Christopher Clover/Panorama

Marbella has recently been under the spotlight in the national and international press, where the property market is being analyzed. Differing viewpoints from valuers, estate agents and developers offer sometimes conflicting perspectives. And then there are the actual buyers and sellers who, at the end of the day, are the driving force behind the market.

The statistics, in general, state that property prices are still going up (17% last year on a national level, according to the prestigious valuation company TINSA) (Diario Sur 19/02/05), and even more on the Costa del Sol), with a record number of new homes being constructed on a nationwide level of 675,000 units.

Price increases slowing down

However, the market is experiencing a maturing process, and a long-awaited slowdown in certain well-defined sectors, despite most areas matching the pace of construction of 2003. Prices have more than doubled over the last six to seven years, and have now reached a level (predicted for several years) that is meeting resistance from purchasers. For example, a large developer in west Marbella, who builds in phases and has sold over 1100 units in the last 6 years, recently complained that his sales dropped 35% last year. When asked how much he raised the prices, he answered, “Why, 20% just like we do every year!” It is clear that with a more sensitive pricing policy, aimed to current market conditions, a more normal price increase of 8% to 10% would have kept his sales figures to a much more reasonable level.

Less speculation and more personal use

With the current price levels, the “off plan” property market has suffered. As well as private buyers intending to use their apartment for retirement, holidays, rental, or a combination of these, this market has attracted investors of all nationalities who have put down deposits on one or several apartments before or at the beginning of construction, paying around 30% of the price, and re-selling them upon completion.

Their investments have paid off handsomely over the last few outstanding “boom” years. However, according to most sources, many are now having difficulty selling on the finished units at the desired price -- sometimes even at a figure close to the price they were buying them at – which obviously discourages new investment. In fact many speculators are looking at new regions, such as the Dalmatian Coast, Bulgaria, Turkey, Cypress or even as far as the Cape Verde Islands. But even if their comparative prices seem attractive, the reality is that it takes generations for new areas take a foothold, to become consolidated, to provide services and infrastructure, and become anything more than a strictly seasonal holiday area. So the profitability of investment of this type in those countries may well prove, in many cases, only to be on a longer-term basis.

The “in and out” speculator buyer in fact distorts the property market, and the fact that they are having less influence on the market than in the past is a healthy sign of a return to more normal market conditions than those of the last 7 or 8 years.

The above should not be read as saying “off plan speculators have disappeared”: there will still be good off-plan properties in the years to come. But the future investor will tend to be more cautious, looking for very well located developments with excellent amenities, right at the start of construction, when he can get the very best choice. Location, quality of design, quality of construction, facilities and timing are the key factors to look for.

Better deals for resale properties

The good news is that the market for properties in the more consolidated and sought-after areas, attracting user-oriented buyers, or longer term investors, versus the short term speculator, is holding out extremely well, and still increasing in value, but at far more realistic percentages than in the past, in the area of 8 to 12% as judged by the mainline estate agents who are often more realistic in their assessments for medium and more expensive properties in the Marbella area than the national valuation companies whose sample valuations tend to be less representative of products sold to the international market in coastal areas. Sellers are becoming more competitive and realistic than in past years in their asking prices, but on the other hand, the top established agencies, not specializing in “inspection trip” clientele, are reporting a much stronger start to 2005 than the same period last year. In fact, one very desirable and well-located Marbella residential area recently reached a record price of over €13,000 per square metre!

The General Plan of Marbella, still not approved, affects the resale market positively

Marbella’s property market has been markedly affected in the last year by the continuing delays in the approval of the General Plan of Marbella, due to disputes between the Town Hall and the Regional Government. The only land that is qualified for new building is that which appears as Urban land in the old 1986 plan. During the era of Mayor Gil, and especially in his third term until 2003, re-zoning of land and building licenses were given out on the basis of Urbanistic Agreements with the Town Hall, which were promised to be incorporated in the new plan. Thousands of apartments and townhouses have since been built and sold, with first occupation certificates granted, and title deeds issued, from when the “Boom” started in 1996. However, since the Gil era of before mid-2003, no new licenses of this type have been granted, which has led to a drastic decrease in new construction due to the dearth of qualified building land in the old plan, from the 7316 units authorized for construction in 2003, down to 3798 building licenses issued in 2004 in the Municipality, a 48% decrease.

Fewer new building permits has strengthened the resale market due to less competition from property developers in the area.

