Marbella Real Estate Market – Brief Study 2010
1.- Appraisal of the current situation in the Marbella Real Estate Market and if the “slow-down” is over and if there are good expectations for sales for the rest of the year.
Compared to a year ago, at the moment we are in a very active market. Sales volume has increased, generally, by at least 50-60%. A year ago, few properties with prices over €1.000.000 were being sold, but now there is a lot more activity, not only for properties below the €1.000.000 price range, but also for those up to €2.000.000 and also the most expensive ones on the market.
I met up with a friend last week who is an economist, writer, teacher, expert in tourism and a highly talented man, Lorenzo Soriano, from Tenerife. Lorenzo said to me, “We are in a seller´s market!” “Really? A seller´s market?” I asked. “Yes, because today if the seller reduces his asking price, there are many more buyers”. And it is true. A year or a year and a half ago we had sellers who lowered their asking prices but they still did not sell their properties. Now, whoever really wants to sell, will.
At the moment, the market is dominated by “bargain hunters”. However, there are many prospective buyers who are not realistic when it comes to making an offer. For example, they may be interested in a property which was originally for sale at €500.000 and which was then reduced by €125.000 to place it at an asking price of €375.000, and then they offer half, without taking into account comparable sales: they are simply holding unreal expectations in the current market. The national press has led people to believe that, if there is a surplus of 1.000.000 new builds on the national market, spread out over all the Spanish municipalities, which are for sale with a 40-50% reduction in price, it must be the same in Marbella.
But, in the first place, you cannot compare the national market in general to a luxury market in an area as consolidated as Marbella. Property prices have gone down significantly, at least by 20% since their all-time highs of three or four years ago, including those in the best areas, but a buyer needs to gather information in order to understand what is selling, at what prices, and he needs to be realistic if he wishes to buy now. There are not a lot of new builds for sale, due to the General Plan having been “on hold” for 24 years which has led to a shortage of land that can be developed.
It should also be taken into account that there are not that many second-hand properties for sale in the most sought-after areas. Last year we calculated that we only had around 4,500 luxury properties, i.e. properties in good residential areas for over €300,000. So, although we are in a market with properties at exceptional prices, and which may last easily for another three years, what we are going to see, and what we are seeing at the moment, is that when a “real bargain” is sold in a particular residential complex, it will not necessarily be replaced by another property with similar characteristics and, gradually, the number of “best buys” will diminish.
Worth noting is that Marbella represents a multi-national market, with a 12-month season. Although the national market is very important, the number of foreign buyers easily reaches 60% of the total. This means that there are many more prospective buyers here than, say for example, the cities of Seville or Málaga, or other places that do not attract foreigners.
Finally, there are three other factors at play in the Marbella market which should be taken into consideration at the moment:
- Although there is a lot of activity in the market, negotiations are more difficult than ever. Often, the seller feels that he is being offered too little because he finds it difficult to accept that his property has a market value which is now less than it was a few years back. Quite often we receive offers that are frankly ridiculous, as mentioned above. I repeat that he who wishes to buy must “do his homework”: he must acquire market knowledge and learn what is selling and at what prices and, within this context, be realistic when looking for a bargain.
- The problem which exists regarding residential complexes with urbanistic charges according to the new General Plan: until the Town Hall sets the value per square metre of the urbanistic charge against the property in the specific area of Marbella where the property is located, it will be complicated to estimate this value without the help of a national valuer and one must be prepared to assume the corresponding expense and time involved in doing the valuation. All buyers want to make a “no risk” purchase and it is up to the Town Hall and the lawyers of the sellers in complexes with charges to quantify the amount of the possible charge, thus making the sale easier, taking into account all the facts and before putting the property up for sale. It really should be that easy but, unfortunately, is not so in practice.
- It is interesting to note that the value of properties in the town centre has not dropped to the same extent as in the rest of the municipality. Recently I spoke with a very good agency who specializes in properties located in the town centre and they told me that prices have only dropped between 5% and 10%.
In short, we can be very pleased with the progress in the market situation. Personally, I am proud of the great team of 24 professionals, of 9 different nationalities, who comprise our agency. They are “champions” in our profession…the sales team, the rentals team and also the support team. I am also very pleased to have my children working with me, they represent the fourth generation of real estate professionals in my family.
