The Costa del Sol is more than just a holiday destination. Shrewd property investors can cash in on the demand for sun, sea and sport, reports Mark Simmons
EG readers are no strangers to the Iberian peninsula. As proof, take the recent Green & Partners/Estates Gazette golf championship (November 14, p72): 110 property professionals managed to fit a trip to Portugal into their busy schedules. This familiarity is a useful asset for those considering the investment potential of areas such as Spain’s Costa del Sol.
The area’s residential market is showing signs of revival. A glut ofpoor-quality schemes and unreliable developers blighted the market earlier this decade. The result has been a more cautious attitude to investment.
“Purchasers are looking for names they can trust. They are also moving to higher-quality units rather than cheap products,” says Knight Frank director Alberto Prieto Ruiz. He reports interest in larger schemes for blocks of between five and 10 apartments, which are subsequently rented out.
Tour companies in particular are struggling to find good-quality accommodation. And units close to golf courses are at a premium.
Knight Frank advises Spanish developer Ferrovial, which is developing 2,000 units at Nueva TorreQuebrada, 22km (14 miles) outside Malaga. Like many developments, it boasts a golf course on its doorstep. The first 400 apartments are due for completion next summer and development plots are also for sale.
Similar opportunities exist at Sotogrande (see box) and at Campos de Guadalmina. Here Spanish developer Fadesa is building 1,800 units on 255,000m2 (2.74m sq ft). A range of one- to five-bedroom apartments, duplexes and villas is due for completion in March 2000.
Some properties will overlook the fairways of the well-established Guadalmina golf club. Fadesa’s Jorge Larios, who is marketing the development in the UK with Allsop & Co, expects that 10% of the scheme’s purchasers will come from the UK.
Profits from development
But Brits are not just investing in Spain as occupier-investors. Companies like Banner Homes are profiting from development. The housebuilder has started work on the first phase of 100 apartments and penthouses at Las Alamandas. The scheme borders the Los Naranjos golf course, outside Marbella. An initial 36 units are due for completion next March. Banner director Piers Banfield expects UK purchasers to account for up to 60% of buyers.
Investors reaching for their cheque books should temper their enthusiasm with a full evaluation of potential returns, warns Healey & Baker partner Roger Cooke. “Just going out and buying apartments to lease in any old apartment complex is running a risk,” he says. “It tends to happen when people don’t know the area and don’t take advice.”
His own advice is to steer clear of complexes that are not built around, or very close to, a golf course. “There is the danger that there will be a slight overdevelopment of pure residential schemes,” he explains. Cooke also points out that buildings tend to age more quickly in the heat. To maintain a reasonable resale value, they need to be well maintained. For apartment units, that can mean hefty service charges.
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Sotogrande cashes in with image change Most Brits have never heard of Sotogrande. Mention the Valderrama golf course, venue for last year’s Ryder Cup, though, and it’s a different story. Valderrama is just one of four golf courses on the 1,619ha (4,000 acre) Sotogrande estate in Cadiz, southern Spain. The resort, half-an-hour from both Gibraltar and Marbella, was originally designed as a retreat for the super rich. This exclusivity may have been attractive when the first villas were erected 30 years ago, but the ethos no longer fits with the burgeoning foreign interest in southern Spain as a resort location. “Sotogrande is so exclusive that people don’t want to come here. It’s all very well being exclusive, but it doesn’t make any money,” complains Nigel Smith, managing director of Sotogrande SA. And with shareholders looking over his shoulder, making money is Smith’s top priority. His no-nonsense approach – “the place has been in a time warp for 25 years” – and experience of leisure development made Wiltshire-born Smith an attractive choice when the board appointed a new MD last year. “The company needs diversification. It can’t put all its eggs into the basket of selling and developing plots,” he says. The Smith solution: develop a hotel, create more golf courses, and build up other leisure facilities, like sailing and racquet sports. The Almenara hotel, which offers 150 double bedrooms, opens next summer. It will create a year-round income stream and boost numbers outside the peak summer season, when the resident population jumps from 4,000 to 23,000. Putting villas that are empty for 46 weeks of the year to good use is also part of Smith’s plan. The resort already offers owners a sale-and-leaseback service, and Smith is reluctantly considering timeshare, or “club ownership”, as he prefers to call it. “I only want to create 1,500-2,000 beds. That will give us a very stable market of visitors who are here every week.” The target market is not full of budding Seve Ballesteros, however. “I’m not interested in having 1,500 beds full of golfers,” Smith admits. He also attempts to soothe existing owners’ fears that the estate will turn into a mini-Ibiza. “All I’m trying to do is to make the place accessible to the top end of the tourism market. I can achieve that through pricing. I’d much rather run at 60% occupancy and make a good profit,” he says. Foreign investors dominate at Sotogrande, and Smith, assisted by British commercial directors Michael Norton and Bernard Hornung, estimates that UK purchasers account for up to a fifth of transactions. Although there is still space for lavish supervillas – the estate’s original offering – Smith is focusing development on three- and four-bedroom houses, as well as some smaller units on islands in the marina. Although Smith wants to extend the Sotogrande concept outside Spain – the Canary Islands and southern France are top of the list – he remains confident that the Spanish resort will flourish. “Tourism is basically recession-proof here,” he says. |
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CONTACTS Piers Banfield, Banner Homes: 01628 536 200 Jorge Larios, Fadesa c/o Allsop & Co: 0171 344 2666 Roger Cooke, Healey & Baker: 00 34 91 522 1666 Alberto Prieto Ruiz, Knight Frank: 00 34 91 431 3131 Nigel Smith, Sotogrande SA: 00 34 95 679 0300 |
