Housing crisis
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The housing crisis in Malaga "far from being solved, will worsen in the short term" 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, which is what is driving prices to exorbitant levels.
These are the calculations presented this Wednesday by real estate consultancy firm Savills in its annual report Vision Málaga 2024, in which it analyses the great challenge facing the city and its metropolitan area to manage the strong population growth forecast for the near future.
Savills' regional director for Andalucía, José Félix Pérez-Peña, has called for a "strong pact between the governing bodies" to tackle the housing problem as an "emergency, just as it was with covid or as it is now with the drought."
Based on forecasts from the INE (Spain's national statistics institute), Savills has highlighted that Malaga is the Spanish province that will see the greatest growth in the number of households between now and the next15 years: 211,000 households will be created in this period, 35% of all those that will be created in Andalucía.
In the next five years is when the highest rate of growth will be realised with the creation of just over 20,000 households per year, double the number that will be added by the capital of Andalucía (Seville). Worryingly, a large part of this growing population will want to settle in Malaga or its commuter belt, where it would be necessary to build "8,000 private housing units and 4,000 social housing units" every year for the next five years, in order to "start to normalise the market".
This would mean doubling the current rate of private housing construction and quadrupling that of subsidised housing. "So far, between 3,000 and 4,000 homes a year are being developed in Malaga, half of what is being built in Seville, when the population growth here is going to be double", explained Pérez-Peña.
These new homes must also have an affordable price, not like those that have been built in recent years. "Malaga has passed the barrier of 4,000 euros per square metre for new private housing and the average price of new flats is already 542,000 euros, which has doubled in less than ten years. It is practically impossible to buy for less than 3,600 euros per metre, which means that a new 100 square metre flat in any area of the city costs no less than 360,000 euros," said this director for Savills.
With these prices new housing in Malaga has become the reserve of an elite group of buyers with high purchasing power; and there are a fair few of these: "Everything that is put on the market is 65% sold within a year, which means that in a year and a half any development is already 100% sold," he said. But with these exorbitant prices this new-build market is "leaving out young people and the average Malaga resident."
Pérez-Peña denied that foreign demand is having a decisive influence on the Malaga property market. "It is mainly a replacement demand: a family that has already paid for their house in Huelin and is selling it to buy a bigger one or in a better area," he explained, recalling that half of the homes are still bought without a mortgage in Malaga.
"The situation is going to get worse and worse unless there is a pact between the relevant governing bodies to create a development area in the province where 15,000 to 20,000 homes can be built in the short term, as has been done in Seville with Entrenúcleos," he said. He has called for the Seville example to be followed in the creation of this new district, where prices are below 2,500 euros per square metre, keeping the average price for the city at a much more moderate level than it is in Malaga.
The question is: where to create this "Entrenúcleos" in Malaga, this new district with 15,000 to 20,000 homes? It has to be an area that is connected to public transport or is shortly to be connected to it, which leaves us only with the northern areas of Campanillas, Cártama or Pizarra. The advantage Entrenúcleos had is that the infrastructure was in place before the house-building started. Here it will have to be done at the same time.
Pérez-Peña acknowledged that it will not be possible to develop land of this magnitude in the short term "unless those in charge come to an agreement to tackle this issue as an emergency."
Regarding the rental market, Pérez-Peña says that the crisis is even more pressing as the supply is meagre and the solutions "are not easy."
"In Malaga the mismatch between supply and demand is also more pronounced than in other cities due to the increase in demand resulting from the increase in population, the difficulty of access to housing for purchase and the increase in tourist housing," states Savills' report. "Both the public and private sectors are aware of the limitations of the rental stock and are analysing public-private collaborative solutions, such as the promotion of subsidised housing projects through different formulas. Both Plan Vive [a 10-year housing plan for Andalucía to 2030] and the increase in the value of renting out are helping to boost investment interest and there is currently a forecast of 500 homes by 2026," according to this report.
Pérez-Peña does not believe that the tourist housing boom is to blame for the rental shortage. "It's a bigger problem than that," he said. "Forty-five per cent of the housing in the city centre is tourist housing and that can't happen, that's obvious. But transferring these properties to the conventional rental market would not solve the problem; the pressure will continue to be there because the problem is not a tourist one, it is a problem of high demand and very little supply: if you look at any real estate portal there are only 800 properties available for rent in Malaga," he explained.
For him the solution would be more along the lines of "incentivising those who rent housing at an affordable price" and changing the legislation to reverse "the aversion that many landlords have over renting to families with children". "There is talk of vulture funds [investment funds that buy distressed debt from commercial companies] but in the end 90% of the market is in the hands of small-scale landlords," he said.
The Savills report indicates that there are initiatives to provide Malaga with more rental housing, but these are clearly still insufficient to meet demand. "In the next few years Malaga will double its supply of buildings dedicated entirely to renting and alternative formats such as co-living and flex-living in the next four years. These figures will ease the tension, although they will not be enough to balance the market," said Pérez-Peña.
The aforementioned shared living projects currently amount to almost 1,500 units in Malaga and will rise to 3,300 units in the next four years, a 130% increase. Student residences, meanwhile, are absorbing part of the demand that until now was entering the rental market, with the number of beds doubling to 3,225, with 600 new places in the pipeline.
"All this new supply of housing models designed for different population profiles, from students to young professionals or families, is focused on well-connected areas that are in line with the type of demand, with options that complement the economic growth of the city, the arrival of companies and universities that promote the retention and attraction of talent," stated the Savills report.
In the last 12 months the market for office space has been driven by the technology sector and, given the lack of supply, coworking spaces have consolidated as an option for the arrival of new companies. Exclusive office buildings have maintained stable occupancy levels at maximum values above 95% with a progressive increase in rents.
The vacancy rate stands at 7.7%, although most of this is on the periphery of the city or in obsolete buildings. The delivery of the four office projects to be incorporated in the city, in addition to the planned growth of Malaga's TechPark, will alleviate the current supply shortage.
Savills suggests that hotel supply is growing at a slower pace than demand. Even with 14% more beds compared to 2019, hotel occupancy is reaching record levels in the main tourism indicators and in hotel operating parameters.
The price of rates reflects the increase in quality but also the need to increase supply, in Savills' opinion. "To match Seville's hotel capacity Malaga would need to build 130 hotels with 100 beds each," said Pérez-Peña. However, he acknowledges that Malaga is one of the few tourist destinations where investment is being made in the development of land for hotels.
In the retail sector national and international businesses are increasingly interested in positioning themselves in the city, driven both by tourism and by a strong development of local demand, which is evolving more and more in search of experiences and quality in their shopping. The prime availability rate is below 1% and secondary areas such as Soho, Alameda and Carretería have gained commercial interest. Overall average rents in the city have increased by 9%.
So far this year take-up in the logistics sector amounts to 30,000 square metres, with the availability rate at critical levels in the short and medium term. The new surface area delivered does not meet the sustained demand of the city due to its very rapid absorption.
This is the case for the former Bacardi factory project, which was delivered in the first half of this year and is now practically complete. Developers and investors are focusing on the analysis of strips of land that have been divvied up for development, such as the final approval of the 'Plan Parcial del Sector SUS-G.1' in Malaga, a tranche of buildable land in the San Julián district near the airport.
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