Property Market forecast trend for 2023-2024 Marbella and Costa del Sol
Spanish Economy: After finishing 2022 with a GDP growth of 5.5%, one of the highest in Europe, Spain expects a considerably less buoyant year. In March, the Bank of Spain forecasted a growth of 1.6% for this year, and the European Commission predicted a slightly lower growth of 1.4%. Both figures are, however, above the expected Eurozone rate of 1%. Current forecasts for Q1 growth are between 0.3% and 0.5%.
Spanish Inflation: After most of 2022 with rampant inflation, 2023 has had a more moderate start in Spain. March recorded a figure of 3.3%, the lowest monthly rate since August 2021. However, core inflation continues to grow, standing at 7.5%, mainly driven by the rise in food costs.
Interest Rates: Unlike inflation, the Euribor shows no immediate signs of falling and is currently approaching 4%. Most analysts believe it will rise to 4% sometime in the near future, although many predict this percentage will be the highest this year.
Much will depend on the evolution of the economy in the Eurozone, future developments in the ongoing war in Ukraine, and unknowns like further banking disruptions on par with Credit Suisse.
Certainly, the number of mortgages taken out in Spain has decreased over the past year, indicating a market slowdown. However, according to the Malaga Real Estate Observatory, OMAU, 45% of Costa del Sol buyers purchase without a loan, suggesting the market is less affected by interest rate hikes.
Property Sales in Costa del Sol – Q1 2023: Official statistics from Registrars and Notaries for the first quarter of the year have not yet been made public. However, those from the Spanish Institute of Statistics (INE) are available for January and February.
According to these figures, there were 5,767 transactions throughout the province during those two months, with 3,042 sales registered in February alone. This total represents a 14.4% decrease compared to the same period in 2022.
However, we believe it’s worth noting that more than 108 properties changed hands every day in Costa del Sol during February. Undoubtedly, a slower pace, but perhaps not what moderation experts had in mind when making their predictions for 2022.
Key Takeaway: The appetite for property in Costa del Sol seems to remain strong, and transactions have accelerated since the last quarter of the previous year.
Property Prices in Costa del Sol Q1 2023: Spain does not publish official sales price statistics; most of the available ones are based on valuations or online portal asking prices. However, different sources provide a general overview of the situation. They also show that the general trend of prices in Costa del Sol continues to rise.
- Tinsa (based on valuations): The company’s first-quarter report revealed that property prices in Costa del Sol increased by 7.6% year-on-year, averaging 1,977 € per square meter. Quarterly, the increase was 1.2%. Tinsa also estimates that prices are still 22.6% below the 2007 peak and 47.2% above the low. Tinsa found that Costa del Sol property prices had gained the most ground in Spain after Madrid and Barcelona.
- Gesvalt (based on valuations): According to this valuation company, prices rose by 11.5% year-on-year up to Q1, reaching 2,419 € per square meter. This increase was the highest in the country, and the average price is now the fourth most expensive in Spain, only behind Guipúzcoa, Madrid, and the Balearic Islands. However, regarding the quarterly change, Gesvalt reports that prices only varied by 0.3% between the end of December and March.
Marbella was, once again, the most expensive place in Costa del Sol to buy a property, with an average valuation price of 3,343 € per square meter. It ranks as the second most expensive city in Spain with more than 50,000 inhabitants. The average price in Benalmádena, Estepona, Fuengirola, Mijas, and Torremolinos exceeded 2,000 € per square meter.
- Idealista (based on asking price): The real estate portal calculated the average price per square meter at 2,849 euros in March, equivalent to a yearly increase of 13.9%. This figure ranks among the highest in Spain, indicating that homeowners are capitalizing on the still strong demand.
- OMAU (based on asking price): According to the quarterly report, prices rose by 4.16% in Q1 of this year compared to Q4 of 2022. The average stood at 3,759€ per square meter. Marbella recorded the highest price at 5,501 € and also the highest quarterly increase (5.6%). Estepona had the second most expensive property in Costa del Sol with prices averaging 3,192 €, although OMAU reports that prices only rose by 0.6% in the last quarter.
Costa del Sol Prices in April 2023: Several places in Costa del Sol surpassed the average price increase in the area at the beginning of this year. According to Idealista, many recorded double-digit increases, for example:
- Benahavís: Prices rose by 7.5% to 3,981 € per square meter, slightly below the Q4 2022 increase.
- Estepona: Values continued to rise by 19.3% to 2,993 € per square meter.
- Manilva: Prices skyrocketed by 18.8% to 2,149 € per square meter.
- Marbella: Values increased by 18.6% to 4,138 € per square meter.
- Sotogrande: Housing prices continued their upward trend, rising by 7.8% to 2,723 € per square meter.
All five locations, except Benahavis, also experienced strong quarterly growth in Q1. Only in Marbella did prices see a 4% spike between December and March.
International Market in Costa del Sol: International buyers have traditionally played a significant role in the Costa del Sol real estate sector, and Q1 seems to have been no exception. OMAU reports that foreigners represent 34% of the market, an unusually high share that underscores the interest in Costa del Sol real estate from abroad.
Key Takeaway: Properties in Costa del Sol remain as popular as ever among international buyers.
Rental Market in Costa del Sol: The lack of long-term rental properties in Costa del Sol was the main story of Q1 this year. According to Idealista, while supply in Spain fell by 5% in Q1 to its lowest level since 2016, in Costa del Sol it plummeted by 15%, one of the country’s largest drops. In Malaga’s capital, the deficit was considerably worse, with 27% fewer homes available in the first three months of the year compared to the same period in 2022.
Meanwhile, rental rates continue to spiral upwards. According to Gesvalt, rents in Costa del Sol were 14.7% higher at the end of March than a year earlier, averaging 12.6 € per square meter, one of the highest in Spain. The quarterly rise was nearly 3%.
Once again, rental properties in Marbella saw their prices soar to an average of 16.70 € per square meter. According to Idealista, rents rose by 22.1% year-on-year. The situation was considerably worse for tenants in Estepona, where rates skyrocketed by 34.9% year-on-year, with a 10.8% spike just in Q1.
Key Takeaway: Supply shows no signs of growing, so tenants can expect pricier rates, and landlords buying to rent can expect better returns.
Market Outlook for the Rest of 2023: Given the weight of foreign buyers and investors in Costa del Sol, coupled with the lack of supply, it seems unlikely that prices will halt their upward trend. On the contrary, we expect them to continue rising. However, we anticipate a slightly less steep curve in the coming months based on quarterly figures.
In terms of sales, we are currently in the high season for buying, and February’s figures indicate an active market despite higher interest rates. We believe we are looking at between 80 and 100 daily sales in Costa del Sol for most of this year.
Tourism, the area’s main economic driver, is currently above pre-pandemic levels. For instance, Malaga airport welcomed nearly 1.5 million passengers in Q1. This figure represents a 25.1% increase compared to the same period in 2022, but more significantly, a 9% increase compared to 2019. Flight operations were 11.4% higher, indicating that Costa del Sol is facing a record year. Based on these figures, we believe the real estate market will reflect at least some of this activity.
Conclusion: The Costa del Sol real estate market continues to defy expectations, with prices and sales remaining strong despite broader economic challenges. The region’s appeal to international buyers and investors remains undiminished, and the outlook for the rest of the year is positive.