Costa del Sol Leads The Way
The Spanish property market shows signs of having found a floor after seven years of declining sales, but the Costa del Sol can boast of more than just touching bottom, with home sales up 36 per cent over 12 months to the end of June.
There were 1,858 homes sold in Malaga province in June, according to the latest figures from the National Institute of Statistics, a dramatic improvement on a year ago.
The overall Spanish property market also expanded in June, growing by 10 per cent, but the Costa del Sol property market performed much better in comparison, largely thanks to foreign demand. On a monthly basis the overall market shrank by 7 per cent, and is still 62 per cent smaller than it was in the peak year of 2007.
Cash-rich foreign investors taking advantage of lower prices are the story behind the figures. A new report on the local market prepared by Aguirre Newman, a real estate consultancy, confirms that foreign demand has been strong this year, and is the driver behind the the improving sales figures on the Costa del Sol. According to their research, 90 per cent of foreign buyers have their own capital and do not need mortgage financing, in contrast to Spanish buyers, 85% of whom need a mortgage to buy an apartment on the Costa del Sol.
Aguirre Newman also looked at the supply of new homes on the market on the Costa del Sol, counting 266 new developments on the Coast, 207 of which were actively being sold, 26 were stopped, and 33 were sold out during 2013. They found that 41 per cent of new developments for sale were controlled by banks or the Sareb (Spain’s so-called ‘bad bank’), rising to 54% if the developments where work has been halted were included.
There was a slight increase in the number of new developments being started on the Costa del Sol, with four new developments being started in 2013. In contrast, not a single new development was started in the preceding three years. With foreign demand now growing, this suggest it’s only a matter of time before there is a shortage of the kind of new homes that people want to buy.
The overhang of empty homes remains one of the biggest issues facing the Spanish property market, but many of those homes might be unsaleable. On the Costa del Sol, the number of new homes for sale fell by 18% in 2014, from 18,485 to 16,508 homes, but 30 per cent of new homes on the coast still remain unsold, and could prove difficult to shift given their quality and location.
Of course a few months’ positive sales statistics don’t mean we are entering another boom on the Costa del Sol. After a strong July, some agents report that August was disappointing for sales, and buyers in all price brackets are still very price sensitive.
For the time being it looks like the market will continue to diverge along quality lines, with attractive properties selling well if the price is right. For their part Aguirre Newman forecast that holiday-home prices in the best areas close to services and amenities will stabilise in 2014, but continue to fall this year and next in less attractive locations, thanks to the excess inventory and weak demand from local buyers.