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Property in Spain: What Costa del Sol house hunters need to know in 2021

Despite rock-bottom tourism figures, Brexit and the pandemic, 2020 was a far better year for real estate in the Malaga area than many analysts expected. Andalusia real estate experts The Property Agent give The Local Spain the lowdown on the Costa del Sol property market this year.

Property in Spain: What Costa del Sol house hunters need to know in 2021
La Araña, Málaga, Spain. Photo: Quino Al/Unsplash

Furthermore, with the start of vaccine programmes in many of the Costa’s key markets for buyers, 2021 has also got off to a good start for property. Industry experts expect to see a surge in demand from June onwards once international travel starts to open up.

But what can we expect to see specifically in the Costa del Sol property market this year? Who will be buying and where? What sort of homes will be in vogue in 2021? What can we expect generally from property this year?

Read on for our report on what’s hot and what’s not in Costa del Sol real estate this year.

A bit of background

Before we turn our attention to 2021, it’s worth having a quick look back at the market last year. While it’s true that sales dropped by 22%, they picked up towards the end of 2020. In Q4, the Costa del Sol registered the second busiest sales per 1,000 inhabitants in Spain after the Costa Blanca. And new-build sales increased by 8% in 2020.

Prices remained static for new-build properties and dropped between 5 to 10% for resale homes. However, those at the higher end of the market (€800,000+) maintained their value. Marbella reemerged as a luxury hotspot in 2020 with the focus firmly on the Benahavis-Estepona-Marbella ‘Golden Triangle’.

Who’s buying Costa del Sol real estate?

Since its crowning as the ‘California of Europe’ in the mid-60s, the Costa del Sol has attracted thousands of Northern Europeans as visitors and second-home owners. Over half a century later, these nationalities continue to make up the bulk of foreign buyers. Even in 2020 when travel was severely restricted, over 28% of sales on the Costa del Sol were to foreigners.

The latest annual statistics (2019) show that among foreigners, the British were by far the majority – they represented 24% of the total in Andalusia. The second-largest nationality was Swedish with 14%. Quarterly statistics for 2020 mirror this trend.

We expect more of the same in 2021. British buyers will remain the largest group despite the introduction of the 90-day stay limit after Brexit. For them, the Costa del Sol now has an unexpected edge – unlike the Costa de la Luz, southern Costa Blanca and the islands, there’s no need for permission from the military to buy. https://www.spanishpropertyinsight.com/2021/01/29/post-brexit-british-buyers-military-permits/

Joining British buyers will be Scandinavians, Dutch, Belgians and Germans, all of whom will continue to favour the warm climate, excellent flight connections and security offered on the Costa del Sol. As has been the case for the last 20 years, their presence will be, as Tinsa observed, “more obvious as the market becomes more exclusive”.

What sort of real estate will be hot in 2021?

The pandemic brought with it some fundamental shifts in housing trends worldwide. These have emerged on the Costa del Sol and will continue to stake their claim during 2021. In tandem with them will be a surge in demand for second homes, new-build properties on the Costa del Sol available immediately and a continued uptick in rental investment.

Mijas Golf Course, with the beautiful Mijas Sierra in the background. Photo: Valentina Sotnikova/Unsplash

New trends in homes on the Costa del Sol

Life in lockdown changed how many of us regarded our home. Mobility restrictions meant that if we already had a private outdoor space, we valued it more than ever. And if we didn’t, we added one to our must-have list. Indoors, we found we needed extra space for working from home and schooling. Plus, more room for everyone without getting on top of each other.

In short, quality of life at home. And as a result, villas with private gardens or spacious apartments with generous communal areas became highly sought-after. Sales of properties on the Costa del Sol priced over €1 million rose by 15% between July and October last year. And this trend is likely to continue well into 2021.

Rebirth of second homes

For many Northern Europeans, the pandemic has meant months stuck at home in the rain and dark. Unsurprisingly in these circumstances, the draw of the drier, warmer and brighter Costa del Sol has been stronger than ever. Plus Covid-19 has shown that remote working is not only possible but desirable.

As a result, analysts are pointing to a strong increase in demand for second homes in the sun. Particularly on the Costa del Sol, a destination perceived as secure, easy to get to and offering excellent digital connectivity. We expect a surge in sales as international travel becomes possible.

