Prognosis for Marbella’s property market in 2020
2020 has been quite a year so far with challenges never experienced before, prompting the CEO of Nvoga, José Carlos Leon, to take stock of the Costa del Sol property market.
It has, without doubt, been a difficult year. What started promising enough soon became dominated by the virus-fighting measures that have also come to play such a big role in our everyday lives. It is unlike any economic recession we have experienced before, but therein also lies hope, for this is very much an artificial downturn caused not by a lack of demand but by uncertainty and travel restrictions.
The rhythm of development has slowed down in Marbella, with fewer viewings causing serious problems for second-home developers that depend almost entirely on the foreign market. A reaction has been a delay in the release of some new projects, an increase in commissions and bonuses on the one hand, and a slight reduction in prices. Yet in spite of the challenges, demand for this kind of property remains strong enough to continue to see a steady flow of transactions.
There has already been a slight adjustment in prices, but a tough market should see them drop by a further 5-10%. Most affected are homes below €500,000, while sales continue in the upper segment, especially for properties above €1 million. The market is expected to revive by the second quarter of 2021.
There has been a price drop of around 15-20% in both short and long-term rentals, with the travel restrictions causing many cancellations and a far lower occupancy rate than normal. Last-minute offers have not done much to improve the situation, which will continue to be challenged. Many property owners have responded by switching to long-term rentals, but an increase in supply will produce better deals for tenants in a market that had seen rapid price increases in recent years.
There is a rising tide of businesses closing from service companies to restaurants, bars, shops and also some hotels, but most are expected to reopen in the course of next year. This also applies to large brands, which are likely to rationalise their operations and reduce the number of stores.
The past few months there has been a notable drop-off in demand for development land as investors stay away in these uncertain times. In response, prices have dropped some 20%, but it will be some time before this market revives, perhaps late next year. In the meantime, those developers and investors who bought well will be able to sell at acceptable prices. Others who acquired land at the top of the market will be better off waiting, though for smart investors with a keen eye this could be a good moment to look for land.
Recently, we’ve seen some new offering hitting the market at attractive prices, albeit not at the levels of 2009-2010. Properties originally destined for the rental market have been repositioned in price and are being offered for sale.
In general, both small and medium-sized companies as well as large funds and developers are being forced to restructure in a bid to see through the coming months. This means staff cuts, offices being closed, furloughs and an overall reduction in spending. One of the notable changes this situation will have produced in the way we work is an accelerated move towards remote working, adaptation of new technologies, smaller, more flexible teams, and the fusion of small, medium and large companies, including banks, hotel groups, funds and property developers.
It has been one of the strangest years in living memory, and we can expect the current situation to continue more or less unchanged for the rest of 2020. However, if new vaccines can provide an effective way of combating the Covid-19 virus we will see a gradual return of confidence and return to normality that may take the first half of 2021 to realise, but which will then gather momentum throughout the rest of the year.
It will take some time to recover what was lost in 2020, but that should account for moderately strong growth in the next few years.