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Andalucía Property Market 2020

This report was written before the world changed beyond all recognition. However, a lot of the information is still relevant and I have updated with the latest statistics.  The overseas property market was in good shape before the coronavirus disruption but what we can’t predict yet are the consequences.

Click here to read my blog highlighting some of the issues that will be important in the post-virus Spanish property market.

Introduction to the Andalucía Property Market

Andalucía is Spain's largest autonomous regionIn this review of the Andalucían Property Market I look back at what happened in 2019 and forward to 2020. The region is an important part of the Spanish property market as 20% of all purchases happen in Andalucía. At the same time, Andalucía is a perfect example of the fragmented property market in Spain. There are areas of price growth and lots of activity, others are flat and barely off the bottom. It really is a two-speed market and what you see depends on what you look at and where.

The domestic and international sectors of the Andalucía property market operate completely independently of each other. And the separation is even more pronounced since the 2008 global crash. Although the domestic market has improved, it is 45% smaller than before the downturn. One reason for this is that domestic buyers are held back by stricter lending criteria.  In contrast, the overseas market is cash-rich.  As a result, the overseas sector in Andalucía is already 30% bigger than it was at the pre-crash peak.  However, there were signs of the overseas market slowing down in 2019. However, there were signs of the overseas market slowing down in 2019. In the event there were fewer foreign buyers but they spent more.

Andalucía’s overseas tourism market is important because 2019 was another all-time record.  As predicted, the 12m barrier wa broken for the first time.  The final total of foreign tourists was 12,079,071, an increae of 3.4%. As a result property owners can generate significant rental income, from both long and short term lets.  So I’ll give the yields you can expect and also how to rent legally. Obviously, the consequences of the Covid-19 pandemic will change tourism and rental potential in the short term and how quickly the market returns is the big unknown.

Full year statistics for 2019 will start to come through in the first half of 2020. So, for this report I am using the latest available and will update as the figures for the final quarter of 2019 are published.

Why Andalucía?


Iznájar AndaluciaAndalucía really does have something for everyone, with lots of options for property buyers.  It’s so much more than a sun ’n sand summer destination, everywhere in the Mediterranean is good for that.  But much of the Med goes into hibernation outside the main summer months and very few places can claim to have a genuine 12-month season. However, the micro-climate areas on Andalucía’s southern Mediterranean coast are buzzing all year round. That’s where you find the mildest winter temperatures on the European mainland.

Meanwhile, on the Atlantic coast there are some of the best wind and kite surfing conditions anywhere in the world.   Head into the Sierra Nevada for Europe’s most southerly and sunniest ski-resort just 45 minutes from the coast.  And it’s also one of Europe’s highest resorts with slopes between 2,100m and 3,300m above sea-level. These altitudes mean it rarely closes before May.  So, with its Mediterranean and Atlantic coasts and inland Sierras, Andalucía has the most varied climate of any region in Spain. But this variation means property buyers need to think carefully about the right location for them.  It’s hot everywhere in summer, but it’s a very different story in winter.  Even on the coasts, being outside one of the special micro-climate areas can mean a temperature drop of up to 10ºC in winter.  Get it wrong and you could freeze.


For sports enthusiasts Andalucía is a dream location.  There’s horse-riding on the coasts and in the sierras. Tennis year-round, scuba diving, wind and kite surfing, rock-climbing, hiking, cycling and mountain biking, snow skiing. They’re all there, with the perfect climate in which to enjoy them.

But for Andalucía the biggest sport of them all is golf.


Aloha Golf, one of 102 golf courses in AndalucíaAndalucía has 102 golf courses. In fact 25% of all Spain’s courses are in this one region and 47 of those are in Málaga province. That’s why the Costa del Sol also brands itself the Costa del Golf. Just over the border in Cádiz province there are seven courses in the Sotogrande area. Valderrama is the most famous, probably the best course in Europe and one of the best in the world. Who can forget the Seve Ballesteros Ryder Cup in 1997, played on this course?

Without doubt, golf is the one of the reasons for the 12-month season on the Costa del Sol. The benefit to the economy is that most of the more than half million golfers come between October and May. In comparison, Mediterranean coasts without a thriving golf sector are relatively quiet and many bars, restaurants and businesses close. The golf sector currently generates around €1bn+ for the Andalucían economy.  Even better, the daily spend of golfers is about twice that of summer visitors.


