Real Estate

Sean Woolley: What’s really happening in the Marbella property market

(Editor’s noteDispatches receives no remuneration for this post. Sean Woolley at Cloud Nine tracks the upscale property market in Spain, a major expat destination.)

Soaring inflation, rising interest rates, a global cost of living crisis, war in Europe. There are a myriad of geopolitical and economic headwinds coming our way, so you would surely think the last thing on anyone’s mind is the thought of purchasing a holiday home in the sun?

Right! And also wrong!

It doesn’t take much to change the plans of property investors, whether that be a downturn in exchange rates, political instability or even a forest fire. In a market that is dominated by second-home ownership, that Mediterranean home in the sun is often the first thing to go by the wayside when the going gets tough.

Where we stand

In the lean years that followed the global financial crisis that began in 2008, there was a fire-sale of worldwide housing assets. This was especially true for those luxury second homes that stood for the ultimate discretionary purchase as people looked to raise cash to survive the crisis and make sure they could hang on to their primary residences.

Whilst there are undoubtedly serious problems for us all to contemplate and cope with right now, primarily a hard squeeze on our household incomes as a result of rising inflation, energy bills and mortgage repayments, employment rates are at an all-time high and there is still availability of (fairly) cheap credit.

In essence, banks are still lending and people are not losing their jobs. In those terms, it seems a far cry from the dark times of 2008 – 2012.

So where exactly DO we stand? If my discussions with clients during the last seven days are anything to go by, it depends with whom you speak. Many prospective buyers, especially at the mid-high end of the market, are adopting a philosophical view, especially in light of their experiences during the COVID-19 pandemic. They are accepting that living costs are on the rise but still intent on pursuing a better quality of life for themselves and their families.

And despite the cost of financing being more expensive than even a few short weeks ago, a mortgage interest rate of 5 percent to 6 percent is historically not too bad, a reminder that we have perhaps gotten a little complacent during the last 10 years of ultra-low interest rates.

Wealthy say, ‘gimme shelter’

As well as those people intent on pursuing their dream of owning overseas, we have for sure seen clients putting their investment decisions on hold. Particularly the Brits.

Let’s talk about the United Kingdom-based buyer for a moment. Now on to their third prime minister in three years, their nation still scrambling for a place in the new world order following Brexit, and they are dealing with a currency in decline. This means that the majority of the Costa del Sol’s traditional top buyer group has other matters on their mind right now.

However, there is a sizable group, especially those high-net-worth individuals and ultra-high-net-worth status, who has now reached a tipping point and has simply had enough of what’s happening in the UK. Many of these are looking for alternative 5-star locations in which to live and invest. With Europe’s best climate, an exceptional travel infrastructure and attractive tax breaks, the Costa del Sol is becoming a destination of choice for many discerning buyers looking to escape the turmoil in their home country.

The COVID pandemic taught us many things, one of them being that it IS possible for many of us to work from home and not be chained to an office desk. This has led to a surge of entrepreneurs and business executives realising that they can achieve the same results from a home in Marbella than they could from an office in Newcastle or Rotterdam.

During the past three years, the high end of the property market has seen a glut of buyers looking for villas from which they and their families are afforded peace, privacy, security and a place from which to work and enjoy life. And who can blame them? While one buying market may be struggling, like the UK, other markets emerge from nowhere.

California of Europe

In the 20 years we had been in business here on the Costa del Sol prior to 2022, we have handled two buyers from the US and/or Canada. In the last six months, more than half of our transacted business has been with North American buyers.

Many of them compare the Costa del Sol to Southern California, but regard it as a better option – and often refer to the area as the “California of Europe.” To these buyers, the landscapes are similar, the lifestyle just as glamorous, but in a safer, more cosmopolitan, less manic environment. And while the Brits are deterred from buying in Europe due to the flagging exchange rate of the pound sterling versus the euro, the Americans are cashing in on their strong dollar.

For North American buyers, there has never been a better time to buy a euro-based asset. And many of these non-EU buyers are going all the way and looking to make a permanent move to Spain. By investing more than 500,000 euros, they can apply for the Golden Visa, which allows them and their dependents to enjoy unrestricted visits and access to the Spanish lifestyle – something that is not now available to the typical British buyer with a budget under the magical 500K euros breakpoint.

Unfortunately, post Brexit, they are now regarded as a third-country national, for whom lengthy queues at passport control and a 90-day maximum stay are now the norm. Even a tumultuous geopolitical event such as war in Ukraine has prompted many HNW families in Eastern Europe (especially Poland and Romania) to head for the relative safety and security of Southern Spain.

So, yes, there are headwinds against us in the Costa del Sol real estate industry, enquiry levels have dipped from their recent heady heights, and there is a little more caution in the market now, with increased costs of living and rising interest rates.

But, fundamentally, the fact remains that millions of people want to be here. They want a better, safer, sunnier life for themselves and their loved ones, and whilst many may have hit a bump in the road in this quest, few of them are deterred from achieving their goal.

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To find out more about buying property in Spain, visit the Cloud Nine Spain YouTube channel or visit the Cloud Nine Spain website here to search for properties.

Read more about real estate here in Dispatches’ archives.

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Sean Woolley is the founder and director of Cloud Nine Spain. With 20 years’ experience of helping clients buy and sell properties in Spain, he’s known as “The Property Doctor” and has contributed to a host of publications. He has recently written the book “From the Ground Up – The Insider’s Guide to Buying Spanish Property,” sharing his years of experience, real life stories, tips and tricks with buyers interested in investing in Spanish Real Estate.

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