Real estate investing: where and when to buy

Last year, over 565.000 people bought a property in Spain, a marked increase over the previous year. Real estate investment rose by 33% to reach a total of €12 billion, but why is real estate so popular, and why is Spain one of the top destinations within Europe and globally?

To answer these questions, one has to look at the broader context of investment and asset classes – in other words, the different options people have as a safeguard for their money and to make it grow.

Real Estate Investment

Buying property as a form of investment goes back centuries, and takes the form of residential, commercial (office), retail, logistical and also leisure real estate. Where large funds tend to dominate the latter categories, private investors focus above all on residential homes, be it in the form of a primary residence, a holiday home or a pure investment intended to generate income from holiday or long-term rentals, or through renovation and sale.

Real estate is one of the key asset classes available to investors:

  • Real Estate and Land
  • Stock Market – Equities and Bonds
  • FX an Cryptocurrency
  • Gold and Commodities
  • Art and Classic Cars

The above exist because they offer investors different benefits at different times. Ideally, one should have a mix of some or all of the above in your portfolio, but if you have to concentrate and choose one while not being an investment professional who can monitor the markets on a daily basis, then investing in real estate has predominantly been the favourite.

Private investors focus above all on residential homes, be it in the form of a primary residence, a holiday home or a pure investment intended to generate income from holiday or long-term rentals, or through renovation and sale

Stock market investment can be volatile in the short to medium term, with historically low yields for bonds in recent years; FX and commodities are highly specialist; cryptocurrency enticing but should never make up the greater part of your portfolio, and gold is a good shelter for your money but has limited ability to earn good returns.

The remaining asset classes, which offer safety and returns as well as the enjoyment of their usage, are art/classic cars and real estate, and though the former has been performing very well in recent times it too is a specialist field given to a certain degree of volatility. This leaves real estate as one of the key options for private investors.

Forms of income from real estate investing

The returns from real estate investing can be both direct and indirect – either as a result of owning and using a property, or through its use as an income-generating business:

• Direct income through short-term or long-term rentals

• Direct income through commercial use – such as a B&B

• Renovation and sale direct income

• Indirect income through increased value between moment of purchase and sale of either a primary residence or holiday home

The above returns can make owning a property or developing a large or small property portfolio highly attractive, even after costs and taxes – and this while enjoying the use of the home. Real estate investing is also so popular because it balances good returns with the security of owning a tangible asset in the form of land and bricks and mortar.

Spain has for several decades now been a main focus of real estate investment because it offers many opportunities for holiday rental ownership as well as the climate and lifestyle amenities that make it one of the most popular locations in the world for second homes and even full-time relocation.

While funds and other institutional investors tend to focus mainly on large cities such as Madrid and Barcelona, and to a lesser extent upon coastal areas, private homebuyers and investors are very much focused on the Costa Blanca, Balearic Islands, Tenerife and especially the Costa del Sol, with Marbella at its heart.

Property transactions in the latter region’s key municipalities of Marbella, Estepona and Benahavis – a luxury residential area known as the Golden Triangle – rose by 48% to 8.644 sales in 2021, an indication of just how strong the lifestyle appeal and subsequent investment potential in the area is. For while most people purchase out of quality of life considerations, this strengthens the market greatly as it solidifies the enduring appeal of coastal regions such as the Costa del Sol among buyers from across Europe and also regions of Asia and the Americas.

This comes against a background of safety and security, natural beauty and the legal and financial stability of a member state of the European Union, coupled with low-interest mortgages and favourable financing conditions – all factors that contribute to Spain topping many international rankings for real estate investing.

Property transactions in the latter region’s key municipalities of Marbella, Estepona and Benahavis – a luxury residential area known as the Golden Triangle – rose by 48% to 8.644 sales in 2021

Most popular areas an properties

Within the Costa del Sol, Marbella and to a slightly lesser extent Benahavis and Estepona are the most sought-after areas, with most buyers spending between €500.000 and €8 million, though the €10 million-plus market is growing steadily and now even properties of €35 million and above are increasing in number.

Marbella has joined the international A-list of real estate and lifestyle destinations, with the kind of residential areas, properties and accompanying services to match. The top property types sought after include:

  • Frontline beach penthouses in Puerto Banús and the Golden Mile – mostly as second homes
  • Golf valley homes – as primary and second homes
  • Frontline beach villas in Los Monteros and the Golden Mile – mostly as second homes
  • Frontline golf villas in Nueva Andalucía – as primary and second homes
  • Luxury villas and penthouses in prime areas of Marbella and Benahavís – as primary and second homes
  • Country club villas and mansions in La Zagaleta and El Madroñal – as primary and second homes

Valued factors of investment properties

 

Buyers generally look for rental and holiday homes that are close to amenities, have great sea views and sufficient space. In addition they must have gardens and amenities such as swimming pools, games rooms and also modern styles. Primary residence buyers add to this list proximity to practical amenities, as well as gymnasiums, garden space and privacy.

Some of the most important factors that add value to a Marbella (investment) property include quality of design, finish and amenities, space, frontline beach locations or panoramic setting with spectacular sea views, modern style and technical infrastructure. A gated community and proximity to all surrounding facilities combined with a high degree of privacy are also valued features. You can have an idea of what we are talking if you have a look at our luxury development.

Within this tick list, newly built contemporary apartments are by far the most popular among luxury buyers. They offer modern style and luxuries, as well as a superior build quality. At the heart of it all is a climate, setting and lifestyle that continues to grow in desirability.

Prospects for real estate investing in Marbella

2021 produced record transactions and investment in value terms within the Costa del Sol’s luxury real estate segment, in a year where Spain’s economic growth rate matched the overall world average of 5,6%. For 2022, the OECD has targeted a global figure of 4,5%, which again seems likely to mirror economic growth in Spain this year, and demand for real estate in Marbella and surroundings remains unchanged.

Though there is a relative shortage of supply of modern new-build luxury homes for sale in Marbella and areas compared with demand, and prices have risen steadily, there are as yet no signs of a bubble, so the market remains solidly attractive and a good hedge against rising inflation. Moreover, in an uncertain international climate, the stability of real estate combined with that of the Costa del Sol offers obvious advantages when compared with most other asset classes.

Contact our property specialists for personal information about real estate investing in Marbella.

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