Why Marbella is becoming Europe’s latest hotspot for Asian buyers

0

The famous coastal resort is spearheading the recovery of Spain’s property marketshutterstock_208074850Marbella, and the surrounding province of Malaga, originally came to the attention of Europe’s elite in the 1940s after local businessman-cum-playboy Prince Alfonso von Hohenlohe-Langenburg helped transform the sleepy fisherman’s village into a playground for the rich and famous. The party-loving Prince funded the construction of the Marbella Club and invited his millionaire friends to come and join the fun. In the following years, the resort town evolved into one of the world’s most desirable destinations for weekend jet-setters and second-home buyers alike.

But by the time the financial crisis struck Spain’s real estate market, Marbella was shadow of its former self.

The city was practically bankrupt after more than a decade of serious corruption under the rule of right-wing mayor Jesús Gil. Unlike the majority of residential markets in the country, however, Marbella appears to be on the mend with signs that its bygone glory, as well as investor confidence, is being restored.

La Zagaleta
Located just 10 kilometres from the coastline in Marbella’s affluent Benahavís district, the 2,000 acre development comprises two 18-hole golf courses, an equestrian club and various other five-star facilities

“Buyers have become much more demanding and take longer to purchase a property,” Pia Arrieta Morales, managing director of Marbella-based real estate agency Diana Morales Properties, explains. “At the start of the crisis they were looking for a bargain, but buyers are now viewing property as mid- to long-term investments.”The Spanish market is still only making tentative steps towards recovery after experiencing price drops of up to 50 percent in some sectors during the crash. But while prices in certain markets continue to fall – albeit at a slower rate than previous years – the national average rose 1.15 percent year-on-year in Q3 2014, according to the latest index by Property Registras.

Indications that confidence has returned to the Marbella market are evident. The Ministry of Development noted that the supply of new homes from last January to September hit 17,235 in the Malaga region, a 40.6 percent increase on the same period in 2011, while estimates suggest that prices in Malaga’s primary destinations climbed by up to 5 percent.

It seems likely that there were more than 60,000 purchases by foreign buyers last year. This represents 20 percent of all transactions throughout the country in 2014.

“Prices in Marbella tend to hold value much better than those in other areas,” Morales adds. “Compared to other Spanish markets, it tends to go into a recession later and come out first.”The city has historically fared better than the nationwide market due in part to its enviable climate, excellent infrastructure and broad spectrum of leisure facilities, and unlike in many Mediterranean destinations, tourists and holiday-homers are a year-round fixture. Indeed, the increasing number of routes to major international hubs from Malaga Airport – one of Spain’s busiest – and the presence of more golf courses than any other region in Europe illustrate its evergreen appeal.

More: Asian buyers boost Spain’s luxury market

A key factor behind Marbella’s recent resurgence has been the strong recovery of the overseas market in the last three years, according to Barbara Wood, founder of The Property Finders, a buying agency with offices in the UK, Spain, Australia and New Zealand.

“It seems likely that there were more than 60,000 purchases by foreign buyers last year,” she says. “This represents 20 percent of all transactions throughout the country in 2014.”

Photograph by Wayne Chasan
Five-bedroom duplex penthouses at Estepona Playa, which is within walking distance of the marina and the town centre, start from USD4.27 million

What’s more surprising is that Wood estimates that international investors accounted for about 40 percent of residential investments across all price levels in Malaga and 75 percent above the USD1.5 million threshold in the last 12 months. The foreign market continues to be driven by its traditional base of investors from the UK and Western Europe, but there’s also been steadily growing interest from Russian, Middle Eastern and Asian buyers, partially fuelled by the introduction in September 2013 of the Golden Visa initiative. The scheme, which grants residency permits to foreigners who purchase property in excess of EUR500,000 (USD678,000) as well as visa-free travel in the 26-country Schengen Zone, has yet to gain much traction among Asian investors, although this looks set to change in the coming years.

“With an increasing number of wealthy Asian families choosing to educate their children in cities such as London, Edinburgh, Zurich, Paris and Geneva, the Golden Visa is a useful tool as it allows parents wanting a base in Europe to have free movement within the Schengen area,” says Christian de Meillac, head of Spanish sales at Knight Frank. “If demand tracks our current wealth forecasts we expect the Vietnamese, Indonesians and Indians to have a stronger presence alongside the Chinese buyers.”

A rise in Chinese investment has already been noted by Spain’s General Council of Notaries, which stated in a recent report that the number increased by 66.5 percent, from 316 to 526, between Q1 2013 and Q1 2014.

More: Why foreign buyers have rediscovered an appetite for German real estate

However, the attraction for Asian investors to the Marbella area, rather than the country’s established urban investment destinations, goes beyond the benefits of the Golden Visa and the favourable lifestyle options. The potential for year-round rental incomes, says Wood, means buyers can find gross yields in the region of 7 to 10 percent, whereas equivalent returns in cities such as Madrid and Valencia currently average about 4 percent.

She adds: “With more than 60 million annual overseas visitors, about 40 percent of which don’t stay in hotels, property owners wanting a return their investment can expect a steady demand for well-located, well-maintained and well-furnished properties.”

Beachfront villas and condominiums continue to be a popular investment option for overseas buyers, and even during the recession such projects remained in demand. Further up the ladder, wealthy investors are snapping up golf course properties and units in exclusive, gated communities such as La Zagaleta – one of Europe’s most sought after private residential enclaves.

Lomas Marbella Club (1)
A penthouse unit Las Lomas del Marbella Club, can be found in the region of USD1.3 million

Located just 10 kilometres from the coastline in Marbella’s affluent Benahavís district, the 2,000 acre development, which comprises two 18-hole golf courses, an equestrian club and various other five-star facilities. In early 2013 one of its 10-bedroom villas was put on the market for a reported USD13.4 million. It goes without saying that some of the world’s super-rich call La Zagaleta home, or a second home, at least. A more viable investment option – relatively speaking – can be found at Estepona Playa, about 30 kilometres south of Marbella and Benahavís. Five-bedroom duplex penthouses at the beachfront project, which is within walking distance of the marina and the town centre, start from USD4.27 million. Back on Marbella’s coveted Golden Mile, properties, such as a penthouse unit Las Lomas del Marbella Club, can be found in the region of USD1.3 million.

Financing options for locals and foreigners also improved in 2014. For the past few years, banks have offered mortgages amounting to only 50 to 60 percent of the value of a property, but some institutions are now providing more flexible loans once a significant portion of the property has been purchased.

“Homes within an hour’s drive from Malaga and Gibraltar airports tend to be the most popular with foreigners, but products being offered can vary.” says de Meillac. “With the golden visa requirement at EUR500,000, some developers are pricing at that mark, so buyers must be aware that they are getting value for money and make sure they work with a reputable agent.”

is the editor-in-chief of Property Report