Marbella – Late entry to one hell of a party!

A string of huge names in international real estate have either opened or are set to open offices over the coming months. These agencies include the likes of Savills (40,000 staff), The Agency (115 offices in 12 countries), and Colliers International (19,230 staff) as well as some very large international brands with staff counts to match, currently scoping the market for new offices and a presence in Marbella.

There are also associates, including Sotheby’s (1,713 employees) and Christie’s (1,350 offices in 48 countries), and some Scandinavian agents spending heavily on marketing and new offices. Some have been here before and failed, while others are dipping their toes in the market. One thing is for sure: once again, the Golden Mile of Marbella looks set for some classic power struggles between brands.

For those of us who were here during the effervescent boom of the early 2000’s and survived the financial crisis of 2007-8 this all feels very familiar. The big question, the large elephant in the room – is whether this is a sign of a mature and established market or late entry to one hell of a party.

Only time will tell.

Entering a fierce and unregulated market

What is for sure is that they will enter one of the toughest, unregulated real estate markets in Europe. There will be casualties. It’s simply impossible with this many mouths to feed and with such little stock on the market that everyone can make a living.

Competition is already fierce, but if the market continues on its current trajectory with increasing competition and decreasing stock it can only become fiercer. Marketing budgets will balloon, offices and staff counts will explode, experienced staff will be hard to find and difficult to retain.

Instagram will creak with even more beautiful images of people trying to sell beautiful properties. Marbella’s magazine Essential will double in size, and open houses will groan with the sheer quantity of agents dressed for success.

In many ways, this is good news for Marbella and recognition of its status as a real estate brand in Spain. However, to go back to where I began, the question is whether Marbella – and the Golden Mile – can sustain this many mouths to feed.

The other interesting fact is that most of these players are focused on a tiny fraction of the luxury sector market. According to a recent article in Sur, the number of luxury homes valued at over 3 million euros was 3.5% of the market in Marbella and Benahavís, or 2,900 homes, at the end of 2022.

Malaga VS Madrid

The number of agents

 

As I’ve written before, the real estate market in Spain is largely unregulated, with no MLS, centralised standards, or even regional standardization. As a result, it’s hard to know the exact number of real estate agents practising at any given moment (let alone qualified, trained ones).

On idealista.com, 862 agents or agencies were listed just for Marbella and 2,280 for Madrid. Madrid’s population is over 3 million, while Marbella’s is a fraction of that, at approximately 150,000.

That means that in Madrid, there is one real estate agent per 1,315 people, whereas in Marbella, out of every 174 people you meet, one will be an estate agent.In other words, for every flight in and out of Malaga airport, you have a chance to meet an estate agent!

The size of the market


Taking another sample statistic, the National Statistics Institute (INE) counted 34,251 sales in Malaga province for the January 2023 /December 2023 year whilst according to idealista.com there are 2,080 estate agents in the Malaga region. If that is a more or less accurate number and we assume that everyone sells the same amount, then that would be 16.5 houses sold per agency in Malaga per annum; of course, sales are not divided equally; some agencies sell more, and some sell less. And many people still sell privately without a real estate agent.

Madrid


According to the INE, Madrid sold 70,147 houses in 2023, just over double the number sold in Malaga. But Malaga has almost the same number of real estate agencies—some representing multiple agents, offices, and staff and some just one person with a phone number and a logo.

If Madrid has 2,280 agencies, that equals almost 31 houses sold per agency per year. That looks to me like a much healthier average, knowing that it will also be divided up unequally, as I mentioned above.

The numbers we have suggest that adding some high-profile, heavy-hitter real estate agents will accelerate some kind of shakeup in the local industry. Those on the bottom rungs will face a harder fight as the introduction of big top players pushes some of the middling players towards lower-end properties.

I think what we’re probably looking at currently is that a few agencies make a lot of money, some make decent money and a lot scrape by or less. But it’s hard to know because of the paucity of stats. So, the first thing to say is that the real estate sector should become regulated andmore organized generally but some us of have been saying that for a very long time.

Effect on local industry

Because these new agencies focus almost exclusively on luxury and super-lux properties, regular buyers and sellers might not even notice their effect on the market directly. But the overall impact from the clients’ point of view will be positive. It will increase the professionalization of the local industry, which is a good thing.

The number of houses changing hands continues to rise, as you can see from the ten-year chart of home sales via the INE stats. That will help attract new players to the market.

It’s also worth noting that the INE chart doesn’t differentiate by sales price. What we are seeing in this sector is a more rapid increase in the turnover of luxury properties in Marbella and Malaga provinces. According to some industry estimates, the growth is quite striking. I myself have written previously that the luxury market is growing at a rate faster than the wider market. That creates space for new players in this niche, whether the addition of agents with existing agencies or the addition of entirely new agencies.

There’s a final factor worth mentioning here as well: brand names don’t just come in and scoop up existing clientele. They bring their own network of pre-existing, high-net-worth clientele with them. That will expand the market and create more demand for new construction of luxury properties, especially with the overhaul of planning regulations that will open up new development opportunities. All of that will create more jobs.

Their arrival is also likely a result of the magnet effect, by which I mean that Americans are already moving to Spain in growing numbers, and Andalusia is a popular destination. The agencies are following their clients. As I wrote:

“By late 2022, Malaga province was home to 2,692 American residents. That makes it the province with the fourth-highest number of US citizens… There are also now eight US cities, including LA, Dallas and Miami, that offer direct flights to Spain.”

While there’s some reason for anxiety among local real estate agents, overall, I think that it’s an exciting time offering great opportunities. It shows just how much of a world-class destination we have become.

Written by Adam Neale | Opinion | June 19th, 2024