Investment Strategy for Costa Blanca Property

Costa Blanca Property Is Not a Get-Rich Scheme: It’s Strategic Wealth Building

It’s a lifestyle asset that can also build wealth—if you’re thoughtful about it. The question isn’t whether property “always goes up” (it doesn’t), but whether your specific investment aligns with market realities, your financial goals, and your risk tolerance.

Costa Blanca Real Estate Market 2025: Verified Data

Spain’s property market, particularly Costa Blanca, has weathered the post-2022 European correction better than nearly all other major European markets. According to the Global Trends and Tactics 1Q 2025 report by Nuveen Real Estate, prices have held strong, demand remains high, and rental yields are outperforming expectations.

Price Growth 2024–2025: - Valencian Community (which includes Costa Blanca): +18% year-on-year - Alicante province: +15.9% year-on-year, with average prices reaching €2,457/m² - Torrevieja: +13.6% year-on-year, average price €2,282/m² - Orihuela Costa: +12–15% estimated, prices €1,200–€1,900/m²

Foreign Buyer Share: Costa Blanca North reports foreign buyers represent 43.7% of transactions, demonstrating sustained international demand. Costa Blanca South sees similar patterns, with British, German, Scandinavian, Belgian, and Dutch buyers dominating.

5-Year ROI Forecast (2025–2030): Analysts predict +12–15% total appreciation in premium coastal areas, driven by limited coastal supply, high international demand, stable rental market, and established legal transparency.

Rental Yields: What’s Realistic

Gross Rental Yield (Alicante Province, 2025): 5.8% average

Costa Blanca South Yields: - Torrevieja, Orihuela Costa: Standard properties yield 4–6%; beachfront and prime locations yield 6–8% (including appreciation potential) - Villamartín (golf properties): 4–5% long-term rental; higher for short-term tourist rentals (if licensed) - Premium coastal areas (Cabo Roig beachfront): 5–7%

Costa Blanca North Yields (for comparison): - Jávea: 6–8% gross yield including appreciation - Moraira: 4.3% average in 2024; premium properties 4–6%

Rental Drivers: - Tourist demand: Year-round tourism (Costa Blanca has 300+ days sunshine), strong summer and winter seasons (Northern European “sun seekers”) - Long-term expat rentals: Retirees, remote workers, families seeking 6–12 month leases - Golf tourism: Villamartín, Las Ramblas, Campoamor golf courses attract seasonal renters

Investment Strategy by Buyer Profile

Different buyers have different goals. The property strategy must align with the goal.

1. Live + Build Wealth (Primary Residence with Appreciation)

Goal: Buy a property to live in, with expectation of capital appreciation over 10+ years.

Strategy: - Focus on areas with stable demand, good infrastructure, and resale liquidity - Prioritise Costa Blanca South towns with strong international communities (Orihuela Costa, Torrevieja) - Avoid over-personalised renovations that limit resale appeal - Consider future resale: Will this area still attract buyers in 10 years? Is the community stable?

Risk factors: - Market downturns (property is illiquid; selling quickly is difficult) - Over-supply in certain urbanisations (check how many properties are currently for sale in your development) - Changes in local regulations (tourist rental restrictions, tax changes)

Expected outcome: 3–5% annual appreciation (conservative estimate), lifestyle value, potential to sell in 10+ years at profit.

2. Rental Income (Tourist Rentals)

Goal: Generate income through short-term holiday lets (Airbnb, Booking.com, direct bookings).

Strategy: - Location critical: Beachfront or within 10-minute walk to beach; proximity to restaurants, shops, amenities - Seasonality matters: Tourist rentals perform best March–October; winter occupancy drops significantly (except Christmas/New Year) - Legal compliance essential: Obtain VT tourist licence from local council; register with NRUA (National Registry); verify community permits tourist rentals (60% vote required post-2025 law) - Management required: Either self-manage (time-intensive) or hire property management company (typically 15–25% of rental income) - Furnishing and presentation: High-quality furnishings, professional photos, excellent reviews drive bookings

Yield expectations: - Gross yield: 6–8% in prime locations (Orihuela Costa beachfront, Torrevieja promenade) - Net yield (after management, maintenance, taxes): 3–5%

Risk factors: - Regulatory changes (tourist rental restrictions increasing across Spain) - High competition (saturated market in some areas) - Seasonal volatility (empty periods November–February) - Maintenance and damage (tourist use wears properties faster)

Tax implications: Rental income taxed as non-resident at 19–24%; must declare all income; professional tax advice essential.

3. Long-Term Rental (Stable Income)

Goal: Generate reliable monthly income through 12-month tenancy agreements.

