Property Investment in Málaga and on the Costa del Sol

Why is the Costa del Sol appealing to property buyers?

The Costa del Sol has an exceptionally international property market. Alongside Spanish buyers, people from the UK, Germany, the Netherlands, Scandinavia, France and many other countries are interested in properties in the region. Demand arises for a variety of reasons:

• Permanent residence
• Second or holiday home
• Long-term rental
• Capital investment
• Future resale
• A combination of personal use and investment

These different groups of buyers help ensure that the Costa del Sol property market doesn't depend solely on a single source of demand.

Málaga – more than a holiday destination

Málaga has developed considerably in recent years. The city combines a historic old town, beaches and a Mediterranean lifestyle with a university, international infrastructure, culture and a growing business and technology sector. The decision by international companies to establish themselves in Málaga has also changed perceptions of the city. Today, Málaga is no longer purely a tourist destination, but increasingly a place where international professionals, entrepreneurs and families want to live and work on a permanent basis. This can be particularly interesting for the long-term housing and rental market.

Málaga or the Costa del Sol – where should you invest?

The right location depends on what you want to achieve with your property. A property intended for long-term rental should be chosen according to different criteria than a luxurious second home or a property you plan to renovate and resell later.

Which property strategy suits you?

"Property investment" can mean very different things. Before searching for a property, you should therefore first decide what you want to achieve with your investment.

Holiday rentals – check carefully beforehand

Buying a property solely on the basis of potential holiday rental income should today be checked particularly carefully. The legal and municipal requirements for touristic rentals have changed in Spain and Andalusia and can vary depending on the property and municipality. Rules set by an owners' community can also be relevant. For this reason, it should be checked before purchase whether the intended use is actually permitted for the specific property. An existing touristic use or registration should also be legally verified, and should never automatically be regarded as a guarantee of future rental potential.

Calculating the return correctly

A common trap in property investment is looking at gross rent alone. A simple example:

This figure can be helpful for an initial comparison, but says little about actual profitability. For a more realistic picture, purchase-related costs and ongoing expenses should also be taken into account. The key question is therefore: What actually remains after all costs? A property with an impressive gross yield may be less attractive after deducting all costs than a property with slightly lower rental income but lower ongoing costs and better long-term resale potential.

Don't focus only on the price per square metre

The price per square metre is a useful comparison figure, but should never be the sole decision criterion. Two properties of the same size in the same area can have very different values. On the Costa del Sol, for example, the following factors play a major role:

• Micro-location
• Sea view
• Orientation
• Terrace and outdoor areas
• Distance to the beach
• Walking distance to restaurants and shops
• Condition of the property
• Quality of the residential complex
• Parking and storage
• Lift
• Community costs
• Renovation potential

For this reason, a local assessment of the property is often far more meaningful than an average price per square metre for an entire municipality.

Buy with a clear exit plan

A good investment decision considers not only the purchase, but also the future sale. Before buying, therefore, ask yourself: Who might buy this property from me later? A property that appeals to several groups of buyers can be more flexible in the long run. A good location, an attractive terrace, sufficient bedrooms, parking, a lift or a sea view, for example, can be important not only for current use, but also for a future resale.

What costs must investors take into account?

In addition to the actual purchase price, buying a property in Spain involves additional costs. Depending on the property, these can include, among others:

• Property transfer tax, or IVA and AJD for new builds
• Legal fees
• Notary and land registry costs
• Financing costs, if applicable
• Technical surveys
• Renovation and furnishing costs

In addition, there are ongoing costs after the purchase. For this reason, the actual investment budget should always be set higher than the pure purchase price.

Independent legal review

Regardless of whether you're buying a property for yourself or as an investment, we recommend instructing an independent Spanish lawyer. They can review, among other things, ownership status, land registry entries, charges, permits and other legal aspects. For an investment property, it should also be clarified whether your intended use is legally permitted.

The right property matters more than the general market

It's tempting to choose properties solely based on which area is currently particularly in demand. For a good investment, however, it's the individual property that counts. An excellent property in a good but less well-known area can be more interesting in the long run than a problematic property in a famous location. That's why, at Right Casa, we look not only at the region, but at the property itself: What does it cost? What does it offer? Who would rent it? Who would buy it later? And what ongoing costs arise?