on average by 8.83% from the first quarter of 2022 to the first quarter of 2023, and up to 40% in certain key, prime or super prime areas. Clearly, and in accordance with the laws of supply and demand, a diminishing stock of properties coupled with an increasing demand always leads to an increase in asking and selling prices.

Evidence of the shortage of new or refurbished properties for sale is the relatively small number of building projects approved in Marbella last year. Of the 7,075 residences approved by the Colegio de Arquitectos of Málaga in 2022, only 690 were for Marbella, whereas in Estepona there were 1,067, Mijas 909 and Benahavís, 157

Without a doubt, the main reason for the reduced number of project approvals in Marbella is the lack of fully-zoned building land, a problem dating back at least a decade. This has not only driven up fully-zoned land prices but also pushed property developers to buy development land in Estepona or Benahavís
instead. Even though new, fully-zoned development land will come on the market with the definitive approval of the new general zoning plan of Marbella, expected in 2024 (already initially approved on 30 March, 2023), the time necessary for the development process indicates a likelihood of a continued shortage of properties for at least three, or four, more years.

Increase in Prices.

Asking prices in all price categories in Marbella have risen, on average, by about 15% between June 2022 and June 2023, reaching a new all-time high of €4,233/m2– approximately double the average asking price per m2 of 10 years ago. Although this figure does not represent real sales prices, it is an excellent orientation with respect to what the increase in real sales prices will have been on average in Marbella. Average price statistics are available for the whole province of Málaga, with the Property Registry noting price increases for the whole province at 3.4% for new properties and 11.2% for resale properties. Official
statistics for new properties are misleading, however, as they are only recorded when the title deeds are issued and therefore don’t include properties that are sold off-plan or under construction.

Prices Predictions.

Notwithstanding the enormous price increases of the past two years, there is hard evidence that Marbella prices, even at today’s levels, are very competitive: Of the 50 most costly municipalities in Spain, Marbella is only number nine on the list, which is headed by Sant Josep de Sa Talaia in Ibiza, at €6,295/m2.
Globally, Marbella is in 16th place, just ahead of Madrid and Dubai, as quoted in the Knight Frank 2023 Wealth Report, with Monaco leading as the most expensive city to buy prime property in the world, at an average sales price of over €50,000 per m2.
As a general rule of thumb, prices for new or refurbished luxury apartments in the Marbella area start at €6,000/m2 and go right up to €25,000/m2 in the most sought-after beachfront areas of the Golden Mile, sometimes even higher in the case of certain unique properties. Prices for new or refurbished villas, start in the region of €8,000/m2 and go up to €14,000/m2. According to an article published by the Bank of Spain in June 2023, despite the increase in mortgage interest rates, “due to the scarcity of new construction, the high costs of construction materials and the favorable financial situation of the different buyers in the market, the price of housing will continue to demonstrate resistance to decrease, in spite of the other variables in the residential market, such as sales volume or the number of properties approved for construction.” Even with the post-pandemic surge quieting down, and inflation decreasing to a core rate of 5.9% in June 2023, we believe that prices will continue to increase, but the increases in the coming months will be more
moderate.

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