2.- The type of property being sold the most.
Up until the end of last year, most market activity was seen for properties located in the most consolidated areas with asking prices below €800,000. It goes without saying that, in times of economic hardship, a second home, especially if finance is required, is a luxury that can easily be done without.
But this year we can see that those properties being sold have, after negotiations, price tags of up to €2,000,000, with activity also in the higher price range of the market.
For example, in many cases, a villa which is placed on the market at an asking price of around €2,400,000 – €2,500,000 will be reduced to approximately €2,000,000 and will eventually attract offers coming in at about €1,650,000 – €1.700.000.
3.- Areas where most sales are being made.
It is clear that the areas where most sales are being made are the more consolidated ones and where the properties are better located. Nueva Andalucía is one of these, and everywhere on the Golden Mile, and also in the residential complexes in East Marbella.
4.- What should be taken into consideration when buying in today’s market.
- Sufficient market knowledge to be able to recognize good value for money (asking price or offer price) in relation to quality and specs, to be able to recognize what is over-valued, and to be aware of real sales prices. Having said this, over-valued properties (in the sense of their offer price) may be worth viewing because, in a lot of cases, the owners will not have received many visits and will possibly lower their price considerably. A good agent will be able to guide his clients well in this respect and will do everything possible to show what is available on the market…even other agents’ properties…with the sole intention of finding the property that “fits best” and at the best price.
- More often than not, the “perfect” property cannot be found (or it does not exist!) and so there will have to be a “trade off”. Sometimes, a couple may not totally agree on a specific property and so, finding a property which will please both will normally mean reaching some sort of compromise.
- If a property is found which is considered to be very well priced, the client needs to team up with his agent and ask him to “sound out” the seller´s bottom price. With this information available, a “reasonable” offer can be placed. If the offer is too low, it will be like throwing a bucket of cold water on the seller and no answer will be received. The idea is to place an offer that will awaken the interest of the owner and engage him in negotiations.
- When making an offer, one has to be very articulated and needs to pay great attention to the details of the transaction, not only the price, and these should be dealt with all at the same time: if furniture is included in the price; when would the buyer be ready to sign the private contract and pay the corresponding 10%; when would he be ready to close; and all other points corresponding to the offer. And, above all, it should be made very clear that a deposit of €10,000 or €20,000 would have to be paid immediately, as soon as the offer is accepted. If the buyer can show that he is prepared to make the commitment immediately, he will attract the attention of the seller and show that he is serious about his offer. Those buyers who place four offers simultaneously only send out a message which will be interpreted as anything but genuine.
5.- What to highlight when selling a property.
- The most important point is to set an asking price which appears interesting to the public for the property on sale. If the asking price is too high, viewings will not be generated. If the price is right for the current market, visits will be made and this will result in the owner receiving offers.
- Contact has to be maintained with the agents and the seller should request feedback from his agent if the outcome of a viewing is not reported. Although this should be in the agent´s protocol, more often than not it does not happen, especially for non-exclusive properties. It is important that the seller “works” his agents so that they give him priority amongst their clients.
- The property should be clean, with paintwork at its best, and in general good condition in order to give the best impression possible to the prospective buyer. It is the same as when selling a car, it needs to be clean and with no scratches on the bodywork, in order to sell at the best price. This removes possible objections from the buyers who, psychologically, will value the repairs, paintwork, etc. at least 10 times the real value in order to try to lower the price.
6.- If the real estate crisis has changed the type of client and the market.
Of course, the type of client is very different from that of four or more years ago and the market has obviously changed, it is the exact opposite to what it was before.
At the moment, we are going through a very interesting time in the market, with a lot of activity although in many respects, as mentioned above, it has both its difficulties and its challenges. There are now many bargains that we thought we would never see. Whoever intends to purchase should really start to “sound out” the market now. It´s not that the best priced properties are going to sell immediately but, due to the current amount of prospective buyers in the marketplace and the real sales volume, what is very clear is that the Marbella market has already hit rock bottom and recuperation is already in progress.
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