With news that nearly every project on Costa del Sol is selling or sold out its very clear that there is a huge demand for new properties even if they are more expensive than resale properties. Due to the shortage of land in good locations especially in and around Marbella and increased building costs we are going to be seeing properties in 3 distinct price categories as we come out of recession.
Currently we have two very distinct types of properties with the first being prime location in Marbella and Puerto Banus which actually is now more expensive than a year ago and a mixture of discounted key ready new developments, distressed sales and bank repossessions that are selling below market value but more importantly below the cost of construction.
The reality as the majority of the good stock is taken for the market we are going to see properties in three price brackets and this is already illustrated in La Cala de Mijas. Here you can buy a bargain 2 bed apartment key ready new development at 145,000, a high quality 2 bedroom apartment in Oasis de Mijas for around 220,000 and a super brand new 3 bedroom apartment at starting prices of 339,000 through to 600,000. Three beds in Oasis de Mijas sold for between 275,000 and 300,000 but as you can see there is still a price differential. And the location is vastly superior for Oasis de Mijas.
In Marbella and Puerto Banus this situation is only going to be more exaggerated as lots of different investors look for land or projects to finish that just don’t exist on the open market and it’s only a matter of time that banks begin to realize the true value of the assets they are holding.
So what will happen when we have a three tier market? If we take a look at Costa Blanca where new build is 10-15% more expensive then it’s clear that Russians and Scandinavians will pay the difference but UK citizens tend not to. However there is a cash difference in Costa Blanca of say 90,000€ compared to 80,000€ i.e. only 10,000€ but that’s likely to be at least 50,000 in cash terms in Costa del Sol.
There will be buyers for all three price points the real question is how many at each price point and how it will affect the market as a whole. Our view is it will just make a distinct choice for would be property buyers and focus the distinct choices between Costa del Sol and Costa Blanca.