Why the Costa del Sol is number one for savvy real estate investors

Alta Tiara terrace with swimming pool

If you are familiar with the Costa del Sol, you will already be aware of its many natural charms, not least the scenery, climate, relaxed, healthy outdoor lifestyle and world-class facilities. These are the very reasons why yet again, Malaga Province and in particular the Costa del Sol, continues to be magnet for real estate developers, investors and individuals hoping to snap up real estate in one of the most idyllic locations on earth.

The demand is particularly high amongst international buyers (34%) and is expected to increase, as Spain’s Digital Nomad Visas offers non-EU nationals the opportunity to live and work in Spain, with the added bonus of preferential tax rates.

Heading towards record breaking sales

The Spanish Institute of Statistics’ figures record a 23% increase on the number of properties sold on the Costa del Sol between January and November 2022,  as compared to the same period in the previous year.  When the figures are in for the entire year, the number of transactions is expected to equal the record-breaking figures not seen since 2007.

Malaga property prices

The overall price of houses in Spain increased by an average of 7.5% during 2022 (Fotocasa report). Yet in Malaga Province it was a completely different story, with the price of resale properties on the Costa del Sol increasing by 12.4%, bringing the average price per square metre to €2,774, rising to €4,006 in the cosmopolitan hotspot Marbella. That said, the cost of buying luxury homes in Spain is still substantially lower than purchasing a similar standard of property in other countries, giving you much more bang for your bucks.

Off-plan investments

If you are looking for the best returns on your property investment, it can pay to consider looking at the stock of new homes for sale on the Costa del Sol, in other words buy off-plan during the construction stage. This route allows real estate investors to secure a property such as this new development for sale in Marbella, at reduced price with enhanced capital gains potential and high rental yields.  Idealista.com estimates the savings associated with buying off-plan property in an up-and-coming area as being 15%, as opposed to buying a resale property.

Some points to consider when buying off-plan 

As the property has not yet been built, it is advisable to use an experienced real estate agent familiar with off-plan property sales who ensure your interests are protected throughout the construction process. One of the first recommendations is to find the right legal representation. Nor Estates can introduce you to experienced lawyers (who speak your language) who can help you arrange a bank offer guarantee for your property before you buy it. They will also ensure the developer has secured the deposit with a bank guarantee and check planning permission is in place etc.

Malaga Airbnb top destination for 2023

The digital travel company Airbnb, which operates across 191 countries, listed the top trending travel destination for 2023. Malaga not only achieved pole position, it was the only city in Europe to appear in the top ten destination list, beating big hitters like Sydney and Melbourne, which achieved second and third place respectively.

High rental income

The latest statistics from Tinsa lists the average rental yield for Malaga Province property at 7.22% which is substantially higher than Spain’s two major cities of Madrid and Barcelona, with average rental yields of 4.96% and 5.29% respectively.

These figures clearly position Malaga as the savvy option for real estate investors within the buy to let market. The potential for Malaga producing the most favourable returns on investment is supported  by the figures issued by the Central Bank of Spain back in March 2022, which pegged the national average gross rental yield as 3.7%.

The Costa del Sol’s long-term rental market prices will continue to rise, as demand is consistently higher than the supply of properties.

Price to Earnings Ratio (PER)

If you are considering going down the route of real estate investment for the rental market, there is a simple calculation to help you estimate the all-important price to earnings ratio. This is how you can work out the number of years it will take to pay for the property based on the average gross rental yield. Also, inversely, you can also calculate the potential rental yield from the price of the property.

As an example, if you buy an apartment on the Costa del Sol for €500,000 and the average gross rental yield is 7.22% (Tinsa), this equates to 3,008€ per month or 36,100€ annual rental income.  The PER is calculated by dividing the property price (500k) by the annual gross rental income (36,100€), showing that it would take 13.85 years to pay for the property (or 166.22 months). Of course, the more exclusive the area, such as La Zagaleta, Benahavís or the Golden Mile Marbella, the higher the potential returns!

Costa del Sol has the most luxury properties

In conclusion, the Costa del Sol is destined to tug at the heartstrings and appeal to investors, as it represents the best of all worlds, secure investments and over 320 days of superb sunny weather.  It is it also home to almost one quarter of Spain’s million-Euro plus properties (23%) and as such deserves its reputation as delivering the ultimate luxury Mediterranean lifestyle.

If you would like any further advice about Norestates real estate services or the stages of buying a home in Spain, please contact us on or call +34 600 224 087 / + 34 951 319 178.