One segment that knows very little about recession is the luxury housing market. As it continues at a good pace, experts predict it will grow during the second quarter of 2024.
It should be noted that, while the rest of the residential segments have been slowing down during 2023, it has remained resilient and Spain is ranked as the fourth destination luxury worldwide.
"After 2023 when there was a certain amount of buyer caution due to economic and political instability, we can confirm that movement is returning and double-digit increases are expected at the level of purchases," according to Jesús Abellán, CEO of Arum Group.
More transactions
A study prepared by Grupo Tecnitasa on luxury housing found that, since 2018, the volume of transactions concerning properties worth €1.5m to 5m has multiplied sixfold. However, assets worth more than €5m have experienced even more exponential growth: transactions have increased ninefold.
At Arum Group, they believe that in this quarter, there will be moderate growth compared to 2023 and that potential buyers will be mainly foreigners interested in investing in stable countries like Spain, "so sales will surely improve even more in the second half of the year (since summer and winter are usually peak seasons in many of these destinations).”
Although Madrid leads the market, we must not forget Murcia, “which will also experience growth in luxury property sales.” The CEO of the developer reaffirms that demand remains high, and although prices are expected to stabilise, “the lower supply of new construction (high in demand) could keep prices at favourable levels for sellers and buyers.”
He highlights that, in the Canary Islands, where purchases traditionally skyrocketed in the winter months, they see how sales are becoming seasonally adjusted and how investors are arriving more balanced and staggered throughout the year.
“At the moment, there is more demand than supply, so it's one of the most interesting markets for new-build buyers in 2024. It will be one of the best areas for investing in real estate.”
Rising prices
The per-square-metre price for premium homes (from €1.5 to €3m), luxury (from €3 to €10m) and super-luxury (from €10 m) has increased more than 10% since 2021. The average prices that year were around €6,700/m2, while in 2023, it stood at €8,110/m2, according to Grupo Tecnitasa.
Regarding prices, Jesús Abellán believes that they will grow slower than last year, where the conflict between Russia and Ukraine, which affected the supply chain and the shortage of materials and minerals, was a determining factor in this gradual rise.
“It is true that the sector has seemed to be oblivious to the macroeconomic situation of rising rates and the resulting increase in bank financing costs. Madrid and Barcelona have become an important focus of attraction. Sales prices continue to rise, and in the Ultra High-End segment, the average sales price can be between €10,000 and €18,000 per square metre, depending on the area.”
The most popular luxury areas
It's nothing new that Madrid and Barcelona have almost 80% of luxury demand (with a more balanced mix between Spanish and international buyers), "but other areas also stand out like Andalusia and Levante on the coast, the archipelagos, such as the Balearic Islands (especially Mallorca and Ibiza) and the Canary Islands (with Tenerife), due to their superb climates, attract foreign buyers in particular,” according to the CEO of Arum Group.
On Tenerife, the number of new-build projects is skyrocketing like never before. The expert acknowledges that this is a destination that is really booming. “We are talking about 15 projects that have gone on the market and are in the construction process to be delivered in the next two years.”
Most are branded residences, which are booming on the archipelago and in the rest of Spain. Homes integrated into hotel complexes stand out, managed by operators specialising in the luxury segment, providing owners with hotel services and extra income when they are not enjoying them. “An example is the Abama Luxury Residences with the hotels Las Terrazas de Abama Suites and Los Jardines de Abama Suites.”
The sector is also experiencing a golden moment in consolidated tourist resorts such as Abama Resort Tenerife, Sotogrande, La Zagaleta or La Manga Club due to the per-metre-square price stability and medium-term profitability (they are investments that are considered a safe-haven asset).
Grupo Tecnitasa highlights Mallorca as the place with the most luxury homes, especially in Palma de Mallorca and Calviá, Pollença, Bunyola Deyá and Andratx. In Ibiza, Sant Josep de sa Talaia, Eivissa and Santa Eulària des Riu stand out.
The Valencian Community is also beginning to become a luxury destination. In Alicante, properties worth €4.8 m have been registered in Altea, where towns like Jávea and Teulada-Moraira stand out, with homes worth more than €4m.
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