The interest in acquiring a second home in coastal areas resurfaces again, after the difficulties of the crisis.
It is a classic picture of summer for several decades: the family loads their vehicle with suitcases full of swimsuits, towels, umbrellas, and whatever equipment is considered necessary to enjoy a few days of relaxation in one of the coastal towns of Spain
For years, enjoying a residence by the beach was one of the main aspirations of the Spanish middle classes, largely due to the construction boom that was experienced in many regions of the Spanish coast in the 1990s and the early 2000s. But the crisis that hit the country from 2007 froze demand for second homes when, for many families, it was enough to maintain their main home. Pictures of abandoned urbanizations, half-done, gave an ugly reputation to the Spanish coast and became emblematic of the effect of the bubble.
Now, and for some time now, some of those crazed «sell» signs are being torn off by a batch of new owners. The coastal property market has also begun to recover. In the last year, the sale of homes rose almost 28% in the city of Malaga, 26.9% in Alicante, 26.6% in Estepona, about 26% in Gijón and 24.4% in Las Palmas de Gran Canaria.
«Since 2015, we are seeing positive behavior in some areas such as the Costa del Sol, the Balearic Islands, the Canary Islands or some areas of southern Alicante,» explains Susana de la Riva, director of Marketing and Communication of the taxation company Tinsa.
A rising market
These areas, heavily linked to tourism, have been boosted by a foreign demand that has always been a fundamental part of the real estate market on the Spanish coast. That is still true today. This is explained by Darío Fernández, a partner of Prime Invest, a company dedicated to advising and managing real estate assets on the Costa del Sol. «There is a very differentiated demand for areas, especially active, which are those that attract more international clients, where both the promoter activity as transactions are high,» he explains. On the other hand, in areas most linked to the national buyer, «activity remains low», he adds.
Beatriz Toribio, director of Estudios de Fotocasa, explains that the economic situation in Spain and low salaries have kept the national demand for second homes very contained. However, this situation begins to offer recovery symptoms, as indicated by Tinsa, where they point to areas such as La Manga del Mar Menor in Murcia, certain coastal towns of the province of Huelva or south of Pontevedra as some of the areas receiving this demand. nationally.
A recent study of the Casaktua real estate portal highlighted that the percentage of Spaniards with a second residence has risen by five percentage points in the last year, up to 28%, and 18% is looking for a second home, in comparison to previous 10%. Of these, 60% pretend that this new house is located in some coastal area.
Precisely, Casaktua launched this week a series of tips when dealing with the purchase of a second home. Among them, they pointed out the need to determine whether the property being purchased is for their own enjoyment or as an investment «that is, with the intention of receiving some type of remuneration thanks to rent or for its subsequent sale», in which case, the price has a higher importance.
This warning is far from out of place, as Toribio observes, to a large extent, the current national demand is focused on investment for rent. In a scenario of low interest rates like the current one, in which savers have lost the possibility of obtaining an attractive return for their money through conservative financial products, such as deposits or bonds, many have put their eyes on homes in coastal areas. The low prices, after the collapse caused by the crisis, and the boom of holiday rentals in private homes, have been the great catalysts of this movement.
These conditions are promoting a sharp rise in prices, which in some areas exceeds 10% in the year, but do not limit the potential for revaluation, since, in general terms, prices are still up to 40% below bubble peaks. «If this economic context is maintained, with this foreign investment interest, everything indicates that the prospects are positive in the short and medium term,» says Toribio. Although, obviously, the coastal market is not homogeneous and admits many nuances.
In the specific case of the Costa del Sol, «at a general level, we are well below pre-crisis prices in many locations, but if we focus on the most consolidated areas, frontlines, urbanizations with a brand, areas near towns, etc., prices have not only been reached, but clearly exceeded,» says Darío Fernández.
This situation is even more noticeable among the highest-level homes, a segment still dominated by foreign buyers to a greater extent—only 10% corresponds to national demand. «In some specific areas the prices are already the same or even higher, but in some areas there is still a small margin that buyers are taking advantage of to acquire those homes,» observes Carlos Padilla, senior real estate advisor of Diana Morales Property, a firm associated to Knight Frank.
Padilla explains that in this segment, which includes exclusive homes with prices between 2.5 and 10 million euros, «the annual price increase varies between 4 and 7% in the last two years, with a difference between new developments and resale, the new ones being more expensive, but also more modern and current in equipment or energy management. This last factor has resulted in a very high quality of the reformed properties in the last two years.»
The pull of new work
But the demand for quality construction is not exclusive to the most luxurious segment. Susana de la Riva observes that in some areas, where there is still a large stock of unsold housing, it has been rebuilt, because the current offer does not satisfy the clients’ demand, due to being outdated or poorly located.
And in the same line, Darío Fernández observes that «the difference of interest of the client in the promotions of new work with respect to the existing ones is very remarkable. Not only marking a big price difference with respect to the new work in products that are in the same locations (more than 50% in most cases), but also due to the difference in sales rhythm and market absorption. Undoubtedly, the new work occupies the main interest of buyers and investors.»
The real estate boom on the coast, as in the whole of Spain, forces us to question whether the market is entering a cycle of irrational exuberance as in the past, with disastrous consequences for the country’s economy.
In this regard, the experts are confident that the market is still far from the excesses of the past. And not only because, in general terms, prices remain well below those of then, but by the behavior of market players themselves.
Thus, Beatriz Toribio highlights that the percentage of Spaniards who participate in the real estate market has been reduced in the last year. The sharp rise in rental prices has eliminated much of the demand and this has not automatically moved to the search for housing in particular. In his opinion, the mere fact of the rebound of buyers seeking a second home with a view to the investment is significant change of mentality worked in recent years. For that reason, and as long as the financing does not get out of hand, it drives away the ghosts of a new crisis.
With this confidence, those thousands of Spaniards who will load their vehicles in the coming weeks to enjoy a few days of rest on the beach can take their vacations. This picture will hardly be part of the Spanish summer panorama. But perhaps many, at the time of return, already have a place to leave umbrellas and towels parked until the next getaway.