“The new government must repeal the tax on large fortunes; it hinders foreign investment.”
“The resort is working on a hotel project that will involve an investment of 170 million euros.”
“We have sold plots for over 10 million euros.”
“Legal and regulated immigration is the solution to the labor shortage.”
Developed in the early 90s, La Zagaleta has established itself over the past 30 years as one of Europe’s most exclusive luxury residential resorts. A heliport, two of the country’s best golf courses, a Clubhouse and restaurant exclusively for owners, and a strict security and privacy system are some of the features of this place located in the mountains of Benahavís (Málaga), where prices range from 10,000 to 15,000 euros per square meter and plot sizes range from 3,000 to 20,000 square meters.
We are in the midst of the high tourist season, in a summer that is expected to be historic, although also marked by inflation and price increases. How is all this experienced from a place like La Zagaleta?
Well, the demand continues to exist for both finished villas, plots, and rentals. Regarding hospitality tourism, the forecasts indicate that even the figures from 2019 will be surpassed. It is true that there is inflation, like in the rest of Europe, but Spain remains a very competitive country, from a price perspective, for the European market.
Málaga has positioned itself as a national benchmark in the luxury tourism sector. What role does La Zagaleta play in this scenario?
La Zagaleta is a benchmark in luxury residential tourism and first residence real estate, mainly due to our client profile and the unique configuration of the resort, which is unparalleled in Europe in terms of low density, green areas, and sports facilities. We are unofficially recognized as the best resort in Europe, and that is of even greater importance here in Málaga.
A summer also marked by politics, following the municipal elections in which the PP won strongly in most municipalities on the Costa del Sol, we are faced with this paradigm shift at the national level. How do you assess the outcome of the general elections?
The best scenario is a stable government that, in the next four years, has the capacity to legislate for the good of the citizens without having to owe too much to those with whom it forms alliances. If the government had to form alliances with more peripheral powers, it wouldn’t go as well, that’s for sure. Ideally, the two major parties on the right and left could reach agreements on specific and important issues for everyone.
What would you ask of the new government in terms of fiscal policy, or what measures do you think would be interesting to implement in this regard?
In principle, we would ask for the application of VAT to short-term apartment rentals (when the duration is less than 45 days), as currently it is exempt from VAT, to mitigate the competitive disadvantage compared to the hotel sector. On the other hand, we would like to maintain the modification of the special talent attraction regime (known as the Beckham Regime). And one of the fundamental aspects we request is the repeal of the recently approved Wealth Tax reform (known as the Solidarity Tax on Large Fortunes), which, through the modification of Article 5, establishes that entities whose assets consist of at least 50% real estate located in Spanish territory will be considered located in Spanish territory. This is, in my opinion, a brake on attracting foreign investment in residential and hotel projects, and that is a risk that neither Andalusia nor Spain can afford.
We were talking about tourism, but the province, and especially this area of the Costa del Sol, has been a benchmark in high-end housing for decades. How do you see the situation in the sector?
Well, I believe that the luxury housing sector is in very good health, but it is true that the Costa del Sol has a land problem; there is little space for luxury residential areas characterized by low density. To have a low-density resort, a lot of land is needed, and the Costa del Sol does not have an excess of land to accommodate residential areas like La Zagaleta or similar. Luxury housing also includes properties that, although not characterized by low density, are located in privileged locations, such as the Golden Mile or the center of Malaga. What happens is that in a holiday destination with excellent weather like the Costa del Sol, residential tourism looks for something more, such as low density, large green areas, sports facilities, and high security.
Which architects and construction companies are most in demand by Zagaleta’s clients?
We have been working with various architects for many years, such as Tobal Studio, which has designed a large percentage of La Zagaleta’s villas, and Juan Salvador Shvartzberg. Now we have launched a new department where we seek exclusive agreements with younger and less known architects; the offer of professionals in Marbella is very good. As for construction, we have changed the way we work. We used to have some trusted companies like Solís or Jamena, and decision-making was more artisanal. Now, in an effort to be more transparent, we carry out a blind bidding process, inviting six or seven construction companies to compete, and we award the project to the one with the best score. Currently, we are working a lot with Rugue, Prinza, or Atlas Group; there is a lot of competition, and we do not rule out working with others in the future.
Most construction companies claim that they are unable to find qualified personnel. Is this problem also affecting La Zagaleta?
Absolutely, we are experiencing this problem throughout the construction chain. The bottleneck is in delivering construction projects within deadlines that are manageable for a developer; they can’t find surveyors or engineers to complete them in less time. The same goes for other trades; there is a tremendous shortage of qualified labor.
What do you think could be the solution?