The El Partal reflecting pool in the Alhambra palace in GranadaSome of Europe’s finest and oldest cities are in Andalucía.  Cádiz is thought to be the oldest continuously inhabited city in Europe, settled by the Phoenicians over 3,000 years ago. The annual New York Times list of 52 places to see had Cádiz at number 50 in 2019. Read the NYT list.

And in the UK The Sunday Times has highlighted great things to do in Andalucía that have nothing to do with lying on a beach. For example, some serious hiking or the triangle of Andalucía’s most iconic cities.  And the project to create a coastal path along the entire 180kms Costa del Sol between Manilva and Nerja is progressing.

Great access

Good access boosts property markets.  One airline serving a minor airport 100 kms from where your property is located doesn’t really cut it.  If that airline decides to pull out there are implications for both rental potential and sales prices.  Arrivals into Málaga airport are on target to top 20m for the first time and it is one of the few cities in the world with flights to all five London airports.  There are also four excellent regional airports at Seville, Jerez, Granada and Almería, plus Gibraltar, with flights all over Europe.   

In addition, the number of long-haul flights from Málaga is increasing, with routes to Istanbul, Tel Aviv, Abu Dhabi, Doha and Riyadh. When it becomes easier to get somewhere, more people go there.  So the cancellation of Delta Airlines summer non-stop service between Málaga and JFK New York is a big disappointment. It will be interesting to see what effect it has on US visitor and property buyer numbers in the region as these have been in double-digit growth for several years.  A plane change in Madrid or Barcelona may be a deterrent, only time will tell.

Andalucía Tax Changes

Following a change of government in Andalucía in 2018, new tax laws in respect of Inheritance Tax and Gifts were introduced during 2019.  If you are planning to invest in a property in Andalucía I recommend taking advice early in the process as Andalucia is now a much more tax-friendly region for E.U. and E.E.A. citizens.

The Good News in Spain

Overall, unemployment in Spain continues to fall. It finished 2019 on 13.2%, that’s the lowest in a decade.  Youth unemployment is down to just over 32%.  Interest rates remain low.  Euribor, which sets the interest rate for the majority of Spanish mortgages, registered another historic low in August 2019 but ended the year slightly better at -0.263%. The prediction is that it will remain negative throughout 2020. In addition, all autonomous regions registered price increases at some point during 2019, although there were fluctuations.

But there are always buts

Yes, unemployment is down.  Nevertheless, at 13.2% it is still the second highest in the Eurozone, only in Greece is it worse. Meanwhile, in Germany it is 3%.  Moreover,13% has to be viewed against the Eurozone’s average of 7.5% and the OECD average of 5.2%.  In addition, in some Spanish regions unemployment is struggling to get below 20% and stay there. Unfortunately, Andalucía is one of those regions. For example, in Cádiz province adult unemployment is 25%, among the young it is closer to 50%.

Yes, youth unemployment is down but it is still an average 32% nationally.  In fact, one third of the under 30s age group in Spain has never had a job.  Meanwhile, in Germany the unemployment rate for the same demographic is an average 6.3%. 

Yes, 600,000 new jobs in a year is impressive. However, seasonal, temporary and part-time contracts still outnumber permanent ones by a big margin. Even worse, a long-term contract doesn’t necessarily equate to full-time, about 40% of permanent contracts were for part-time positions.  One of the reasons for these figures is that tourism is currently the biggest source of employment in Spain in 2019, with 14.6% of the total workforce, about 2.8m jobs. Unfortunately, jobs in tourism tend to be low-skilled, low paid, temporary and seasonal.  The fact that jobs in Andalucía depend heavily on tourism is a long-term problem. As the impact of Covid-19 becomes clearer I think Andalucía will do well if unemployment does not head back above 30% in the short term.

The Andalucía Property Market

Setenil AndaluciaOne of the most striking features of the overseas property sector during Spain’s long recession was how little it was affected by what was going on during the domestic economic meltdown.   Recovery in the overseas sector started some 4 years before the domestic market started to stir  again. That’s why any analysis of Spain’s property market has to treat the overseas market separately.

We know that 60% of all purchases in Spain happen in the Mediterranean coastal regions and the islands. Andalucía is one of those regions.  And these few locations have one thing in common. They are where the overwhelming majority of overseas buyers head for.  However, close analysis of the statistics shows uneven and patchy activity. For example, Andalucía had the highest number of total purchases in any region in Spain in every month in 2019.  However, when you look at the individual provinces it’s very clear that activity levels vary a lot within the region.

