Unveiling the Investment Potential: Why Marbella & Costa del Sol are the Ultimate Real Estate Hotspots
Introduction
Along the picturesque Costa del Sol, renowned for its breathtaking beauty, Mediterranean climate, and luxurious lifestyle, lies Marbella. Beyond its sun-kissed beaches and vibrant culture, savvy investors worldwide recognize the significant real estate opportunities here. In this article, we delve into the investment potential offered by Marbella and Costa del Sol, exploring factors such as income from short-term rentals, property appreciation, tax benefits, and market trends.
Potential from Short-Term Rental Income
One of the main attractions for investors in Marbella and Costa del Sol is the lucrative potential from rental income. With year-round sunshine and a thriving tourism industry, the region attracts a growing influx of tourists seeking holiday accommodations. Villas and apartments in prime locations, such as beachfront properties, golf course estates, or luxury residences, command high rental prices, ensuring impressive returns on investment throughout the year.
According to Gesvalt, rents in Costa del Sol in 2023 were 14.7% higher than the previous year, averaging €12.6 per square meter, one of the highest in Spain. Once again, rental prices in Marbella saw an increase to an average of €16.70 per square meter. According to Idealista, rents increased by 22.1% compared to the previous year.
Property Management Services: For those looking to invest in property without the hassle of management, a range of professional property management services are available in Marbella and Costa del Sol. These services offer comprehensive solutions for property maintenance, promotion, rental bookings, guest services, and financial management, allowing investors to maximize their returns while minimizing their involvement. From regular maintenance checks to handling guest inquiries and coordinating cleaning services, property management companies offer peace of mind and convenience for owners.
Long-Term Property Appreciation
Investing in real estate in Marbella and Costa del Sol offers not only immediate returns but also the promise of long-term capital appreciation. Over the years, property values in the region have shown a consistent upward trajectory, driven by factors such as limited supply, growing demand from both domestic and international buyers, and ongoing infrastructure development.
Prices in Costa del Sol in 2023: Several areas of Costa del Sol surpassed the average price increase at the beginning of this year. According to Idealista, many recorded double-digit increases, for example:
Marbella: Values increased by 18.6% to €4,138 per square meter.
Benahavis: Prices increased by 7.5% to €3,981 per square meter.
Estepona: Values continued to rise by 19.3% to €2,993 per square meter.
Manilva: House prices rose sharply by 18.8% to €2,149 per square meter.
Sotogrande: House prices continued their upward trend, increasing by 7.8% to €2,723 per square meter.
Tax Benefits
In addition to attractive rental returns and capital appreciation prospects, investing in property in Marbella or other areas in Costa del Sol offers favorable tax benefits for investors. Spanish tax laws provide various incentives and exemptions for property owners, including reduced capital gains tax rates, deductions for property-related expenses, and exemptions for rental income from short-term rentals. Furthermore, non-resident property owners can benefit from a favorable tax regime, making it an appealing choice for international investors looking to optimize their tax liabilities.
NON-RESIDENTS in Spain (even if residing in the EU) can deduct the following expenses from their quarterly income tax return:
- Interest resulting from a mortgage loan for the purchase of the property.
- Local taxes, administrative fees, and surcharges.
- Expenses related to the formalization of lease contracts.
- Maintenance costs can be offset; expenses for renovation and improvement of the house are excluded but can be claimed at the time of property sale.
- Community fees.
- Home insurance premiums.
- Repairs: plumbing, roof renovation, painting, pool pump, etc.
- Utility bills: electricity, water, gas, internet, and landline.
- Cleaning
- Concierge, gardening, alarm, and security services (e.g., in residential complexes).
- Lawyers’ fees are 100% deductible for the calculation and submission of the quarterly income tax return.
- Property management expenses.
- Advertising invoices from booking platforms.
- Advertising expenses.
- House depreciation.
The Junta de Andalucia has approved a law regarding tax benefits on the purchase of properties in the region, which has lowered a series of other taxes, including: Property transfer tax (second-hand homes at 7%), IRPF (personal income tax), property tax, inheritance tax, among many other taxes.
Following this new tax law, Andalusia has become the region in Spain with the lowest taxation. The new administration, which took office in 2019, is fiscally favorable and has continued steadfastly with its policy of lowering or even abolishing taxes.
Market Trends & Best Areas for Real Estate Investment in Costa del Sol
Understanding market trends and identifying promising locations is essential for real estate investment success. In Marbella and generally in Costa del Sol, several areas stand out as particularly attractive investment destinations. The Golden Mile of Marbella, Puerto Banus, Estepona, and Benahavis are among the most sought-after locations, offering a winning combination of luxury services, scenic beauty, and strong rental demand. Additionally, emerging areas like Mijas Costa and the New Golden Mile present interesting opportunities for growth and investment potential.
Various sources provide an overview of the situation. They also show that the general trend of prices in Costa del Sol continues to increase.
Marbella was, even in 2023, the most expensive place in Costa del Sol to buy a property, with an average valuation price of €3,343 per square meter. It is the second most expensive city in Spain. The average price in Benalmádena, Estepona, Fuengirola, Mijas, and Torremolinos exceeded €2,000 per square meter.
Idealista (based on asking price): The real estate portal calculated the average price per square meter at €2,849 in March, representing an annual increase of 13.9%. This figure is among the highest in Spain, indicating that homeowners are capitalizing on the still strong demand.
OMAU (based on asking price): According to the quarterly report, prices increased by 4.16% in the first quarter of this year compared to the fourth quarter of 2022. The average stands at €3,759 per square meter. Marbella recorded the highest price with €5,501 and also the highest quarterly increase (5.6%). Estepona had the second most expensive property in Costa del Sol with an average price of €3,192.
International Market in Costa del Sol
International buyers have always played a significant role in the real estate sector of Costa del Sol. OMAU reports that foreigners represent 34% of the market, an unusually high share indicating strong international real estate interest in Costa del Sol. In conclusion, properties in Costa del Sol remain more popular than ever among international buyers.
Conclusion
Marbella and Costa del Sol emerge as prime real estate investment destinations with unparalleled potential. From the appealing short-term rental income to capital appreciation, tax benefits, and professional property management services, the Andalusian region offers a compelling market for investors seeking to diversify their portfolios and capitalize on lucrative opportunities in Spain’s dynamic real estate market. With its timeless charm, vibrant lifestyle, and promising growth prospects, Marbella and Costa del Sol stand as the most attractive destination for investors worldwide.
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