2024 in review – Real Estate and Construction on the Costa del Sol
2024 was a very busy year for MDCI, supporting a range of clients to build in Spain in a number of ways. These include; undertaking due diligence and project viability studies, managing project bidding and value engineering processes, project management and project rescue services. We’re definitely not alone in having a busy year, we’ve seen the whole real estate and construction industry across Spain, and particularly on the Costa del Sol increasing in strength and this seems set to continue, thanks to high demand from buyers and low supply of properties.
A very strong real estate market
In the first 10 months of 2024, there was a 1.6% increase in property sales in the Malaga province compared to last year. Across Spain as a whole, property purchases were up 7.5% from 2023. October was a particularly strong month, as reported in the Sur in English – “the number of transactions soared by 51% in the country, rising from 45,879 in October 2023 to 69,418 in the same month in 2024. Meanwhile, in Malaga the rise in sales and purchases was just over 44%, going from 2,565 to 3,698 from one year to the next, which also made it the fifth province where most houses were bought during that month.”
This is great news for real estate agents, but there’s a distinct lack of supply, which is driving prices up and causing people to increasingly consider new build developments, or to build their own homes. According to the report ‘New build housing in 2024’ by Fotocasa Research, 65% of people who have bought a home in the last 12 months considered buying a new-build home. We’ve also seen a big increase in families building villas on the Costa del Sol, because they just can’t find what they are looking for.
How the construction industry is faring
2024 has been a very strong year for the construction industry too, continuing the gradual, ongoing growth that we’ve seen since 2017. According to the Spain Construction Industry Databook, this growth is set to continue until 2028. Business Wire reports that, “The construction industry in Spain is expected to grow by 3.9% to reach EUR 83.51 billion in 2024. Despite near-term challenges in certain construction sectors, Spain’s construction industry is poised for significant growth. The industry is expected to grow steadily over the next four quarters, with the growth momentum continuing over the forecast period. A CAGR of 3.6% is projected during 2024-2028, with the country’s construction output expected to reach EUR 96.05 billion by 2028, indicating substantial growth potential.”
There are many large-scale construction projects underway, with the five largest being a battery manufacturing plant, a photovoltaic solar plant and three residential complexes in Valencia, Seville and Granada. Find out more
However, experts say that these residential projects and the many others currently underway will not be enough and much more housing needs to be built to meet the demand. According to Savills, there’s a housing crisis in Malaga, which is set to worsen “unless the rate of construction triples and reaches 12,000 homes per year for at least the next five years to normalise the market and correct the strong imbalance between supply and demand”.
What impact is this having on clients and developers?
This is fantastic news for owners of construction companies, but not such good news for clients.
The high demand is causing a lack of labour and pushing prices up across the board – from land to materials. It is also resulting in greedy speculation from some companies and leading to builders “cherry picking” the most profitable projects and avoiding fixed priced contracts. They can afford to lose projects because of the ongoing and growing demand and this unfortunately is leading to ongoing projects without strong contracts being beset by cost increases and time delays.
Sadly, we’ve seen an increase in demand from people asking for us to intervene and use our experience and expertise to sort out ongoing issues and save the project due to these factors.
It shows the importance of doing things properly from the beginning and bringing on the right people from the outset to set solid foundations for a smooth project. MDCI can offer the most value by working with clients from the planning stages, and delivering advice and support throughout the project from start to finish. These are the projects we will be prioritising in 2025, to be able to maximise our value to clients.
Top Tips for Successful Construction Projects in 2025
- When looking for a construction company, beware of the small and inexperienced firms without solid purchasing capability, as this can result in a lack of control on prices and resources. Also beware of any firms who ask for a large deposit up front to “guarantee the price given”.
- It’s key to make sure your bidding process is well managed, so you can select the right construction company and make sure that you’re getting the best prices. In order to be able to compare bids like for like, they must all be bidding on the same brief and comprehensive execution project. You need an expert to be able to manage this process for you, prepare the brief and then evaluate the bids, as well as negotiate with the bidders to bring the price down. This is something we can support clients with, which can save 10-20% of the initial quotes.
- Be realistic when setting completion dates and deadlines, to ensure that works can be completed correctly and not rushed. People often seem to be in an unjustified hurry to build without appreciating that the occupation of the unit – although important- is not the overriding factor -and this leads to corners being cut and deals being reached which under duress start to unravel over time.
We predict that in 2025 the market will continue to “mature” and demand will remain high. Consequently, the problems and non-performances will also be high, so if you are due to start a project in 2025, please bring in the professionals to support you from the outset.