The recent trade war between the US and China is putting pressure on global stock markets. With tariff increases of up to 125% by China and retaliations of over 145% by the US, we are already seeing the impact on stock markets. The S&P 500 lost more than 10% in just two days, while the Nasdaq Composite has entered a bear market, with losses of 20% since December.

Economic uncertainty and implications for investors

The economic turmoil comes in the middle of what looked like a promising spring for investors. The uncertainty about how long these trade tensions will persist and what further economic consequences we can expect is causing concern among investors. Many are now looking for more stable investment alternatives to protect their assets and/or their return on savings].

Disclaimer: It is important to be thoroughly informed when making financial decisions. This article provides general information and not specific investment advice. Always consult financial experts for personal advice.

Real estate as a safe haven during economic turmoil

Historically, real estate often proves to be a relatively stable investment category during periods of economic uncertainty and market volatility. This is particularly true for high-quality properties in sought-after regions such as the Costa del Sol.

Some concrete examples:

• After the 2008 financial crisis, when stock markets fell dramatically worldwide, luxury property markets on the Costa del Sol saw a much more limited decline in value and a faster recovery than the wider property market.
• During the recent COVID-19 pandemic, demand for luxury homes in Spain soared, with price increases of 16.87% in Estepona between 2023-2024.
• Unlike equities, which can lose billions in value in a matter of days, property valuations remain more stable due to the underlying value of the physical asset.

An important insight from the real estate world is that quality properties - such as spacious homes in good neighbourhoods - typically continue to sell well, even during economic uncertainty. In the long run, simply owning property is always more profitable than waiting for the perfect time to buy property.

Property on the Costa del Sol: a proven stable investment

The Costa del Sol stands out as a particularly robust property market to invest in[LINK blog post 1], even during economic fluctuations. This is due to a combination of factors:

• Consistent international demand:
  The region continues to attract foreign buyers, not only for the climate but for the complete Mediterranean lifestyle. With 325 days of sunshine a year and an international community, the attraction remains regardless of economic cycles.
• Limited supply in prime locations:
  Especially in popular areas such as Estepona and Marbella, available building land in A-locations is becoming increasingly scarce. This natural limitation of supply creates a floor under valuations.
• Proven resilience:
  The luxury property market on the Costa del Sol has shown in the past that it recovers faster from economic shocks than other markets. After the pandemic, the number of high-end transactions increased by double digits.

Diversification as a strategy: real estate to complement your investment portfolio

One of the fundamental principles of successful investing is diversification, or spreading investments across different asset classes. Especially during stock market volatility, this strategy proves its worth:

• Low correlation with equity markets:
  Real estate often does not move in the same direction as equities, offering stability within a diverse portfolio
• Inflation protection:
  Unlike many financial assets, the value of real estate often rises with inflation
• Double efficiency:
  Real estate offers both potential value growth and rental income, even if it is harder to get a rental licence

A concrete example: an Alness client who invested in a flat in Estepona in 2016 for €260,000 is now seeing a market value of €380,000 - a value growth of 46% over eight years. This represents an average annual return of around 4.9%, excluding any rental income.

Not every home is equal: focus on the luxury segment

It is important to stress that not all property segments perform equally during economic uncertainty. The luxury segment in particular remains resilient. When markets become uncertain, investors look for tangible assets.

Market data shows that these features in particular contribute to stability during uncertain times:

• (New-build) homes in established premium locations
• Detached villas and spacious flats
• Property with unique features such as sea views

Timing and patience: investing with a long-term view

A crucial difference between equities and real estate is the time aspect. While stock markets fluctuate by the hour, real estate develops over years or decades, making it fundamentally more stable. We see this clearly on the Costa del Sol, where luxury real estate realised a 40-60% increase in value between 2010-2023, despite financial crises and pandemics.

The risks

While property on the Costa del Sol can be an attractive investment during stock market turmoil, it is important to also recognise the potential risks:

• Liquidity constraint:
  Real estate is not as liquid as equities and can take longer to sell in a difficult market
• Potential short-term volatility:
  Property prices can also fluctuate in the short term, especially in the middle segment
• Higher transaction costs:
  The cost of buying and selling property is significantly higher than for equities

For investors considering diversifying into Spanish real estate, it is essential to take a long-term view and not invest with capital that might be needed in the short term.

Real estate as an anchor in your investment strategy courtesy of local expertise

A balanced investment strategy combines different asset classes, with high-quality property on the Costa del Sol can serve as a stable base during stock market volatility. The key to success lies not in choosing between equities or real estate, but in finding the right balance ánd the right properties.

When navigating the complex property market, local expertise makes the difference between a successful investment and a missed opportunity. Without thorough knowledge of the local market, it is difficult to determine true value, identify growth areas and manage legal complexities.

Alness helps you find real estate that not only provides resilience during economic fluctuations, but also continues to create value in the long term. And supports you through the entire process: from search to purchase. Take contact us for a personal interview About the possibilities.