The dust settles

Although the market is going through a period of consolidation, there are no indications whatsoever of an impending crisis. We are only observing the laws of supply and demand in action. In the most sought-after areas, along Marbella’s Golden Mile, and other key consolidated golf, mountainside, beachfront or beachside areas, the market is still sometimes reaching record prices. Many areas are now fully developed, meaning fewer cranes, less dust and less noise, -- increasing the desirability of these more consolidated zones.

David Searl, the dean of Costa del Sol authors, who has been writing about property for longer than he would like to remember, has just written an article entitled “The Boom is Over… Long Live the Boom!” where he makes similar observations, indicating that although the days of 20% and more price increases are over, the market remains very healthy indeed, and “you could even say it is booming!” He concludes: “We can sum up the reasons why Costa del Sol property will remain a good investment in two words. The words are Florida and California. These two sunshine areas are the fastest growing places in the United States of America. People move there to retire or to live and work away from the colder northern weather. The Costa del Sol is in exactly the same privileged position compared to the rest of Europe and always will be.”


A Twelve-Month Season lends great strength to the Property Market

In the mid to late 60’s, Marbella was beginning to be associated with high-profile tourism. The official population jumped from 18,000 in 1965 to 29,000 in 1970, indicative of the beginning of this trend. The key locations at the time – apart from the Old Town – were the Marbella Club, Puerto Banús, Nueva Andalucía, Los Monteros and Guadalmina, the last three with their respective golf clubs, all of which were built betting on the future of residential tourism. Many business people and celebrities called Marbella their home at the time, including the founding fathers; Prince Alfonso Hohenlohe (whose family had founded the Marbella Club in the early 50’s), and José Banús (many called his vision of Puerto Banús and Nueva Andalucía “crazy” at the time!), Manolo Lapique, Ignacio Coca, and other big names such as Jaime de Mora, the von Thyssens, Princess von Bismarck, Mel Ferrer and Audrey Hepburn, Guy de Rothschild, Terry von Pantz, Deborah Kerr, Jean Negelesco, Ray Milland, and many others.

The wonderful microclimate of Marbella, its strategic location, and the warmth of its people made Marbella unique in Europe, a special place for special people, which was in fact the slogan Panorama used when it opened its office in Marbella in 1970.

At that point in time, Marbella had most of the ingredients to eventually become a major, quality holiday and residential destination with a twelve-month season, rather than simply a summer holiday resort. However, there were less than 30,000 residents in the late ‘60’s, and for a town to be operative year-round, with enough business for luxury shops, boutiques, restaurants, night spots, leisure and amusement facilities, a minimum nucleus population in the winter “off-season” months was required of around 150,000 inhabitants, between registered residents and residential tourism.

This was finally achieved three decades later, between 1996 and 1997, when the “off-season” took on a life of its own, transforming Marbella into the only resort city with a 12-month season on the Mediterranean Basin. It is precisely this 12-month season, combined with other factors, that has led to the explosion of growth in the property market since that time.

There are many other reasons why the property market will remain extraordinarily solid, in Marbella and the whole Coast, for many years to come:




• A strong and stable multi-source market:

The property market in this area is pan-European and stretches well beyond Europe itself. This multi-source market allows for greater resilience, stability, depth and strength than in less established resort areas. When one nation’s economy is down – such as the German economy today – others are thriving, such as the United Kingdom’s. As the German economy is beginning to recover, the return of German purchasers for second or retirement homes in the Marbella area will not be far behind. And of course, one should also take into account the importance of new markets of Eastern Europe and other areas.

• A wealthy national market investing in Marbella:

Spain is the fifth economic power in Europe today and the eighth in the world, a far cry from the “poor cousin” it was perceived as when it joined the European Union in 1988. The national wealth created in the last decade has contributed directly to the growth of Marbella as the first resort city for Spaniards themselves, in addition to the rest of Europe, lending great strength to the foundations of the market. Marbella, Torremolinos and Benalmádena alone absorbed 65% of Spanish tourism last year.

• Hundreds of thousands of Europeans want to own properties:

A study performed by the Advanced Management Services Group forecasted that more than 800,000 Europeans are expected to purchase homes in the Spanish Coasts and Islands in the next five years. Other studies published over the last two years indicate that up to twice that many families could be purchasing in the same time period. These are serious studies and even if only a fraction of these people purchase, there is sufficient demand to keep the property industry healthy for years to come.