For example, based on the notarial returns for 2019, overseas buyers represented 19% market share in Andalucía, slightly above the national average of 18.7%. However, in Málaga province foreign buyers represent 31% of the market, way above the national average. In addition, foreign buyers completely dominate the market above €1m with 75% market share.

Andalucía’s Hotspot – That would be Málaga

About 20% of all property transactions in Spain take place in Andalucía.  However, Andalucí­a has eight provinces and approximately 30% of all transactions occur in just one province, Málaga. Moreover, the city itself, plus Marbella, account for 34% of all purchases in the province. Add Estepona, Benahavís  and Mijas to the mix and that rises to 55% of all transactions in the province. So, one third of Andalucían purchases occur in just one province while more than half of purchases in that province occur in 5 municipalities. 

In contrast, in Andalucían provinces away from the coasts or not on the radar as far as overseas buyers are concerned, it’s a very different story. For example, Jaén and Huelva had only a 5.18% and 5.6% share of the overall Andalucían property market. 

In actual numbers the differences are striking. While 10,184 overseas buyers purchased a property in Málaga province, only 213 did so in Córdoba province and 224 in Jaén. Even in the coastal province of Almería the overseas market is only one-third the size of that in Málaga, with a total of 3,041.

Nevertheless, there were 2.65% fewer overseas buyers overall in Andalucía in 2019 compared with 2018.  However, they spent more.  On average, an overseas buyer in Andalucía paid €1,774 per square metre for a property in 2019, up 4.5% year-on-year. 

Málaga City

The Cathedral and Gibralfaro in MálagaFor a certain type of buyer Málaga city is definitely worth a look.  Almost all the 20+m overseas visitors who fly into the airport don’t visit the city.  They turn right or left as they leave the airport and head along the coasts. That’s a shame as the city has undergone something of a transformation in recent years and there are some great property options to suit all budgets.  It is still possible to find apartments in the historic city centre for under €350,000, great for weekend breaks and excellent rental yields.  However, although Málaga only requires short term rentals to be licensed at the present time, the town hall is on record as stating they are watching the situation carefully. Read more background to why some cities are banning short term rentals here

The Sunday Times has highlighted Málaga as a great weekend destination. There are frontline beach apartments with amazing panoramic views of sea and the city from the €1m level.  Many houses and townhouses are within walking distance of the city centre and the beach for a range of budgets.  It’s a city with great beaches, great food, culture and history and more overseas buyers are taking a serious look.  And there’s growing resistance to the trend in other Spanish cities in which the historic city centres are losing their residents, becoming more like tourist theme parks.  In January 2020, Málaga Town Hall announced a 5-year moratorium on new licences for bars and restaurants in 103 city centre streets. 

What’s in Demand – New Build

For reasons I have never quite understood, foreign buyers are like moths to a flame if new-build is available, even when the location is inferior. The fact is there is very little raw building land available in the very best locations. It was built on years ago.  Consequently, it follows that much of the new-build activity is not in prime locations.  Nevertheless, the appetite for new-build properties has seemed unstoppable, with contemporary and minimalist architecture at the top of everyone’s list.  However, since the recovery started the supply side of new apartments and houses lagged way behind demand. Inevitably, this imbalance inflated new-build prices, to a level I believe is unsustainable.  New may be nice but is it worth paying double, or even more, per square metre than a resale?  I don’t believe it is but overseas buyers have been doing it. 

However, as more new-build projects come on stream, and the signs are that the pace is picking up, I think new-build prices will come under pressure.  In fact, I have already seen reductions on developers’ price lists. I predict buyers who purchased in early phases of some new developments will find their property is worth less than they paid by the time they get the keys.  I can accept that many buyers are not looking to make a huge profit in the short-term, they’ve made a life-style purchase. However, I’ve yet to meet one who is happy with the idea of a loss even before they’ve moved in.  In fact I think some buyers are paying such inflated prices for new build properties that they may never see a return on their investment no matter how long they hold it.

The Supply Side

At the height of the building frenzy in 2006 Spain approved building licences for 735,000 units, of which approximately 21,000 were in Málaga province.  In 2014, the total of building permits in the province was 798, a fall of 96.2%.  In reality, the construction industry was more or less wiped out. 

