The market demand in 2021/22 represents an incredible increase of 30.15% of sales over the pre-pandemic year of 2019
The market demand in 2021 represents an incredible increase of 30.15% of sales over the pre-pandemic year of 2019. It should be noted however that the sales figures in the Marbella area even in the pandemic year of 2020 were nonetheless surprisingly strong. The pandemic in fact convinced a large percentage of buyers, some of whom had been waiting for years to purchase a property in Marbella, that the time had finally come to fulfil their dream and start enjoying the incredible lifestyle that this beautiful part of the world has to offer.
BILLIONS OF EUROS INVESTED INTO THE MARBELLA AREA
In 2012 the Marbella property market began to recover from the 2008 crisis with a surge of purchases due to a serious pent-up demand, which had built up over the prior five years of recession. This demand was led not only by normal end-users but also by all types of investors and property developers, from the individual developer refurbishing or building one home, to those building groups of five or ten villas or larger developments including apartment projects, to major international funds building entire gated communities who for the first time started to invest heavily in the area.
Consequently, the Marbella area has seen thousands of new homes being built with investments of billions of Euros. Additionally, refurbishment and modernization of older properties has taken place in all of the different neighbourhoods in the area.
Many of these investors who placed their confidence in the future of the Marbella area have designed, built and sold amongst the highest quality properties of their type anywhere in the world. The key word now is quality, and never before has Marbella seen such a wide variety of homes that are being built with world-class design, technology and qualities of finishes.
AN EXPLOSION OF SALES OVER €4,000,000
It is in great part due to property developers’ confidence in producing world-class homes that the market for properties over €4,000,000 has exploded since the pre- pandemic years. We estimated that in 2018 there were at least 65 properties sold at or above this price, growing to over 120 from mid-2020 to mid-2021.
However, in the last year this figure increased further to reach in the area of 150 properties sold at or above this price category. Sales of properties over €4,000,000 are now commonplace, including many sales over €10,000,000. This is one more indication of the strength of the market and the appeal of this special area of Europe to the most affluent buyers.
PRICES ARE RISING
With inflation the highest it has been in decades almost everywhere in the Western world, a drastic increase in direct construction costs calculated at 23,5% in 20216, and a demand for properties clearly in excess of supply, it is inevitable that property prices have risen, and will continue to rise in the near future.
While demand has risen significantly across the board, it has risen much more so in the luxury segment of the market, and this phenomenon is not just exclusive to the Marbella area or Spain, but is happening all over the world.7 A stark decrease in luxury housing inventory coupled with increasing buyer demand for this sophisticated type of property is driving prices of luxury real estate upwards everywhere8 and causing a historic increase in the sale of properties that are off- plan or under construction.
Fortunately, as the supply of resale properties becomes more limited, there are new projects coming on the market all the time: the Marbella Town Hall reports that building licenses for more than 1,000 properties were granted in the course of 2021.
As mentioned in last year’s market report, many projects were put on hold in 2020 at the height of the pandemic lockdowns. Most of these have resumed development, and now between 250 and 270 major projects are planned for development along the Costa del Sol over the next few years. These new projects, coupled with the many smaller projects about to receive building licenses, will no doubt help keep a supply of new properties going, necessary for the increasing demand, even though we expect the market demand to continue in excess of supply in the near future.
The real estate portal Idealista has estimated the increase in average asking prices in Marbella from May 2021 to May 2022 to be 15.8%, with an average asking price throughout the municipality of €3,658/m2 (compared with €2,604/m2 for the whole province of Málaga). As always, intrinsic market mechanisms and the law of supply and demand will control how much prices can rise in the future. Up until now, however, with the demand at mid-year continuing unabated, buyers are clearly finding prices reasonable compared with other luxury destinations.