New builds ready now

In their report Spain Real Estate Market Outlook 2021, CBRE reported that one of the “most striking consequences of covid-19” was “heightened demand for new-build housing with immediate availability”. Buyers were reportedly not prepared to wait 12-18 months for construction to finish.

CBRE expects demand for immediately (or imminently) available properties to remain strong in 2021. The Costa del Sol currently has a buoyant new-build sector focused on the western end in Sotogrande, Manilva and Estepona, and in the central area, in Mijas Costa and Malaga city. High demand for this property could lead to price rises in areas “most hard-pressed for supply” says CBRE.

Rental investment

Industry statistics revealed a significant increase in buy-to-let (BTL) and build-to-rent (BLR) investment on the Costa del Sol during 2020. The area’s growing population, the rise in digital nomads and the lack of affordability have pushed rentals to the forefront.

A report by JJL found that 24% of homes in Spain were rentals and expects this to rise exponentially over the next few years. CBRE has similar predictions and forecasts it will exceed 27% in five years. The same report found that the Costa del Sol has the fourth-highest rental rates in Spain after Madrid, Barcelona and Palma de Mallorca.

Investment in BTR in Spain saw an uptick of 22% in 2020 and the Costa del Sol is one of the areas marked for expansion of this niche sector. Analysts believe that while funds will be increasingly drawn to large-scale BTR, individual investors will favour BTL opportunities in key areas of the Costa del Sol.

The coastal town of Estepona is very popular with foreign buyers. Photo: pietpsphotos/Pixabay

Where are they buying Costa del Sol real estate?

In keeping with the trends listed above, we expect the following hotspots on the Costa del Sol this year:

  • Western Costa del Sol

Space ranks as a priority in buyers’ wish lists so the lesser populated parts of the Costa del Sol will take centre stage this year. Among them will be Manilva, an area whose population has increased significantly over the last few years but that still offers the lowest build-density on the coast. Casares and Sotogrande can also expect to see strong interest as both offer wide-open spaces in pristine countryside.

New developments between Sotogrande and Estepona will also experience strong demand, particularly as the vast majority offer generously sized homes with private gardens and/or large communal areas. Plots of land in this part of the Costa del Sol will also emerge on many buyers’ radars.

  • Benahavis-Estepona-Marbella 

Many buyers will be drawn to the so-called ‘Golden Triangle’ this year. Properties with a price tag of over €5 million are expected to be particularly popular in Marbella. According to council figures, revenue from the tax on construction will increase by 13% this year, mostly from high-end new builds.

2021 in a nutshell

As we well know from our experience in 2020, the future is far from predictable. However, there are certain underlying trends that should mark the course for Costa del Sol real estate this year.

Gradual recovery in prices

The new year got off to a good start for property on the Costa del Sol. In February, Tinsa reported that square metre prices on the Mediterranean coast generally rose by 2.3% in the year. 

According to asking prices on the Idealista online platform, the increase was 3.4% on the Costa del Sol generally, 6.8% in Estepona and 3.3% in Marbella.

General consensus points to a rebound in resale prices throughout the year, although some sectors (small properties with little exterior space in built-up areas) may continue to see decreases of between 5 and 10%. New-build prices, however, are expected to maintain their value or increase in areas with short supply.

The beautiful village of Frigiliana in Malaga province. Photo: Manfred Zajac/Pixabay

A gradual rise in sales

Mobility restrictions have led to pent-up demand among the Costa del Sol’s most discerning market: foreign buyers. Once travel is open again, sales should gradually rise – many analysts point to this happening from mid-Q2.

Big interest from foreign funds

One thing is for sure, the Costa del Sol will continue to attract international investors. According to Cushman & Wakefield, foreign funds have already earmarked €9,200 million for property investment in Spain in 2021, 18% more than 2019. Around 20% of this is destined for the residential sector.

On the Costa del Sol, the investment will continue to focus on high-end new builds. 40% of the area’s largest developers including Neinor Homes and Via Celere have REIT capital backing. Construction is concentrated on the west end of the Costa del Sol and on luxury second homes for the residential tourism market.

Conclusion

Of course, much will depend on the success of vaccine programmes and how quickly international travel returns, but we expect a good year for Costa del Sol real estate generally. The area has compelling attractions, impossible to resist for Northern Europeans despite outside factors. At The Property Agent, we’re looking forward to a strong 2021 for property.