The most obvious solution is immigration. Spain cannot afford to debate whether it needs legal and orderly immigration or not; it either welcomes it or faces a serious problem. Vocational training is booming; private companies like Medac or Cesur are growing significantly. However, Spain still needs to import labor; that is undeniable. The problem is that Spain has an issue with salaries; it is challenging to attract professionals from countries like Germany because wages here are much lower. Personally, I’m not worried if wages increase, but for that to happen, taxes must decrease. Wages and taxes cannot go up simultaneously. While the party that has been in power until now has been mostly left-leaning, lowering taxes has been impossible; the PSOE, on its own, I’m convinced, would have lowered taxes.
We often see headlines stating that the most expensive homes in the country are located here. What is the average price of a villa in La Zagaleta?
The average price per square meter for new housing is around 10,000 to 15,000 euros per square meter. For used housing, the price depends on orientation, views, and location. We have some premium locations where plots have been sold for over 10,000 euros per square meter; in other words, we have sold plots, just the land, of 10,000 square meters for over 10 million euros.
Who buys these homes, and has the profile of La Zagaleta’s owners changed?
The main customers, not only in La Zagaleta but also in the entire Costa del Sol, are still from the British market, and even Brexit has not changed that, quite the opposite. Behind them, there are Germans, Swiss, and Scandinavians, and in recent years, there has been an increase in Belgians and French buyers. We have noticed a significant decrease in the Russian market, not only due to the war, but even before that, due to Putin’s restrictions on taking capital out of the country, we had already seen a significant decline. Some ex-Soviet republics such as Ukraine, Azerbaijan, or Kazakhstan are still bringing clients to the Costa del Sol. Russia has other destinations that are more appealing due to proximity, like Turkey, which is the preferred destination for the Russian market.
In addition to nationality, what is the profile of luxury property buyers now? Are they younger?
Without a doubt, we have seen an increase in young buyers, especially related to the rise of technology companies. Now we have more young buyers and families. Becoming a luxury residential destination is the result of decades of work; before buying a villa, clients usually stay at a hotel, so having good hotels in this segment is essential. Marbella is what it is today because 60 years ago, the Hohenlohe Family brought their royal friends here, and that’s how the destination began to take shape.
Around 300 villas, two golf courses, a heliport… all of this in a municipality with less than 10,000 inhabitants. What economic impact does La Zagaleta have on Benahavís?
This resort generates around four million euros per year in Real Estate Taxes (IBI) alone for the Town Hall, which is approximately the annual budget of the Castellar de la Frontera Town Hall, where we have our new project planned. Added to this are the new construction licenses, amounting to around 17 million euros, or the licenses for sports facilities, which also exceed one million euros. Since 1990, investments in infrastructure and general systems have amounted to around 55 million euros, and investments in homes (built by the developer or third parties) could easily reach 800 million euros. As for employment, around 2,000 people access the urbanization daily for work, and La Zagaleta companies generate around 200 permanent direct jobs and 630 indirect jobs.
Speaking now about expansion plans, how is the expansion project of La Zagaleta going?
Beyond finishing the available plots here (about 110), we have two major projects. One is a hotel development here in La Zagaleta, a project that is already finished, and we are in negotiations with a brand that could be incorporated. It is a 170-million-euro investment that La Zagaleta neither wants nor can handle alone. We have been looking for a partner for a long time, and it is almost closed now. The hotel will have 60 rooms and 66 associated villas as branded residences, all on a 110,000 square meter plot. This hotel will have its independent entrance, and guests will be able to use our resort’s second golf course. The hotel will be associated with an international brand like Mandarin, Six Senses, or Four Seasons; we are extending the validity of the agreements because they were signed a while ago.
When do you expect construction to start?
Ideally, we could start at the end of this year, but I cannot guarantee it.
And what about the Castellar project, which will host one of the most important golf courses in Spain? What is the current situation, and when will it become a reality?
This is a project that we acquired in 2015 and has been undergoing processing by the founder of Valderrama, Jaime Ortíz Patiño, since 2007. He wanted to build a second golf course for Valderrama and bought this plot. Administrative procedures are taking longer than we expected because we changed the residential and hotel model he had planned. Added to the slowness of the administration, especially the Ministry of the Environment, has caused the deadlines to be doubled or even tripled from the initial forecast. The good news is that the golf course already has a license for construction, and the residential and hotel part is divided into two phases; half is in the first phase and will have definitive approval soon, and the second phase is in the scope document phase. The project includes a hotel with around 120 rooms, about 100 associated villas, 90 residential properties, and some condominiums. We could start building the golf course now, but we don’t want to start without having the assurance that the residential part can also be built.
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