The Costa del Sol property market is going global. Let’s take a look at some of the reasons why the real estate market continues to boom despite the pandemic’s setbacks.
Costa del Sol
In a period so affected globally by the Covid crisis, at Spain Life we thought it would be important to look at the Marbella property market as restrictions on life, travel opens up again and there are clear signs that demand for real estate is growing.
Between 2014 and 2019 the real estate sector in Malaga has experienced very significant growth in the number of homes built and homes sold.
According to statistics from the Official Association of Architects of Malaga, in 2014, 509 free rental and new build homes were approved, and in 2018 that number rose to 7,376. Moreover, the volume of purchase and sale transactions increased from 3,850 million euros in 2013 to more than 6,303 million euros in 2019 (Ministry of Public Works, 2020).
Malaga has become the second-fastest-growing Spanish province in terms of housing construction and transaction volume. The latter represents around 45% of the total number of transactions in Andalusia.
The Luxury Real Estate Market is More Active than Ever Before
Since the lockdown was lifted in June of last year, there has been an unexpected, even exceptional, the volume of property sales and purchases. In 2021, the luxury sector of the real estate market (i.e. properties valued at more than €1M) has been accelerating every month high than the last.
The luxury real estate market, rather than being negatively affected as most would have anticipated, has thrived, far exceeding all expectations.
This increase in demand, which has been growing at an almost frenetic pace, has been the direct consequence of the coronavirus pandemic, as confirmed by our statistics and those of most real estate agencies specialising in the high-end market.
With the real estate market being so active despite the mobility restrictions between European countries, it appears that this wave of sales and purchases is only just beginning, and is an extraordinary and positive indicator of the market we will see in the coming months, as travel restrictions continue to relax.
Other Reasons Why the Market is Looking Up
Although Marbella is traditionally a second home tourist town, we have observed that many of its current owners have decided to make their second home their primary residence, spending more time in the area.
The Andalusian government has reduced the transfer tax by up to 3%, setting a single general rate of 7%, and has reduced the stamp duty tax from 1.5% to 1.2%, as an interim measure until the end of 2021, with the possibility of extending this reduction in the future.
Inheritance and gift tax was already virtually eliminated in April 2019, making Andalusia one of the most fiscally favourable regional governments in Spain. Important tax reductions are also pending approval by the regional government. These tax cuts will certainly help to boost property sales in the region.
Mortgage interest rates have remained at historic lows. Even those with high purchasing power who buy homes in the area are benefiting from these low rates, as it is more profitable for them to invest their money in their businesses.
This is happening not only in our area but throughout the country: the month of March 2021 closed with a high number of 10-year mortgages granted in that month alone.
According to Bankinter, a 15-year mortgage taken out by a resident in Spain in June 2021 would accrue approximately the following interest rates: Fixed-rate: 1.30%. Variable-rate: first-year: 1.75%, following years Euribor (currently at -0.485% negative) + 0.99%. Non-residents would pay a fixed rate at 2.25%, and a variable rate: first year: 2.50%, and the following years Euribor + 1.75%.
There is another interesting conclusion to be drawn from this increase in real estate sales and purchases since the beginning of the pandemic: that the acquisition of real estate is being perceived worldwide as a “safe harbour” investment in these uncertain days and, without doubt, much safer than stock market shares or other investment alternatives.
What’s more, it is a fundamental investment in the quality of life that many can afford today.
Could Brexit Cause Any Upset?
There is a long term relationship and indeed a love affair between the UK and the Costa del Sol, and this seems unlikely to change.
The respective governments will eventually work together to ensure that Brexit does not produce lasting damage, and the desire of British buyers to obtain residency status in Spain could provide a boost to the property market.
However, today more than ever, we are not reliant on a single market but are also seeing rapid growth in markets such as Poland, Estonia, Canada and the United States.