However, as activity picked up it was clear the biggest increases in new permits were in the Mediterranean coastal regions, precisely those locations favoured by overseas buyers. So the cranes are not spread evenly across Spain but are clustered in just a few regions. I’ve already highlighted the fact that transaction numbers are focused in just a few locations and it’s no different when it comes to new construction activity.  For example, 51% of the 18,171 building permits approved in Andalucía in 2019 were for Málaga province.  In contrast, Jaén province accounted for just 5%. 

As the supply side improves one would expect prices rises to moderate even if demand holds steady.  On the other hand, if demand is actually falling, then new-build prices will be under serious pressure. One thing for sure, no developer goes into a project expecting prices to fall during construction. The assumption is always that prices will rise phase by phase.  I think 2020 will give some of them quite a shock. Already, there are rumours circulating of developers delaying the launch of new phases as sales slow.  

In my opinion, it’s more likely that demand for over-priced new-builds will start to fall.  Many aren’t that well-located or of particularly high quality and it’s hard to justify the asking prices.

The Price Conundrum

Puerto Banús with La Concha mountain behind in MarbellaMarbella, the sixth most expensive town in Spain, is a good example of the new-build versus resale price conundrum. With thorough research it is still possible to identify prime location resale properties for between €2,500 and €4,000 per square metre

At the start of 2020 a client was negotiating to buy a detached villa. With 5 bedrooms, 200m from the beach, walking distance to town, and with the contemporary look that is so in demand.  The asking price was the equivalent to €3,280 per square metre and the negotiation brought it under €3,000 per square metre.  So, I am mystified why buyers are paying €6,000 per square metre for villas in a new development close by. It is further from the beach and on a main road. The properties are jammed in almost within touching distance of each other and roof terraces are overlooked by nearby apartments several storeys higher.  I accept that there is a premium for brand new, but double the price?  It doesn’t stack up.

Also at the beginning of 2020 I located a 2 bedroom townhouse, fully renovated to the highest of standards. In addition, it was front line to one of the coast’s best golf courses and priced at €3,535 per square metre after a 5% reduction.  After negotiation, my clients bought it fully furnished for the equivalent of €3,450 per square metre.

A similar property, in very good condition but with a bit still to do to get it to the same level, sold for the equivalent of €2,930 in December 2019.  However, even at that level it had been reduced from the original asking price before a buyer emerged. For the same clients, I looked at a beachfront apartment.  Top quality finishes and in an unbeatable location, the asking price equates to €3,890 per square metre.  When I am researching the market for my clients I always do the price per square metre calculation to help me come to a conclusion about the asking price.

The Andalucía Property Market and Tourism

There is a close link between rental yields in Andalucía and the health of the Spanish tourism sector. Currently, Spain is the second most visited country in the world.  According to Ministry of Tourism statistics about 35% of Spain’s 83m+ overseas tourists do not stay in hotels. About 14% of the tourist total, that is 12m, head for Andalucía.  Obviously, some will have their own homes or stay with family and friends, but that leaves a serious number of overseas visitors renting privately.  As a result, rental yields make letting a property in Andalucía an interesting option.  And not just for the serious buy-to-let investor but also as a way to cover a property’s running costs.  Across the board, top quality, prime located properties were 100% occupied in high season in 2019.   And golf and cultural tourism throughout the year gives Andalucía a genuine 12-month season.

Indeed, marketing campaigns to pitch Andalucía as more than a sun ’n sand destination seem to be paying dividends.  The biggest monthly increases in visitor numbers in 2019 occurred in what are thought of as low season months.  For example, 8% up in both February and March 2019 and a 5% increase in October.  In contrast, both July and August registered decreases, -5% in July and -1.9% in August.  

There is high demand for both long and short term rentals.  However, it is absolutely essential that the location is the best and the property must be in 5* condition. What used to be considered luxury items, such as free wifi, flat screen t.v. & satellite, high quality interiors and equipment, are now standard requirements.  It doesn’t have to be a grand detached villa.  There is just as much demand for smart two bedroom apartments in the right location.  

 I did think property price rises would squeeze yields. However, demand is so outstripping supply that doesn’t seem to be happening.  In general, an apartment or townhouse can achieve 8% gross yield if available for short term lets throughout the year.  A similar property let long term can achieve 5%-6%.  At the top of the market a detached beachside property can gross 10%+ in the short term market.  In all cases, location and interior finishes are key.