Strategy: - Target properties near services, schools, hospitals (families and retirees prioritise these) - Inland properties (Villamartín, San Miguel de Salinas) often better for long-term rentals than tourist-heavy beachfront - Simpler property management (1–2 inspections/year vs. weekly turnovers) - Lower gross yield but more stable cash flow

Yield expectations: - Gross yield: 4–5.5% - Net yield: 3–4.5%

Risk factors: - Tenant default (Spain’s eviction process can be slow) - Longer void periods (finding quality long-term tenants takes time) - Lower gross yield than tourist rentals

Advantages: - Stable monthly income - Lower management intensity - Less regulatory risk (long-term rentals not affected by tourist rental restrictions)

4. Remote Worker (Cost-of-Living Arbitrage)

Goal: Buy property to reduce living costs while working remotely for UK/EU/US employer.

Strategy: - Property purchase is part of cost-of-living calculation, not pure investment - Calculate: mortgage cost vs. UK rent savings vs. expected appreciation - Factor in: purchase costs (10–13% of property price for taxes, fees, notary), ongoing costs (IBI, community fees, maintenance)

Example calculation: - UK rent: £1,500/month (€1,750) - Spain mortgage (€150,000 property, 80% LTV, 3.5% interest, 25 years): €675/month - Spain costs (IBI, community, maintenance): €200/month - Total Spain housing cost: €875/month - Savings vs. UK rent: €875/month (€10,500/year) - Plus: Build equity + potential appreciation

Risk factors: - Currency fluctuation (if earning in GBP, spending in EUR) - Employment changes (remote work policies can change) - Property illiquidity (if you need to relocate quickly, selling takes months)

Expected outcome: Reduced housing costs + lifestyle improvement + wealth building through equity and appreciation.

Costa Blanca vs. Other Spanish Regions: Comparative ROI

Costa Blanca South offers the best balance: affordable entry, strong rental yields, high foreign buyer liquidity, stable appreciation.

Common Investment Mistakes to Avoid

Through hundreds of transactions, Prime Home Match has identified recurring investor mistakes:

1.        Buying for tourist rentals without verifying licensing: Tourist rental laws vary by municipality. Some areas restrict or ban short-term rentals. Always verify before purchase.

2.        Over-estimating rental income: Agents often quote “potential” rental income based on peak-season rates. Reality: seasonal drops, void periods, management costs, and competition reduce actual income by 30–50%.

3.        Ignoring resale liquidity: Some urbanisations have dozens of properties for sale simultaneously, indicating over-supply and weak resale demand. Check current listings before buying.

4.        Buying “cheap” without due diligence: Properties priced 20–30% below market often have hidden problems (illegal construction, community debt, poor location). Cheap can become expensive.

5.        Confusing gross yield with net yield: Gross yield ignores costs (management, maintenance, community fees, IBI, taxes). Net yield is what actually matters.

6.        Underestimating purchase costs: Budget 10–13% of purchase price for taxes, fees, notary, lawyer. This is additional to the property price.

Tax Considerations for Investors

Purchase taxes:

ITP (Transfer Tax) on resale properties: 10% in Valencian Community - IVA (VAT) on new-build properties: 10% + 1.5% AJD stamp duty

Annual taxes:

IBI (Property Tax): €300–€800/year depending on cadastral value - Non-resident income tax: If non-resident, pay annual deemed rental income tax even if property is empty (typically €200–€500/year) - Rental income tax: 19–24% on net rental income for non-residents; 19–47% for residents (progressive scale)

Capital gains tax (on sale):

- Residents: 19–26% progressive scale on profit - Non-residents: 19% flat rate on profit

Plusvalía Municipal:

Local capital gains tax paid by seller (buyer should verify seller pays this; sometimes incorrectly shifted to buyer in contracts).

Professional tax advice is essential. Spanish tax law is complex, and non-compliance results in penalties.

The Honest ROI Conversation

Costa Blanca property can build wealth. But it requires: - Realistic expectations (3–5% annual appreciation, 3–5% net rental yield is good) - Due diligence (legal checks, market research, area analysis) - Professional support (buyer’s agent, lawyer, tax advisor, property manager if renting) - Long-term perspective (property is illiquid; plan to hold 5–10+ years) - Alignment between your goal and property strategy

If you’re buying for rental income: location, management, seasonality, and legal setup matter. A 3% yield in a tourist zone might look good until winter. A quieter area might underperform if you need high turnover.

If you’re buying to live here: think about resale 10+ years out. Will this area hold value? Is the community stable? Can you sell easily if plans change?

If you’re a remote worker: property is part of your cost-of-living calculation, not a pure investment. The math is different.

What’s your actual goal—live, rent, invest, or a mix? Once we know that, the property strategy becomes clear (and the mistakes become avoidable).