Marbella Real Estate Market Report 202201 Jan 2023 | News and Updates
As I stated in the last real estate market report 2021, this past year, 2022, has been a record-breaking year in terms of growth in demand for real estate on the Costa del Sol, and specifically in Marbella.
In our last report we talked about two main macro-economic causes that directly affected the evolution of the real estate market in Marbella: low interest rates and the energy crisis. Well, it is in these two parameters that the biggest changes have occurred this year.
How do these changes affect the real estate market in general?
On the one hand, a significant increase in raw material costs has a direct impact on the price of living in general, driving up inflation and consequently construction costs. Therefore, as margins decrease, construction companies are forced to increase final sales prices, resulting in an unstoppable escalation of new house prices.
On the other hand, the rise in interest rates to try to contain inflation makes the price of money and therefore mortgages, which were so cheap in previous years, more expensive. The result of the rise in the price of money and mortgages is a reduction in the purchasing power of families who need financing to buy a home.
What is the result for the real estate market of this new scenario?
- New developments: a decrease in purchase demand in general due to the considerable increase in prices.
- Second hand properties: a decrease in demand from buyers who need financing. For buyers who do not need financing, it will probably still be interesting to invest as it is a conservative way to fight inflation.
Having said that, let us now turn to how this affects the Marbella market, which undoubtedly belongs to a small group of geographical areas that have peculiar characteristics.
How do these changes affect the real estate market in and around Marbella?
Of course, in Marbella, the consequences of this whole situation will undoubtedly be felt, but in a different way.
Let us analyse point by point the specific characteristics that make the real estate market in Marbella and the Costa del Sol different.
Buyer clients in Marbella are mostly Europeans between 40 and 70 years of age who are buying a property either as a second home to live in for several months of the year and even to work and send their children to school or as an investment to protect their money.
In many cases, this is a customer who does not need financing.
In addition, citizens from countries that were previously less common in the area, such as Estonia, Poland, Lithuania or Romania, are now investing in the Costa del Sol.
Therefore, not being dependent on the domestic market and demand being globally distributed means that the negative impacts are absorbed in a totally different way.
Marbella’s Garden City concept is one of the main post-covid reasons that, along with teleworking, although they have lost momentum, remain compelling reasons to invest or live in Marbella and its surroundings.
Big cities are no longer a priority for the general public and Marbella meets the requirements of a green, spacious city with an extremely warm and sunny climate and its location in the south of Europe and its good communications make it a star destination for long stays or even working remotely.
Marbella is still a small town, with an approximate area of 115 km2 and some 27 km of beaches and although in recent years it has been expanding towards its extremes, Benahavis and Estepona to the West and Mijas Costa to the East and today has a varied and quality real estate offer, the growing global demand has meant that since last year it has been confirmed that demand has exceeded supply.
Marbella Real Estate Market Report 2022, CONCLUSIONS
Focusing on the Marbella and Costa del Sol market let us review the points we have discussed.
- Rising interest rates will affect families needing finance to buy, especially the domestic client, with the international client being the least affected.
- Rising inflation and the poor performance of the stock market are encouraging people to protect their money by investing in bricks and mortar, especially in second hand housing.
- A trend towards a client profile with a higher age range and greater purchasing power continues to be confirmed.
- The concept of Marbella’s garden city is still in value.
- New technologies and teleworking are also important reasons to spend long periods of time away from the country of origin.
- The global demand for Marbella and the Costa del Sol means that the region does not depend on a single market or a single buyer profile, but on a multitude of them.
That said, it is unlikely that this is the preamble to a fall in prices in and around Marbella. What we are likely to see is a slowdown in price rises.
The selling price of new homes will continue to rise for the reason we have already mentioned, the increase in the cost of raw materials and also, in Marbella and in the luxury sector, demand will probably not decrease so the sector will be able to maintain its margins.
With regard to luxury second-hand housing, prices will remain high and will probably continue to rise, but at a lower rate than in the past.
In addition, the real estate market both locally and nationally has a very low level of leverage and this protects the stability of the sector against rising interest rates.
So, to the question, is this a good time to buy?
If you are an investor and do not need financing, it will be the best way to protect your money. In addition, the demand for rentals, both long and short, is high so you can get a good return on your investment.
Is it a good time to sell?
If you are an investor it is a good time to liquidate your investment. If it is your main home I would not recommend selling as you will have to put a lot of money on the table to buy something better. Waiting will not be an option either as rents are currently expensive.
We arrive at 2023 with a lot of inertia and also with a lot of uncertainty, pending events and knowing that in this global world everything has an influence.
I am convinced that the prominence and strength that Marbella has gained in recent years will be maintained over time and that this solid demand will not waver.
We wish you, on behalf of the whole Benarroch Real Estate team in Marbella, a healthy new year full of new projects.
Article by Brice Benarroch Mennessons01 Jan 2023
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