surinenglish

Bubble bursts on Costa's luxury property market in wake of Covid-19

La Zagaleta is just one of many luxury areas by the coast.
La Zagaleta is just one of many luxury areas by the coast. / Josele
  • Homeowners selling in a hurry to release cash and inflated valuations before the pandemic are the reasons behind a fall in prices now

The coronavirus crisis is also hitting those with the deepest pockets. The luxury property market on the Costa del Sol is showing signs of a drop in prices of up to 20 per cent for the homes with the least demand and that were priced above their real value before the pandemic set in. The findings are according to a report by top-end market specialists, Barnes.

The pandemic has put an end to speculation that was rife in this exclusive segment of real estate, where homes frequently change hands for over five million euros.

Some owners have needed cashflow quickly in the last few months and so prices have dropped. These owners have other businesses that have suffered losses from the start of the crisis in March and they've had to put their Costa properties, which they usually rent out or use for their own holidays, on the market. The bigger the need for cash, the less profitable the deal for the owners, explains Barnes, which believes this impetus will see market demand recover medium term.

However, in the meantime, the financial climate over the next few months is going to be "particularly favourable" for buyers.

Barnes has opened a Marbella branch to service demand for upscale homes along the entire coast, where prices can reach 7,000 euros per square metre. This local office has 150 homes on its books with prices from 300,000 to 25 million euros.

Key to a recovery in demand is the reopening of international travel, as almost 90 per cent of clients come from countries including the UK, France, Germany, Belgium, Italy, Switzerland and Russia.

Directors of Barnes, Jeremy Lauwers and Marie-Laurence Van de Berg, see the market settling down mid term. "The international buyer will return again to this part of Spain because of its attractive characteristics," they said.

Regardless of price, home purchases fell by a half up to April this year in Malaga province. Experts say it will be next spring before there is any real recovery and that price drops will be widespread. On the Costa there are some 240 new-build projects under way involving over 5,000 apartments and houses.