Nine reasons why . . .

5. MARKET DEMAND

The Federation of Municipalities of the Costa del Sol predict that this coast will become the most extensive metropolitan area in Spain, stretching along 147kms of coast from Nerja to Sotogrande. More than 2 million people, almost double the present population will line the shores by the end of 2007. "There are no indications of slow down. Every sign indicates that our economic growth will continue. Malaga relies on tourism and real estate, which some people think can vanish overnight, this is simply not going to happen".

According to a report by Advanced Management Services Group, undertaken for the organizers of "Marbella Meeting Point" the Costa del Sol received more than 20% of total investment by foreigners of secondary homes in the Spanish Territories. The report shows that in the next 5 years more than 800,000 European families (mostly German or British) will buy a home in Spain. Andalucia represents 32% of all Real Estate investment in Spain and the Costa del Sol alone assumes 90% of Andalucia's share.
". . nearly half from Britain . ." There are two points of interest: One, that lots of northern Europeans (especially Britons) like Andalucia, and Secondly that Andalucians seem to like this influx of 'extranjeros' - there's a good fit.

This northern customer-base comes from mature economies with high property values and an ageing population. People who may have 'done with' full time work, or seen their children settled, or with time to enjoy themselves. People with significant capital value that can be extracted from their local properties, to invest elsewhere, in their 'new' lives. These are experienced and intelligent customers - they have money to spend; they like this part of the world and what it can offer them.

Foreign Demand

Andalucia is becoming the California of Europe, so they say . . because of its perfect year-round climate, scenery, infrastructure investment; and the availability and quality of newly built properties, to purchase or rent for holidays or short stays. Factors driving this ever forward include the increased feasibility of working away from 'home' or 'office' provided by modern telecommunications, the rise in home equity value available to northern Europeans to realise and spend elsewhere, and the surge in 'baby boomer' retirement - people who are both active and keen to escape to the sun.

These 'retirees' - their ages actually range from late forties through to sixties and beyond - have faced the fact that their stockmarket-based pension investments will not deliver what was promised, and that an investment in property not only could, but could do so where the sun shines and the sea is blue. Recent changes in UK pension rules now mean that retirees can put their pension investment into overseas property through a SIPP (self-administered pension fund). This will further increase retiree interest in Andalucia.

In mid-2004 the Spanish bank BBV reported that 150,000 houses are purchased by foreigners each year - they constitute 15% of the total Spanish property market. Out of this total 90,000 are second - holiday - homes and 45,000 are bought by foreigners coming to Spain to live and work. Overall, this study calculated that 1.8 million Spanish homes were foreign-owned, with probably over 1 million of them British owned. La Caixa bank calculates that the value of this foreign investment in Spanish property doubled to 6,000€m in the three years up to 2002. This existing high level of demand is expected to increase further so that in the next five years 1.5 million people will buy in Spain.

Spain is still seen as the best place in Europe to buy property in and to live in. Of Britons buying abroad, 41% choose Spain and this is expected to mean nearly 100,000 British purchases in the next five years. [Mintel report November 2004]. The latest research by Barclays Bank [November 2005] reported that the number of Britons owning overseas property is set to double to 4.4 million, with Spain heading the popularity list by a significant margin - twice that of the next intended destinations (the USA and France) and well aahead of South Africa, Dubai, Portugal and Bulgaria. In March 2005 Inmueble magazine conducted research that indicated that the Costa del Sol was the preferred region to buy in, by a wide margin - 42% preference compared with the next popular (Costa Blanca) at 15%.

60% of the 52 million tourist visitors to Spain (the world's favourite destination) preferred to rent a 'holiday home' rather than stay in a hotel - that's over 30 million people a year and one of the factors that makes the possibility of renting out a Spanish property so viable. Owners of property in the more exclusive areas of the Costa del Sol are able to charge the highest rents in Spain (including the Balearic and Canary Islands).

There is no reason to expect this level of demand to slacken. The warm climate will always be a key and unchanging factor. Although there is great energy being put into new developments, there is still room to accommodate them; and the political maturity and authority to demand that they are sensitively carried out, so as not to destroy one of the region's other key attractions - the natural environment. Tough recent action against illegally constructed buildings is a strong indicator of this political will. Expenditure on infrastructure projects is increasing from an already high level, resulting in even better air, road and rail links and also visitor assets such as marinas and golf courses. More and more people have the opportunity to purchase property in Spain - especially Andalucia - and this part of Europe will continue to attract their investment, even in the face of new and cheaper competition from Hungary, Bulgaria, etc. Those countries cannot compete with what Andalucia can provide.

Competition from Eastern Europe?

The RICS’ (Royal Institution of Chartered Surveyors) European Housing Review 2005 by UK housing expert and economist, Professor Michael Ball, examined the macroeconomic and demographic influences on the main European housing markets. Now in its sixth year, the report provides unique data and in-depth analysis covering a combined market of 460 million people. This year’s report also covers the 10 new EU accession countries for the first time, with in-depth chapters on Hungary and Poland and an overview on the remaining eight.

The new EU countries in central and Eastern Europe have more affordable but more precarious housing markets, which means foreign investors should exercise caution. A big issue facing the new accession countries is quality of housing as they are faced with the task of overhauling the legacy of poor quality housing from the post-war Soviet years. Some of these countries still lack an adequate legal property infrastructure to effect necessary improvements.