Costa del Sol Real Estate

Past performance of the Costa del Sol property market and outlook for the future

Of course we’re all wishing now that we’d snapped up some prime Costa del Sol real estate back in the early 1970s and sold it in the boom years of the late 80s.

That was the costa’s crazy hey day when all but the most naïve investors were raking in enviable profits from their property portfolios. Villas and apartments either on or near the most popular coastal strips were doubling in value in less than five years and get rich quick investors were ploughing their profits into the burgeoning number of off-plan property schemes springing up along the southern coast of Spain.

The 70s and 80s were the honeymoon period both for the big developer and the small investor looking for a lucrative lair for their nest egg. But as with all honeymoons, it had to come to an end. The ludicrous property price increases of the 1980s began to slow down in the 90s, followed by a feverish rush to snap up Spanish property in the lead-up to the introduction of the Euro in January 2002. At that time it was estimated that billions of pounds worth of black money was hidden under Europe’s metaphorical mattresses and one of the best ways to get rid of it before the tax man pounced was to invest it in Spanish real estate.

The Costa del Sol - Bust or boom?

Costa del Sol property still seemed one of the world’s safest and best investment opportunities in the early part of the 21st century but financial analysts were issuing gloomy predictions of a massive crash. The bubble was about to burst, they warned, and the effects would be most devastating in those areas – such as the Costa del Sol – where house prices had risen too high too quickly.

So were they right? Well, it’s been more a case of the balloon slowly sagging rather than bursting. Certainly the Costa del Sol property market has seen a price slow down since 2004. Some owners have been dismayed by an alarming decrease in the value of their properties but in the main prices have stabilised rather than crashed.

This slow down was inevitable due to a number of factors. The town halls, landowners and developers got too greedy. Construction was allowed to continue unchecked for too long, would-be investors were unnerved by the dire “bursting bubble” forecast and new markets were opening up in eastern Europe offering cheap holiday homes at prices not seen in Spain since the 1970s.

The Costa del Sol vs other european hotspots

For the first time, Spain was facing serious competition – both in terms of being a cheap European holiday destination and as a prime investment opportunity for those looking to buy a rental or second home. Previously unchallenged tourist centres, such as those along the Costa del Sol, had to wake up to the fact that countries like Bulgaria, Turkey and Croatia were offering holidaymakers and homeowners better value for money.

The clouds have certainly been gathering over the Costa del Sol’s golden investment ground but there are still profits to be made in southern Spain for those who look before they leap and don’t expect the instant rewards of the late 20th century boom years.

In fact it’s a good time to buy on the Costa del Sol as long as you can wait a while for a good return on your investment. The bottom end of the market is faring particularly badly because of a glut of ugly urbanisations where developers are struggling to sell cheek-by-jowl properties at prices which foreign buyers are no longer prepared to pay.

But there are still plenty of areas where property prices are continuing to rise steadily at an annual rate of around 10-12%. And many market analysts believe that some of the up and coming unspoilt areas, such as the Costa de la Luz and Almeria, present excellent opportunities for the long term investor.

There’s no doubting that Spain has to pull its socks up as a leading holiday destination but northern Europeans will always want to come to the Costa del Sol with its year-round sun, excellent transport links and unrivalled leisure facilities.

There’s still good money to be made for the cautious investor who chooses the right kind of property in the right location. If you sign up to an off plan property without even visiting the area or researching local housing market performance – well, you’ll probably get what you deserve!

Click here to see our investment guides to Spanish Property