Marbella consolidates its position

as a top luxury destination in Europe

The change in taxes and legislation, the commencement of the new General Municipal Development Plan (PGOM) and the increase in the price of high-end properties in Marbella have consolidated the coastal town as a top luxury destination in Europe, according to the annual Marbella Real Estate Market Report prepared by our associate company Diana Morales Properties, regional representative of the international consultancy Knight Frank.

Marbella is no longer just a tourist destination for golfers and retirees, but has become a permanent residence for many families with hybrid work formats that demand quality of life, infrastructure, prestigious international schools and accessibility to the rest of Europe’s major cities.

The report reveals that while in other cities the recession, as a consequence of the Russian invasion of Ukraine and the rise in interest rates, has begun to take its toll, “Marbella has emerged stronger, showing growth figures well above those of its competitors, and continues to consolidate itself as one of the preferred places not only for those seeking a holiday home, but also for those who wish to take up residence.

The price of high-end homes in Marbella rose by 7.1 per cent last year, according to Knight Frank’s Prime International Residential Index (PIRI 100).

In terms of the volume of property sales in 2022 in Marbella and its surrounding area (the Golden Triangle, which includes Estepona and Benahavís), there was an increase compared to the previous year for both new and resale properties. Although the quarterly data from the Ministry of Public Works revealed a significant slowdown in sales of newly built homes. This was most evident in the municipality of Marbella with quarterly figures for new-build sales falling in the last three quarters by 265, 50 and 30 homes respectively. Meanwhile, in comparative terms, second-hand sales figures remained fairly consistent throughout the year.

In reference to the outlook for 2023, the report notes that despite being in a context of uncertainty – with the scourge of the war-related energy crisis and the financial earthquake originating in Silicon Valley – that could undermine the sustained growth enjoyed during the post-Covid period, thanks to the solid performance of the market in the last two quarters, “everything suggests that 2023 will be another fairly healthy year for the real estate sector on the Costa del Sol in general, but especially in Marbella”.

Pia Arrieta Morales, managing partner of DM Properties points out that “our outlook could be described as cautiously optimistic, and while sales volumes appear to have slowed, we have observed that the average transaction value continues to rise”. Furthermore, “the legal limbo in which Marbella’s urban planning situation – currently operating on the basis of the 1986 PGOU – is expected to come to an end by the end of the year, providing planning certainty for land awaiting final approval for development, which will attract investors and developers looking for business opportunities in the town,” she concludes.

General situation

After the post-Covid real estate boom, it was expected that everything would return to normal in 2022. But nothing could be further from the truth. According to the sales data register, 2022 saw the strongest annual growth in high-end prices (5.2%) since the global financial crisis.

As indicated in Knight Frank’s Outlook Report 2023 and the HNW Pulse survey, all signs point to an increase in real estate investments, whether for inflation protection, diversification benefits or to help in times of uncertainty. One third of High Net Worth Individuals (HNWIs) are looking to increase their residential real estate assets.

Spain is in the top 3 of the ranking of countries for home buying by high net worth individuals, according to data from Knight Frank’s annual Attitudes Survey.

In 2022, the number of home sales and purchases in Spain was the highest in the last 13 and a half years, with 646,241 sales and purchases, an increase of 14.5% over the previous year. However, the year has had two distinct parts, with a very favourable first half and a gradual cooling of the market in the second half, shaping excellent results for 2022 as a whole, but with a less favourable outlook for 2023.

In Andalusia, foreign buyers accounted for 15% of all transactions, approximately 3.5% points higher than in the previous year. British buyers accounted for 16.31% of all foreign purchases last year, with Swedish buyers in second place with 8.82%, down from 10.28% the previous year.

In the province of Malaga, in 2022, more than a third of home sales (33.5%) were purchased by foreigners, an increase of 6.12% on the previous year. According to the Association of Property Registrars, the United Kingdom (16%) continues to lead the list of nationalities of buyers, followed by Swedes (12%) and the Netherlands (8%).

In Marbella, meanwhile, there has been a steady increase in buyers from Eastern Europe (Polish, Slovakian, Hungarian, Czech). Last year DM/KF made sales to buyers of more than 18 different nationalities, with a notable increase in Polish buyers. And in stark contrast to global reports that luxury property buyers are getting younger, in 2022 the average age of its buyers stood at 55.

What the buyer is looking for

DM Properties has detected a number of specific characteristics of the international buyer, noting that they have not changed much from the previous year but highlighting that they are increasingly looking for ready-to-live-in or new-build properties, without further concerns. The top three nationalities that preferred to opt for the purchase of a new-build property in Spain in 2022 were Belgium with 24.5%, followed by the Netherlands with 21.90% and Poland with 21.30%.

At a local level, it is important to note that when it comes to second-hand properties, Marbella continues to be more in demand than neighbouring municipalities, while Estepona takes the lead in new-build housing and is where more projects have been developed in recent years due to the availability of land and easier licensing.

Another aspect to highlight is the sector of “turnkey” villas, where buyers are willing to pay more for a property of these characteristics rather than having to undergo renovation. With regard to this type of custom-built properties, traditionally more difficult to sell than flats, villas up to 2 million euros are performing well, while in the mid to high price range it continues to be more difficult to sell during the construction phase.

Security, interior spaces and the facilities and services within the five-star resort-type urbanisations are another of the aspects most in demand by buyers, according to the report. As well as the sustained commitment to Branded Residences, with the growing presence of internationally recognised luxury brands.

New tax benefits

One of the new sections highlighted in this year’s DM Properties | Knight Frank Marbella Real Estate Market Report is the impact of tax changes and the coming into force at the end of 2022 in Spain of the “Startup Law” (Ley de Fomento del Ecosistema de las Empresas Emergentes), with new tax rules that benefit foreign digital nomads and startups.

This new law includes important tax measures, removes bureaucratic hurdles and relaxes procedures for creating and investing in startups. It also offers incentives to attract international talent and recover national talent, encouraging the establishment of remote workers and digital nomads in Spain. Important tax advantages are introduced, such as the reduction of Corporate Income Tax and Non-Resident Income Tax. Not forgetting the cancellation of Wealth Tax in Andalusia which was applied on the net value of Spanish assets for non-residents, and on worldwide assets for residents, above 700,000 euros according to a progressive scale of up to 3.3%. However, the central government has temporarily established the new “Solidarity Tax” which is levied on net assets of more than €3 million, although taxpayers resident in Spain can apply a reduction of €700,000 and can deduct an additional €300,000 for their main residence. In the Spanish autonomous communities where the Wealth Tax still applies, the Solidarity Tax will only be levied if the tax liability is higher than the accrued Wealth Tax.

It has been proven that, in the aftermath of the pandemic, Marbella has remained firmly in the spotlight as an investment destination and place of residence for Northern European citizens, establishing itself in 2023 as an unrivalled investment hotspot, with a thriving real estate market, thriving tourism sector, favourable economic climate and attractive lifestyle offerings.