The Marbella and Costa del Sol property markets are not only core drivers of the local economy, but also marked by strong demand and supply fluctuations. This has been due to the fact that the bulk of the properties built, sold and rented out on this coast are destined to become second homes, i.e. holiday properties, but in recent years and especially since Covid there has been a significant shift towards full-time living on the Costa del Sol and the demand for year-round residences has grown significantly, producing a more stable primary market element in combination with traditional holiday homes and rentals – all of which are booming.
Perspective
Marbella has experienced pronounced bull and bear markets in the past, most recently during the 1998-2008 construction boom and the recession that followed the financial crisis of that year. The initial impact was deep, but by 2012 the first new modern developments began appearing, with their sleek white architectural lines and high-tech engineering and conveniences. To general surprise, such homes were snatched up quickly, beginning a strong market rally that lasted right up to the first Covid lockdown in April 2020.
The enforced lack of economic activity and travel caused many economies around the world to contract significantly, and Spain was no exception, but it also produced a period of household saving and pent-up demand that was released in 2021. The result was a surge in enquiries and property sales on the Costa del Sol the likes of which had seldom been seen. Supply has consistently struggled to keep up with this wave of demand, and as we write not only are most new properties sold and rented out within weeks, but there are waiting lists for more.
2021 and 2022 have broken previous records in property sales and rentals, above all in value terms, as the Marbella market has moved consistently back upmarket. Surely a phenomenon as pronounced as this cannot only be the result of pent-up demand? Indeed, it is not, for the Covid lockdown experience has had a strong impact on the psyche of people across Europe and beyond, causing many to act upon previous plans and opt for quality of life now rather than later. The result is that many have chosen to buy, vacation, long-stay and live in the greater Marbella area, keen never to be caught between four walls again.
Growth indicators
In 2021, total property sales in the Golden Mile (Marbella, Benahavis and Estepona) rose to 8.624, beating previous records, especially when you consider the fact that the average property value was significantly higher than during the boom of the 2000s, with many above €4 million. 2022 looks set to produce similar figures, and the market is in no danger of overheating, as supply still lags behind demand with new developments sold out off-plan before construction is well and truly under way. What has all of this got to do with the rentals market? Well, to begin with, the sales and rentals sectors are directly correlated.
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Since the bulk of demand in Marbella comes from abroad, both sales and rentals follow largely similar trends, usually in line with economic conditions but now also strongly influenced by the personal motives described above. Moreover, as the region moves upmarket, it becomes increasingly recession-proof, and new properties built in the area are rapidly sold, upgraded and in many cases rented out. Between a growing resident population (long-term and long-stay rentals) and a buoyant tourist sector, this has now become a year-round market without seasonal lows.
The summer season remains a high, but the fact that demand for holiday rentals remain strong throughout the year is indicated by the highest winter occupancy rates in Europe. This is seen in hotel bookings and full restaurants throughout the year, including a new necessity to reserve tables at many establishments in the area. Marbella is booming, and prices are rising, but at a steady, sustainable level. They are driven by keen interest from mostly Northern European but also Middle Eastern and North American buyers and renters, above all young to middle-aged professionals who vacation and work from here for extended periods.
The strength of the Marbella rentals market
Rentals were previously the ‘ugly duckling’ of the Marbella property market, but no longer, as not only is this segment thriving, the quality of the modern villas, apartments, townhouses and penthouses now available makes renting an increasingly attractive option for owner and holidaymaker alike. Today’s homeowners, even in the upper segments, are increasingly open to this option, thanks in large part to the emergence of specialist high-end rentals and property management companies such as Esenzia, which ensure a quality experience for visiting guests coupled with high revenue and hassle-free security for owners.
With the likes of Esenzia taking care of home management and maintenance services, as well as providing a secure and professional holiday and long-stay rental solution, it becomes very feasible to benefit from the high rental rates and secure a good annual return on your property investment as well as use it when you please. Current price levels ensure above-average yields, most typically ranging between 3-5%, but occasionally as high as 8% per annum, though this always depends upon the specific circumstances of each case.
Example of holiday rental rates in Marbella
- 2-bedroom apartment €2000-€6000/week
- 3-bedroom penthouse €4000-12000/week
- 3-bedroom townhouse €3500-10000/week
- 4-bedroom villa €5500-15000/week
- Larger villas €10000-100.000/week
The overall rentals market is strong. Long-term rentals rose 21% over the past year, ranging between €10-€35/m2 depending on the area, and receiving extra impetus from Eastern European buyers and renters opting to invest in and move to one of the most attractive and safest parts of the continent.
A diversified market
Apart from the above, strongly related to the security and the lifestyle offering of this coast, the strength of the property and rentals market of the greater Marbella area is its highly diversified market, which unlike many regions depends not on a single dominant source but many, including Scandinavia, the British Isles, the Benelux, France, German-speaking countries, Eastern Europe, the Middle East and North America, as well as Spain itself. This process has been further aided by a series of incentives and reduced tax levels within Andalucía.
This has resulted in a reduction in:
- Inheritance tax
- Wealth tax
- Property Transfer Tax
- Stamp Duty
- Income Tax
In addition to incentives for ‘digital nomads’, an existing Golden Visa structure and the rapid growth of Málaga’s technology sector – which is about to incorporate hundreds of new employees within Google’s new global cybersecurity centre in the port – this has resulted in a surge in investment in the region, from the launching of luxurious new resort hotels to keep up with growing demand, to new branded property developments and both corporate and public investment in new ventures and amenities, including also the expansion of parks, coastal pathways, sports facilities and green zones.
Taken together, these factors contribute to a thriving property sales and rentals market on the Costa del Sol and in particular Marbella, where prices are rising steadily in step with demand. The Marbella market is maturing and becoming more stable, with an increasingly solid year-round resident base in addition to continued high-end tourist sector – which together with the presence of specialist luxury rental management firms such as Esenzia make renting out your Marbella property a more attractive proposition than ever before.
Why choose Esenzia
Esenzia is a boutique property rentals firm specialising in the luxury segment of the market. We blend many years of home and resort management experience with a service infrastructure that extends from marketing and bookings expertise to arranging hospitality, cleaning, maintenance and security for you in a transparent, efficient and convenient manner.
Born out of the management of our own residential resort projects, we have become one of the leading specialists in the high-end holiday rentals and long-stay market, offering a five-star experience and concierge services to guests and homeowners alike.
Esenzia brings together real estate and luxury hospitality expertise within one company, eschewing quantity in favour of quality, and focusing clearly on targeted areas within the Marbella area, within which we offer guests and owners alike added-value services such as invitations to gastronomic events, access to spa facilities and a co-working space, as well as VIP Family Club membership and benefits.
Let us help you open up a new world of possibilities through your Marbella property