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House buyers from outside the province account for four out of every ten purchases in Malaga
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House buyers from outside the province account for four out of every ten purchases in Malaga

Some 28% of the property purchases are made by foreigners not resident in Spain and a further 12% by buyers resident in other provinces

Friday, 25 October 2024, 15:05

Who buys housing in Malaga, how and for what purpose? Having answers to these questions should be a prerequisite for entering the increasingly heated debate surrounding the housing crisis. Reaching those answers requires knocking on two doors: one for the statistics and the second for the professionals who 'walk the streets' of the property market every day. The information compiled by the Ministry of Housing on real estate transactions contains revealing data on the weight of foreign demand. Perhaps the most striking statistic is that four out of every ten homes in Malaga province are bought by people who do not live in the province. Of the 18,780 property transactions registered in the first half of this year in the province, 28% were bought by non-residents of Spain and a further 12% by people residing in other Spanish provinces (Madrid being the main source, followed by Cordoba and Barcelona). The remaining 60% of deals were signed by residents domiciled in Malaga.

If we compare home sales and purchases in 2007 (the last year before the real estate crisis and economic crash) with those of 2024, two changes can be observed: now non-residents are buying more and Malaga residents are buying less. However, even back then, the relative weight of foreign buyers was already significant, as they accounted for 28% of transactions. The new feature is that this demand was previously focused on the western Costa del Sol, but it is now also very active in Malaga city.

So that is the official data. To find out in more detail about the profiles of homebuyers, it is necessary to turn to the professionals and experts in the property industry. This is the view of a financial institution with a strong presence in Malaga: "A clear distinction can be made between the capital and the coast. In Malaga city, the buyer is mainly of a national profile, with a strong demand for first homes. They are upper-middle class families, looking for homes between 80 and 120 square metres, in well-connected areas with services in the surrounding area. The average age of buyers is between 35 and 45 years old and 70-80% of buyers require a mortgage loan."

On the Costa del Sol, added this spokesperson who prefers anonymity, the buyer profile is changing: "It is becoming more and more consolidated as a luxury and second home destination, or even a first home for older non-residents. We could estimate that around 90% of transactions on the Costa del Sol are made by foreigners with an average age of around 50, a high percentage of whom are retired or professionals who work remotely via teleworking."

Competition in the high-end market segment

Is foreign demand competing with local demand in Malaga's housing market? The conclusion drawn from the opinions of professionals in the real estate and financial sectors consulted by SUR is that this competition only occurs in the 'prime' segment for homes worth over 500,000 euros. Precisely because of this competition demand is "skyrocketing" at this level in the property market according to Mario Garnica, director with Engel & Völkers for Malaga: "In our market, which is the medium-high and high-end, between 65% and 70% of our buyers are foreigners. And of the total number of foreigners, just over half were already residing in Malaga or they bought the property in order to become so." The rest are motivated by investment or second homes. With regard to Spanish buyers, they are split 50/50 between Malaga residents and people from other provinces. Of this national group the vast majority "buy a home to live in", although logically such a property is also considered an investment.

In this high-end market, foreign buyers purchase without a mortgage in 60% of the cases, a percentage that is reversed in the case of national buyers. "Even if they are able to pay in full, the Spanish tend to request a mortgage, even a small one; foreigners generally buy in cash," said Mario Garnica.

Mortgage or cash?

Moving out of the high-end and into the middle price range of the property market, we turn to Tecnocasa for a market view: "73% of the deals we have completed in the province so far this year are for first homes, and the percentage is somewhat higher in the [provincial] capital. The rest is divided between 9.5% of people looking for second homes and 17.5% of purchases for investment purposes", explained Tecnocasa's director in Malaga, Jesús Jiménez. The bulk of its clientele continues to be couples looking for their first home: 54% are aged 24 to 44. Some of these clients end up "diverting" from Malaga city to nearby towns (Alhaurín, Cártama, Pizarra or Coín), where they can find "more affordable prices."

The comparison between sales completed and mortgages drawn down shows that half of the properties are bought without a mortgage. The percentage is lower in the first-time buyers market and in Malaga city it is "around 30%" according to Tecnocasa data. In any case, what is behind the cash transactions, and can they be traced 100% to pure investment purchases or "speculation"? This was how the spokesperson for independent party Con Málaga, Toni Morillas, put it in Malaga city hall during her now famous political exchange with planning councillor Carmen Casero at the last full meeting of the council. Professionals in the sector deny this and point to a more complex reality. "Behind many cash purchases there is a change of home: someone selling their home to buy another," said José Antonio Pérez, director of the Real Estate Business School. Director for real estate consultancy Savills in Andalucía, José Félix Pérez-Peña, also highlighted the high proportion of "replacement demand" in these sales that take place without any borrowing.

Cash purchases also include the profile of the small-scale, local saver-investor, who tends to acquire low-priced properties - small flats or apartments in their neighbourhood - with the idea of refurbishing them and reselling (flipping them) or renting them.

"High unmet demand"

Pérez reminded us that in this portrayal of homebuyers in Malaga there is one profile missing: a "high unmet demand" made up of young - and not so young - people who are looking for their first home and cannot afford to buy because they do not meet the requirements to get a mortgage (the banks demand that the proportion of the mortgage payment must not exceed 30% of household income) or because they do not have sufficient savings to make the required down payment.

Three-way trades in a fast-moving market

Much of the current demand for housing in Malaga is fuelled by replacement purchases: people selling their homes and buying bigger, newer or in a better area. The real estate agency Origen Málaga has specialised in this type of transaction in Malaga city and its founder, Cristina Aguilera, said that lately the market dynamics are such that they have managed several triple transactions, in which one person sells their home to another who in turn sells theirs to a third (short chains). "They are deals that have to be closed very quickly, in just a few days, because each one is linked to the other. They are usually done with small mortgages that are used to finance the difference in price between the property they are selling and the one they are buying, although savings are also usually provided," she explained.

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