Is the Costa del Sol Bubble About to Burst?
The sun-kissed Costa del Sol, a stretch of coastline in southern Spain, is renowned for its stunning beaches, vibrant nightlife, and world-class real estate market. In particular, Marbella has emerged as a hotspot for luxury real estate, attracting investors from around the globe. While prices have been rising steadily, there is no indication that the market is about to burst. Instead, experts believe that the Real Estate Marbella boom is sustainable due to a number of factors, including strong demand from international buyers, a relatively healthy supply of properties, and a favorable economic outlook.
A major factor driving the Costa del Sol property boom is international demand. Over 33% of the market is now made up of foreign buyers, with many coming from northern European countries such as Sweden, the Netherlands, and Germany. These buyers are attracted to the Costa del Sol’s warm climate, stunning beaches, and relatively affordable property prices.
While property prices on the Costa del Sol have been rising, they still offer exceptional value compared to many other popular European destinations. For example, a luxury villa in Marbella can cost around €1 million, while a similar property in the south of France would be closer to €2 million.
Construction Costs and Labour Shortage
The pandemic and Brexit have put a strain on the Costa del Sol construction industry, leading to increased costs and a shortage of labour. This has raised concerns that it could slow down the rate of sales for new building developments. However, so far, buyers have been willing to pay the extra costs and wait for their dream properties to be completed.
Insufficiently Available Properties
With sales and demand continuing to accelerate, there is a risk that the Costa del Sol could reach a point where there are simply not enough properties available to meet the demand. This could lead to prices spiking and potential overvaluation. However, Spain’s relatively conservative mortgage lending policies and the fact that prices are not overly inflated suggest that this is unlikely to happen.
An increasing number of buyers are now open to purchasing off-plan properties. This is partly due to the fact that many clients are younger and less likely to want to touch and feel properties before they buy them. Additionally, off-plan properties often come with a number of benefits, such as the ability to individualise certain aspects of the property and the opportunity to lock in a below-market price.
The popularity of luxury penthouses on the Costa del Sol is growing rapidly. These properties offer a number of advantages over traditional villas, such as 24-hour security, community gardens, state-of-the-art communal areas, and secured parking for luxury cars. Penthouses are also typically larger than villas, and they offer a lock-up-and-leave lifestyle that is appealing to many buyers.
Last year, Euribor, the rate at which banks lend to each other, rose significantly, making it more expensive for buyers to finance their property purchases. However, in 2024, Euribor has shown a steady downward trend, and it is now currently at 3.6%. This is good news for both buyers and banks, as it will make property more affordable and reduce the risk of defaults.
Sustainability is becoming increasingly important to buyers, and many companies are now highlighting their commitment to green practices. One example is the mayor of Estepona, Jose Maria Garcia Urbano, who has implemented a number of strategic projects to improve the city’s environmental sustainability. These projects have helped to improve the quality of life in Estepona, attract new residents, and boost the local economy.
The Costa del Sol property market is in a strong position, with strong demand from international buyers and a relatively healthy supply of properties. However, there are some risks that the market could overheat, so it is important for buyers to be aware of these risks and to do their research before making a purchase. Overall, the Costa del Sol is a great place to invest in property, and there is still good potential for growth in the years to come.