The article describes the real benefits of investing in Marbella real estate market in a very competitive and volatile environment. It shows investment niches where yields may exceed industry standards.
Stereotypes of real estate market in Marbella
When considering the purchase of property in Marbella and the Costa del Sol in Spain in general, and looking through the endless list of agencies, the consumer is facing the problem of choice. Figuring out what is better or worse is simply impossible.
At the end of the day, it all comes down to the choice of 1-2 agencies, the sites of those who evoke more confidence. Then they get to know the agent directly. The final choice is the agent who is just pleasant and comfortable to work with. For all this you should spend a lot of time. In real estate business no one has exclusivity and all realtors grab properties for sale from the same sources.
This is if it comes to buying a ready-made home.
Now, let's suppose clients want to build on their own. This approach would force them to get acquainted with developers who typically have some ready-made projects for construction. They offer them. This is the fastest way to implement the idea of building a house for yourself.
If we are talking about custom made villa, then you need to know the architects. In this case, the architect works like a developer: he has to prepare the project, get all the permits for construction, invite the construction company and perform technical supervision over the timing of construction.
In any case, the buyer seeks to maximize the benefits of the purchase, he wants to be assured of the liquidity of the property in case of sale.
What is the main problem of the market?
To our mind - the uniformity of the proposals. It only looks like there is a great range of choices. After viewing the first dozen properties or visiting the architects it becomes clear the differences are insignificant.
In principle, the eye catches nothing too ordinary. This is the way the market operates. Everything is done in the calculation for the statistical average client and his average taste. And it is all based the market trends. It's in vogue if you want a modern style. The entire market works for this concept. All architecture follows this trend. The only difference is the size of the house, the quality of the interior decoration and the location. In fact, there is a global modification of a global design, taking into account the topography and the required size of the property.
As soon as the question arises about something special, the market has nothing to offer, and the consumer is forced to choose from this kaleidoscope of monotonous offers of houses in the "boxes" style or look for the classical Spanish architecture of older villas, to reconstruct, renovate or even just move in and live in whatever it is bought.
No real estate agency tells you that, their goal is selling.
Choosing a few houses to look at, the buyer is still hoping that he would be attracted to comfort of the interiors because most high-priced properties are sold as ready-made. What do we see here? Everything is subordinated to one goal: to build cheaper, create an illusion of luxury living, and to have the comfort of the interiors. What do we see here?
Everything is subordinated to one goal: to make cheaper, create an illusion of luxury living and sell more expensive. The main parameters in this are the following. Location and view characteristics are the main criteria that influence the price. The rest is all secondary.
And now let's look at the problem from another angle. A large percentage of sales in the market are the purchases for the investments with the subsequent resale. There's no drama whatsoever here. Endless reports and market analyses from leading real estate agencies say the same thing for years.
The market is there, it is increasing and the percentage of transactions is growing from year to year, so Spain is of great interest to real estate investors.
All these things are true. But, first of all, Costa del Sol market alone has more than 30,000 units for sale, with little difference from each other. They all compete with each other for species and location. This is a real battle for a place under the sun.
The second, the profit rate in such competition is very limited and makes a maximum of 12-20% in a new construction industry.
Finally, the volatility of the market in Spain is very high. Yes, there were years when real estate was growing and the difference between buying and selling was profitable. But how high is the difference? The same 10-12%. But what is the period of time? Over 8-10 years? Considering inflation, it's hardly significant. But this is exactly the situation the buyer finds himself in when buying housing on the secondary market.
And it's also impossible to read between the lines in the reports and analyses of real estate agencies. They need to sell. And what to sell? Only what is built on this market. So they sell as fast as they are able.
The world is short of a number of talented people who are capable of creating extraordinary things. Therefore, there is standardization on everything. As the global economy changes and risks increase in the financial sector, where money is created out of thin air through stock exchange instruments and cryptocurrencies, less and less people want to work at all. Mass enthusiasm for IT technologies leads to the illusory world in which becoming an IT specialist one is able to make money without leaving home and without having to leave the computer screen.
Yes, you could, but not on such a scale. France already raises the issue of the 3-day business week. What's the next step? After all, who has to generate ideas, work with their hands, and create physical things? This societal degradation sets in motion a process of maximum standards for everything. Mass market comes into the arena for clothing, automobiles, architecture, interiors. And in lifestyle in general.
It seems that in the field of luxury this would not be the case, because other rules should be in place there. Look at our cities today, the styles in architecture, paintings and contemporary sculpture. The very concept of luxury is declining. The very notion of luxury is degradating. Luxury, the possession of a level of goods and services for the elite, is becoming a luxury mass market. Uniform homes with advertising, shouting that it is true luxury real estate, uniform interiors, like the lobby of a three-star hotel, lawns instead of landscaping. All this is just Industrial design, elevated to the rank of the new luxury standard. In fact, it is profanation and deception of consumers.
The question is whether we have a niche market, where other rules govern? Yes, of course. Today it is called ultra luxury. There are other principles governing real estate, and investments in this type of real estate bring profits in a different way and sharply distinguish such real estate. Of course, to do this, you have to break stereotypes.
Based on their above-mentioned, the niche today is in this narrow segment of the market of ultra luxury. There are very few offers there and it is very difficult to enter into it.
To get an investment with a great return, you need to invest only in the new construction of ultra luxurious properties and follow the rules helping to turn real estate into true luxury, rather than making up tricks for the market to sell.
Why ultra luxury property?
- Properties of this category have no match on the market. They are unique in everything from architecture, interiors and landscaping to transforming it into an object of art, filling it with special decorative elements working to form a high sale price;
- Construction only on prime land. Such plots of land are limited, defined historically in each particular region;
- Liquidity of such properties is very high;
- Such property is very scarce in the market, it requires talented people to build it;
- Only a small circle of boutique class developers could deal with it. In order to get a lower cost, these developers must have exceptional suppliers or they themselves are manufacturers of unique product for decoration of interiors and exteriors. Having their own factories allows them to get the goods at the cost price;
- There is very little competition in the ultra luxury industry. It is impossible to enter the industry without proper experience;
- Unique properties are always in demand on the market;
- Ultra luxury helps to get a return on investment of up to 100% or more of the initial deposit;
- Such real estates increase the capitolization of land and the surrounding real estate, creating elite circle of neighbors.
Read more about how and why the sales price may be driven to a level where the rate of return reaches 100% and more on the blog: Best Investment Properties