MADRID – Luxury remains immune to the slowdown the general real estate sector has been experiencing for months. In 2022, the number of transactions in this segment increased by 55% in Spain and activity continues to grow in the first half of 2023.
That’s in contrast to May’s 6.7% drop in home sales for the sixth consecutive month, according to data from the Board of Registrars presented on Wednesday. Thus, the wealthy elite continues to buy homes while the rest of the people withdraw from the market due to the impact of inflation and rising interest rates on their household incomes and access to finance and mortgages.
The newspaper El Mundo cites as an example a luxury real estate development in the coastal town of Zahara de los Atunes in the Andalucian province of Cádiz. Homes up to 145 square metres with prices of around half a million euros can count on overwhelming interest, according to the Sevillan project developer.
Furthermore, other entrepreneurs who sell real estate in the ‘prime’ market have the same experience. The reduction in the number of transactions is caused by greater economic instability and higher costs of access to the mortgage market. These two factors have much less influence on buyers in the prime housing market. And if there is any influence, it is less significant.
Average price increase of 9%
Added to this is the scarcity of supply in those areas, where high demand continues to push prices up after the pandemic. According to the chairman of Grupo GS, the price per square metre of this type of housing has increased by around 89% since last year. And despite this, demand remains higher than in previous years due to the lack of supply.
More than 7,000 objects worth more than 3 million euros
In Spain, more than 7,000 properties worth more than €3 million are for sale. That represents 5% of the total real estate market, according to the recent first report of the luxury real estate market in Spain, prepared by the insurance company Hiscox and the consultancy Catella.
More and more buyers and investors with higher budgets are interested in purchasing. Broker Engel & Völkers, have seen an increase in the average budget of their clients in recent months. People with greater wealth are less affected by general economic uncertainty and its consequences.
Customer profile with budgets below one million euros has become more hesitant in recent months due to economic uncertainty.
Nevertheless, the market forecasts do not point to a reduction in prices. On the contrary. “In the case of new construction, prices per square metre are between €12,000 and €14,000, while the price for existing homes is around €8,000 (plus renovation costs),” says Barroso of Savills Research in El Mundo.
In any case, the price does not seem to be an obstacle for this type of buyer. They are all looking for spacious and bright homes in good locations in city centres. Although national buyers still account for more than half of luxury market purchases, foreign buyers are gaining ground.
In Madrid, one in four buyers of luxury homes is foreign. In the past, these were mainly Latin Americans because of the greater political, legal and economic stability in Spain. However, now more and more buyers from Colombia, Chile and Peru are added. Interest in the city and specific neighbourhoods such as Salamanca, Chamberí and Retiro from Americans and French has also increased.
Barcelona, Palma and Málaga are also hotspots
Besides Madrid, Barcelona, Palma and Málaga are also hotspots on the market. Málaga is one of the main destinations for the wealthy. Moreover, the arrival of the ‘premium’ digital nomads in Spain is also stimulating the high-end real estate market.
However, it is not only the owner-occupied market that is thriving when it comes to luxury real estate. Demand for premium rental properties has also surged recently, fuelled by people wanting to live in city centres without taking ownership. Prices vary depending on the size of the property, but according to experts, they have increased by 5% to 15% due to the limited supply.