Over the past year, the Costa del Sol region has experienced significant growth in property prices. According to the latest data, new housing prices in the Malaga province have increased by 24.4% per year—one of the highest growth rates in Spain. For instance, if the initial price was around €4,100 per square meter, after this growth it could reach approximately €5,100/m². In Marbella, the average price per square meter is about €5,000–6,000, but in exclusive areas—such as Golden Mile, Sierra Blanca, or Puente Romano—prices can escalate to €10,000–15,000/m² or even higher.

When investing in real estate on the Costa del Sol, there are several strategies to ensure attractive returns:

Investment Strategies

1. Investing in New Construction Projects
By purchasing a property during the early stages of a project, you can benefit from the increase in property value as construction progresses. Recent trends indicate that such investments can be very profitable, as the completed property’s value often significantly exceeds the initial purchase price.

2. Investing in the Secondary Market with Short-Term Rentals

Short-term rentals, particularly in tourist-favored areas, can generate higher returns—typically ranging from 6% to 10% per year, depending on the location and property features. However, executing a short-term rental strategy requires obtaining a tourist license. Recent regulatory changes in Spain have introduced stricter requirements for these licenses, so it’s crucial to verify the feasibility of obtaining one and to review local urban planning guidelines. Additionally, short-term rentals demand more active management due to frequent guest turnover, cleaning, and booking management.

Short-Term Rental Pros:

• Higher returns during peak tourist seasons.

• Flexibility to use the property for personal vacations during off-peak periods.

• Strong demand in coastal cities.

Short-Term Rental Cons:

• Obtaining a tourist license may take time due to stricter regulations.

• Higher operational costs, including management and cleaning fees.

• Seasonal occupancy: while summer occupancy can reach 100%, it may drop to 50–70% in winter.

3. Investing in the Secondary Market with Long-Term Rentals

Long-term rentals offer stable monthly income and require less intensive management. In the Costa del Sol region, long-term rental yields typically range around 4–6% per year, though this depends on the property’s location and quality.

Long-Term Rental Pros:

• Consistent monthly income.

• Lower administrative and management costs compared to short-term rentals.

• Ideal for investors seeking passive income with lower risk.

Long-Term Rental Cons:

• Generally, lower rental rates compared to short-term rentals.

• The property is tied up for extended periods, limiting personal use.

Optimal Locations for Rental Properties on the Costa del Sol

To maximize rental returns, choosing a highly attractive location is essential. The most sought-after areas include:

• Near the Sea or with Sea Views: Properties in these locations are in high demand for both short-term and long-term rentals.

• Close to Entertainment and Service Centers: Proximity to restaurants, shopping centers, sports clubs, and other amenities increases a property’s appeal.

• Near Ports: Areas adjacent to ports are popular due to easy access to water transport services and additional leisure activities.

• Close to Golf Courses: Particularly attractive for long-term rental markets, these areas draw residents and golf enthusiasts looking for a relaxed lifestyle.

Summary
Investing in real estate on the Costa del Sol can be highly profitable, but success depends on choosing the right strategy and location. If you aim for higher—but seasonal—returns, short-term rentals might be ideal, provided you can secure the necessary tourist license and manage the operational challenges. For stable, predictable income, long-term rentals could be a better choice. Additionally, investing in new construction projects can offer substantial capital gains if market trends continue.

In short, as a response to the initial question—selecting the right location and investment strategy is key to achieving maximum returns in the Costa del Sol real estate market.