Important for Yields

I found this finca in Gaucín for clients in 2017When I am working for a client whose brief requires reliable rental income I target certain areas and ignore others.  In addition, I look for a type of property and reject others.  Get the location wrong, even by just a few kilometres and income may be halved.  You also need to comply with the rules about short term holiday lettings.  This is particularly true in city centres where tourist lettings have overrun some districts and Málaga is no exception. However, outside the cities there are no restrictions in Andalucía other than being licensed  and meeting  certain standards.

Nevertheless, many property owners in Spain like the idea of covering running costs and don’t want the property empty for long periods of time.  But the days of leaving a set of keys at the local bar and crossing fingers that no emergencies will arise are over.  You need to be ‘rental ready’. Read more about what is required in Andalucía and other regions in my blog here.

Andalucía Property Market – Conclusions

Farmhouse near Grazalema in the province of CádizIn December 2018 the International Monetary Fund issued a warning about early signs of a ‘slight overvaluation’ in property prices.  It noted that Spanish banks are highly exposed to real estate sector developments and may underestimate the speed at which house prices and relaxed lending criteria can gain traction.

Also in December 2018, I noted warnings from valuers about the spectre of overvaluations creeping back into the market.  Given that most banks currently offer maximum loans of 80% LTV, those without a large deposit are effectively excluded from the market. In reality, it’s been more than a tendency, most banks have been ordering valuers to be conservative.  The loan is then offered on whichever is lower, the valuation or the property price.  Unsurprisingly, it’s always the valuation.  

So, the IMF comments about ‘slight overvaluation’ in prices or the possibility of deliberate mortgage overvaluations were a bit worrying. They may be only a warning flag but they may also be the first signs of something more serious.  Moreover, analysts such as CBRE and BBVA Research also published reports in 2019 with similar warnings about price rises and lower demand.  

Even more reason then for buyers to be very cautious, particularly in the new-build market.  It is essential to do the research and compare asking prices for new property with comparables in the resale sector.  Look at peak prices prior to the crash and ask yourself if you should be paying even more than that now.  Remember that resale prices are still approximately 20% – 30% below that level.  Buyers in the new-build sector should be cautious and ignore what an agent friend of mine calls ‘candles and cushions’ marketing.  Lots of soft focus life-style images, very seductive, but better to check the price per square metre and ask if it makes sense.

Getting it Right

However, if you buy at the right price, Andalucía property is still relatively affordable. There’s potential for substantial capital growth in the medium term and excellent rental yield potential. The sun continues to shine and the quality of life is rated one of the best in the world.  What’s not to like?

The lack of high-quality inventory at the right price in prime locations will be an issue throughout 2020.   My advice to buyers in Andalucía in 2020 is do not obsess about new-builds, especially if not located in prime positions.  Many are not.  Consider equivalent resales, calculate the price per sq.m. to include any renovation if it’s needed.  Then you can take an informed view on what makes the best financial sense. The result will almost certainly be a lower price, a bigger property and, most important of all, a superior location.   A thorough search can still uncover some real deals although they will be harder to find in 2020.  Nevertheless, there will always be some sellers more motivated and realistic than others.  

Don’t buy anything that is blighted.  Roads tend to get busier over time so if it’s noisy now it will only get worse.  If there is a mobile mast in view assume there will be more as the tendency is for them multiply.  Electricity pylons are also a big no-no.  We can assume new housing will increase in the medium term.  So it’s essential to be aware of local planning issues and what might be in the pipeline.  Already, in some areas on the coast I can count twenty cranes while standing still.   

And finally, when I am assessing properties for my clients I always ask the following questions.  If circumstances change and they need to sell quickly is the price right to enable them to do that?  Secondly, is this a property for which there will always be demand irrespective of market conditions?  Without doubt, the shambles of recent years  taught us a valuable lesson.  And that is that there will always be demand for top quality in prime locations. It always has been, still is and always will be about location.

I had a feeling 2020 was going to be an interesting year in Andalucía’s overseas property market, even before the pandemic.   We now know that overseas buyer numbers decreased for the first time in 5 years in 2019.  Whether that was just a blip, a pause after 5 years of continuous growth is the big unknown.  Personally, I think overseas demand remains strong but quality supply in prime areas is weak and new-build prices have risen too fast. I suspect buyers were already becoming more cautious and now the consequences of Covid-19 are another factor to consider.  Interesting times ahead.

©Barbara Wood
For more information about locations in Andalucía please go here. A report covering the property market in Spain in general is here.

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