Marbella Construction Sector sees improved Activity

Thanks to wealthy buyers Marbella’s construction industry finally shows signs of a modest recovery, although Andalusia as a whole is a far cry from a full recovery. The luxury homes market at the Costa del Sol is largely responsible for the first signs of life pulsing through the construction sector, one of the greatest casualties of the property market crash. So far the top-end residential property market has out-performed 2012, which was mainly due to wealthy overseas buyers.


Reasons to be cheerful
Among the local markets at the Costa del Sol, Marbella, Benahavis and Estepona are the most successful. There are 23 construction firms dealing with high-end properties and, according to data published by the DOM3 Association, together these companies were responsible for the construction of 60 luxury homes in 2011. The global investment streaming into the region for these house purchases amounted to EUR 250 million – this rose to 75 luxury homes for an investment of EUR 300 million in 2012, representing a healthy 20% increase on 2011.

Greater investor confidence in Spanish economic affairs and various changes in legislation that allowed old seafront properties to be bulldozed and new ones to be constructed – all these were factors opening doors to greater investment. Another important aspect of the surge in the luxury homes market is that access to credit is far better now, although most investors buying luxury villas don’t actually need finance. Cash purchases have been the rule rather than the exception in Marbella.

Reasons to be cautious

While estate agents are apt to celebrate the return of the foreign buyer with rosy reviews of their enquiries data, there are still several serious obstacles to overcome before the construction sector can get back to activity levels similar to those in 2007 before the property market crashed.
 
The main interest in Spanish luxury property has come from buyers originating in non-EU countries, who are keen to buy a home that comes with an automatic Spanish residency. However, these are buyers from countries where transfer of currency is a problem, as their own governments legislate against large scale transfer activity.
 
Andalusia’s banks, meanwhile, are not exactly competitive or forthcoming with finance, which stops buyers who are not able to purchase outright with cash. In addition, recent changes in income taxation have also put off many wealthy buyers.

Marbella is the Exception to the Rule

Marbella’s property market has always been different from the rest of the Malaga province. The resort has performed better than other destinations because there were already a large number of wealthy residents just waiting for prices of prime property to fall. They snapped up some of the finest villas and luxury estates in Marbella and didn’t need finance to do so.

They may be foreign nationals but they are also highly knowledgeable about their local market, knowing Marbella can look back on an impeccable 50 years of continued real estate investment that will eventually produce capital gains.

José Antonio Muñoz, of Analistas Económicos de Andalucía, explained:  “In areas where the operators have a greater than average knowledge, they perceive the start and also the end of a crisis earlier than most. This explains why, just as has occurred on previous occasions, Marbella was one of the first places to go into the crisis and is now beginning to show signs of coming out of it, unlike other areas in the province.

Following through

Foreign buyers account for nearly 40% of all home sales in the province, an above average percentage. Three hundred plus days of sunshine, Marbella’s amazing amenities and tourist attractions, well established expat communities and a cosmopolitan feel, all this has contributed to Marbella’s construction sector doing better this year.

So far Marbella’s Town Hall has approved 25% more applications made for licenses covering major construction sites than last year. The popularity of Malaga Province developments has meant that a larger number of construction projects actually went ahead this year, whereas in previous years many were postponed or even cancelled due to lack of finance. While last year only 40% of projects went ahead, this year so far 80% of projects with granted licenses have begun building works.