This article has been written by  The Property Agent , a real estate agency specialising in real estate on the Costa del Sol. If you are looking for property on the Costa del Sol you can contact them here HERE. 

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PROPERTY

Home insurance in Spain: How does it work and what does it cover?

Home insurance in Spain has policies which may differ from what you're used to in your home country. Here's why Spanish home insurance may surprise you in terms of what it covers, what it costs, key info and whether it's worth getting.

Home insurance in Spain: How does it work and what does it cover?

If you’re moving to Spain and purchasing a property or even renting, one of the first and most important factors to consider is purchasing home insurance.

According to the latest data available, approximately 23 percent of households in Spain are uninsured. That percentage corresponds to around 6 million homes.

But with low prices and the wide range of situations Spanish home insurance covers, there’s little reason not to get it.

Contracting home insurance is only essential in Spain when you acquire a mortgage. The current Mortgage Law requires you to take out this insurance if you are going to buy a house with a loan and is an essential requirement for banks to grant you the money.

If you’re renting in Spain, you’re not obliged to contract home insurance, but it still may be a good idea.

Your landlord may have buildings insurance, but you may still want to take out some type of insurance to protect your own belongings or the contents of the property. 

In the UK, home contents insurance covers your personal possessions against theft, fire or other damage, while buildings insurance covers the structure of your property if the tiles on your roof are broken in a storm for example, the outside is damaged by fire or a tree falls on part of your property.

In Spain, home insurance works slightly differently. Like in the UK and other countries there are different types of insurance. 

READ ALSO: Is getting rental default insurance worth it for landlords in Spain?

What types of home insurance are there in Spain?

The most basic is seguros de daños or damage insurance which is similar to buildings insurance in the UK. This will only protect the structure of your property. This would be damage caused by major events such as fires, explosions, flooding, acts of vandalism or subsidence and you should still check the smallprint to be sure of the conditions. With flooding for example, most insurers cover flooding damage caused by rainfall greater than 40 litres per square metre per hour.

The second tier is seguros multiriesgo or multi-risk insurance. This covers both your building and its contents and is one of the most comprehensive types of home insurance in Spain.

This type of insurance not only covers big incidents like fire or theft, but it also covers a whole range of minor issues, which is very different from the type of contents insurance in the UK.

Home insurance is only essential in Spain when you acquire a mortgage. Photo: Louis Hansel / Unsplash

It can cover for everything from a blocked sink to a burst pipe in the wall or a broken radiator. Sometimes it may even cover the breakdown of your white goods such as washing machine and fridge, depending on how old they are and what your specific policy says.

It’s also especially useful for flat owners as it covers against damage to your neighbours’ property if something inside your apartment is at fault.

For example, if your shower or toilet breaks and starts leaking into the flat downstairs, your insurance should cover the damage to your neighbour’s ceiling so that you won’t have to fork out a fortune for fixing someone else’s property.

Many major cities in Spain have historic quarters and some of its nicest-looking apartment buildings are some of the oldest too, so it’s particularly useful if your property is old and prone to needing fixing regularly. 

The third and highest type of home insurance coverage in Spain is all-risk home insurance, which has extended coverage that includes robbery on the street, damage to extra storage rooms outside the main property or coverage for cosmetic damage.

What you need to know

Keep in mind that when you do claim or after you have claimed a couple of times, it’s normal that the insurance company won’t want you to be their client anymore and will terminate your contract.

This shouldn’t be a problem, however, you will simply contract a new home insurance policy with a different company. It helps to go with a broker so that they can present you with different options to choose from, so you know what’s the best.

Be aware that every insurance company will have a slightly different policy so just because a certain item may have been covered on your old policy, it doesn’t mean that will be on the new one or be covered to the same amount of money.

What are some of the most popular home insurance companies in Spain?

There are many different companies that offer multi-risk insurance policies in Spain, both international and national companies. Some of the most popular are:

  • AXA Home Insurance
  • Generali
  • Zurich
  • Mapfre
  • Caser
  • El Corte Inglés 

How much does home insurance cost in Spain?

As the multi-risk policies cover so many different aspects, you would imagine that they’re very expensive. Surprisingly though, these are quite affordable at under €200 per year according to the Organisation of Consumers and Users (OCU).

The price isn’t too different from what you’d pay in the UK. Money Supermarket says that a combined home and contents insurance policy in the UK costs around £140 per year, but usually it will cover a lot less. 

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