The changes in tax and legislation, the start of the approval process of the new General Municipal Ordinance Plan (PGOM) and the price increase of luxury properties in Marbella has consolidated this Costa del Sol area as the top luxury destination in Europe, according to the Marbella Real Estate Report released annually by Diana Morales Properties, local representative of the international real estate consultancy firm Knight Frank.
Marbella has evolved from being just a tourist destination for golfers and pensioners and has become a permanent residence for many families with hybrid work formats that demand quality of life, infrastructure, prestigious international schools and accessibility to other major European cities.
The report mentioned above reveals that while in other cities the recession, as a consequence of the Russian invasion of Ukraine and the rise in interest rates, has begun to take its toll, “Marbella has emerged stronger, showing growth figures well above those of its competitors, and continues to establish itself as one of the preferred locations not only by those seeking holiday homes, but also for those who wish to take up residence.”
Luxury property prices in Marbella rose 7.1% last year, according to Knight Frank’s Prime International Residential Index (PIRI 100).
Regarding the sales transaction volume in 2022 in Marbella and its area of influence (the well-known Golden Triangle that it forms part of along with Estepona and Benahavís), was up compared to the previous year for both resale properties and new build. However, the quarterly data from the Ministry of Development revealed a significant slowdown in new build property sales. This was most apparent in the municipality of Marbella with quarterly sale figures of new homes decreasing in the last three quarters to 265, 50 and 30 properties respectively. Meanwhile, on a comparative basis, sale figures of second-hand homes remained consistent throughout the year.
Regarding the outlook for 2023, and despite being in an era of uncertainty with the threat of the energy crisis produced by the war, and the financial storm originating in Silicon Valley that could undermine the sustained growth enjoyed during the post-Covid period, “as a result of the solid performance of the market over the past two quarters, “there is every reason to believe that 2023 will see another fairly healthy year for real estate on the Costa del Sol in general, but particularly for Marbella.”
Pia Arrieta Morales, Managing Partner of DM Properties, highlights that “Our outlook for 2023 could be best described as cautiously optimistic, and where transaction volumes appear to have slowed, buyers have been spending more on property.” Also, “it is expected that the legal limbo which Marbella´s urban situation finds itself in, currently operating on the basis of the 1986 PGOU, will conclude at the end of the year, providing urban planning security on land pending final approval for development, which will attract investors and developers looking for business opportunities in the city”, she states.
The general situation
Following the post-Covid real estate boom, it was expected that in 2022 everything would return to normality. However, this couldn’t have been further from the truth.According to Knight Frank’s PIRI 100, 2022 posted the highest level of prime price growth on an annual basis (5.2%) since the global financial crisis.
As highlighted in Knight Frank’s Outlook Report 2023 and the HNW Pulse Survey, everything points to an increase in real estate investment. Whether for the perceived inflation hedge, diversification benefits or as a boon in times of uncertainty, a third of HNWIs are looking to increase their residential holdings.
Spain is in the top 3 chosen locations for purchasing homes for the world’s wealthy. This was revealed in Knight Frank’s annual Attitudes Survey.
In 2022, the number of property transactions in Spain was the highest in the last 13 and a half years, with 646,241 sales which represented an increase of 14.5% in comparison to the year before. However, the year has had two different parts, with a very favourable first half followed by a gradual cooling of the market in the second half, setting up excellent results for 2022 as a whole, but with less promising expectations for 2023.
With regards to Andalucía, international buyers represented 15% of all transactions, approximately 3.5% higher than the previous year. Similarly in the province of Málaga, British buyers accounted for 16.31% of all purchases made by foreign buyers last year, with Swedish buyers in second place representing 8.82%, a decrease from 10.28% in the previous year.
In the province of Málaga, in 2022, more than a third of property sales (33.5%) were to foreign buyers, resulting in an increase of 6.12% in respect to the previous year. According to the Association of Property Registrars, the UK (16%) continues to lead among the nationalities of buyers, followed by Sweden (12%) and the Netherlands (8%).
In Marbella, a continued increase in buyers from Eastern Europe (Poland, Slovakia, Hungary and Czech Republic) is being noted. Last year DM/KF recorded sales to buyers of more than 18 different nationalities, with a noticeable increase from Polish buyers. In stark contrast with global reports of buyers of luxury properties getting younger, in 2022 the average age of their buyers stood at 55.
What buyers are looking for
DM Properties has identified specific trends from international buyers, stating that they have not changed much since previous years, but noting that more and more buyers are looking for newly built properties that are ready to move in, without the need for further worries. The top 3 nationalities that chose to buy a new build property in Spain in 2022 were Belgian (24.5%), followed by Dutch (21.9%) and Polish (21.3%).
At a local level, It is important to note that when it comes to second-hand property, Marbella continues to be more in demand than its neighbouring towns whereas Estepona takes the lead in new build properties, where most construction has taken place in recent years due to availability of land and smoother processes in obtention of building licenses.
Another trend to highlight is the ‘turn-key villas’ sector, where buyers want to have a ready-to-go property instead of having to go through a refurbishment process. These villas, which were traditionally harder to sell than apartments, have been selling well in prices up to 2 million euros, whilst those in mid to high price range are still more challenging to sell in their construction phase. Security, ample spaces, services and amenities within 5-star resort-type developments are some of the buyers’ most demanded aspects according to said report, as well as a sustained commitment to Branded Residences, with the increasing presence of internationally recognised luxury brands.
New tax advantages
One of the new featured sections this year in the DM Properties | Knight Frank Marbella Real Estate Market Report is the impact of tax changes and the implementation of the “Startup” Law (Law for the Promotion of Emerging Companies) in Spain at the end of 2022, with new tax regulations that benefit foreign digital nomads and newly established companies.
This new law includes important tax measures, eliminates bureaucratic obstacles and makes the procedures to create and invest in startups more flexible. It also offers incentives to attract international talent and recover local talent, encouraging remote workers and digital nomads to establish themselves in Spain. Important tax advantages are also introduced, such as the reduction of Corporation Tax and Non-Resident Income Tax. The elimination of Wealth Tax in Andalucía which was previously applied to the net value of Spanish assets for non-residents, and to global assets for residents, above 700,000 euros in accordance with a progressive scale of up to 3.5%.
However, a similar tax has since been reintroduced by the central government: Billed as a temporary measure, a new “Solidarity Tax” is being levied on net assets of €3 million-plus, although Spanish resident taxpayers may apply a €700,000 reduction and an additional €300,000 is deductible for primary residences. In those regions in Spain where Wealth Tax is still applicable, the Solidarity Tax will only be charged if the rate exceeds the Wealth Tax due.
It has been shown that, after the pandemic, Marbella has firmly maintained its position in the spotlight as an investment destination and place of residence for citizens of Northern Europe, consolidating itself in 2023 as an unparalleled investment hot spot, with a flourishing real estate market, a prosperous tourism sector, a favourable economic climate and offering an attractive lifestyle.