• Concern About Crime, but the Coast remains a relatively safe haven

With so many successful and wealthy people from all over the world residing on the Coast all or part of the year, professionals of crime have inevitably followed to target their wealth. The rise of crime on the Coast is an obvious concern to all members of the Spanish and international community, and one that the Town Hall of Marbella has taken a firm stand in lobbying for more central government support. Recently, the organized crime squad in Málaga has been reinforced with dozens of new specialist agents working along with their international counterparts, resulting in drastic measures against crime and money laundering, as witnessed recently in the press.

Fortunately, it can still be said that street safety is relatively secure in Marbella and surrounding coastal cities, as it is a still a pleasure to see people of all ages walking out at night, unfortunately a rarer sight in most other areas of the world.

In support of the above, the head of the new anti-crime squad of the National Police, recently interviewed in the Diario Sur (13/03/05), stated, that “The Costa del Sol is a really secure area, if we start comparing it with the 300 homicides per year in Naples, or the 70 per year in Madrid” or the delinquency in other major areas of Europe and the world.

• Interest rates remain at record lows, with no sign of increase in sight, and investment in real estate remains an increasingly viable alternative to the stock market:

Both factors have resulted in strong encouragement of property investment not only in Spain but also in most areas of the Western World, with the red-hot market now in Florida and many other regions. Spanish banks are now very finely tuned to the requirements of the foreign purchaser, and very competitive in the mortgage market.

• Investment vs. first-use consideration:

Although there has been a great amount of straight investment purchasing, resulting in many fortunes being earned as a result over the last eight years, it is important to remember that the majority of second or retirement homes are being acquired with the intent of being used by their owners, at least for part of the year, as well as for classic investment purposes. This also lends strength to the market.

• Regional Plan intends to improve Coastal Infrastructure and order growth:

In addition to the debate over the General Plan of Marbella, which will no doubt result in a more environmentally sensitive General Plan, there is the a newly proposed Regional plan called the POT (Plan de Ordenación Territorial) sponsored by the Regional Government, principally intended to plan for a cohesive global infrastructure for the whole of the Costa del Sol and environmentally sensitive development criteria of the Coast for the future, as compared with the uncoordinated and fractured development policies depending on each Coastal city’s General Plan that have been the rule until today. The territorial plan covers not only future property development, as well as the plan for the continuation in improvement of the railway, extending from Malaga to Manilva on the west and east to Nerja, but also covers roads, sewage treatment, water, reserve spaces for cultural, educational, sporting facilities and green zones.

There is a consensus amongst local professionals that the Plan is too invasive in the sense that it tries to impose some criteria which corresponds strictly to local government. It is felt that the Plan has been too hastily presented, with not enough public debate or awareness, and no plan for funding the infrastructure. What it has done, however, is to open up a dialogue between the various authorities and affected parties which will no doubt result in a better consensus between the municipal authorities, residents and Regional Government, and therefore no doubt benefit future generations.


• The increasing popularity of Spain itself:

This trend is also fed by the outstanding resurgence of Spain on the International scene, whether through food, film, music, business, architecture, sports, or even foreign policy. The Spanish voice is being heard, and Spain is winning over the world. The Spanish economy is the strongest in the Euro Zone, with a growth rate of four times the average of its partners. No substantial change in the management of the economy is expected with the new Socialist Government. After September 11th, tourism actually increased on the Costa del Sol, in part due to the so-called “refuge effect” of the Coast’s being perceived as a safe haven from the potential threat of terrorism in big cities.

• A cosmopolitan character:

A particular aspect that has made Marbella so popular is its cosmopolitan character. Marbella is home for tens of thousands of people from every corner of the world, part or all of the year. It is precisely this marvellous mixture of cultures, traditions, languages and professions that creates the real magic of Marbella: the friendliness and peace of the people that live here have an incredibly positive influence on the property market.


With so many different basic indications in favor of continued growth, most of which are unique to this area, the future of the property market in Marbella certainly appears to be well assured, both for buyers and for sellers. However, the next few years are going to be critical for the success of Marbella in consolidating its growth, avoiding too much high-density development, and preserving high levels of the quality of environment. If Marbella is going to continue to appeal to the quality sector of tourists and residential tourism, both the public and private sectors must take the necessary care to ensure that high standard planning, architecture, landscaping, management and services play a central role in the growth of the area over the medium and long term. Recent events confirm that this is happening.