Estepona Market Continues To Shine

Market Report for 2025

Overview of the Garden City

Once a sleepy, little fishing village, this seaside city has grown not only in numbers – reaching almost 79,000 in 2024 – it has also become a cultural and travel hub. The recent additions in terms of infrastructure, beautification, and cultural developments have given it added momentum.

Distinct on the Costa del Sol, Estepona has retained a strong sense of its original identity. It feels less modern in its look and pace, more traditional Andalusian, and less touched by the intensity of tourism in other places.

Much of the credit for its success and enduring culture, must go to the strong local leadership. They have been forward thinking and bold. That has included overseeing major refurbishments in the commercial heart of the city.

Amongst these are the pedestrianisation of significant areas of the old town and waterfront. The city also created a Poetry Walk and a Murals Walk to beautify the downtown with local art. That project has grown to over 60 large murals on building facades.

There have also been important cultural additions, such as the Mirador del Carmen Arts and Cultural Centre and the forthcoming Starlite Music World. The latter will be a 15,000-person auditorium and year-round venue. It has been declared a project of strategic interest by the Junta de Andalucia and will include an investment of €286 million.

The hard work put in to develop a beautiful and sustainable city led to Estepona receiving a 2023 award as the 2nd best city in all of Europe by the Academy of Urbanism.

Beautification, Luxury Hotels, Gourmet Cuisine

Within the Old Town of Estepona, the beautification has been spectacular. Over 130 streets have been pedestrianized, totalling 18 km. Potted flowers and trees are visible everywhere, highlighting the traditional Andalusian look and feel.

In recent years, the entire waterfront area has been pedestrianized, giving people direct access to the beaches. And this process continues with two more revitalization and pedestrianization projects that are underway.

The smaller project has remodelled Calle Terraza, a commercial street in the Old Town which covers 8,668 m2. In addition to making it safer, cleaner and more pedestrian friendly, there are more plants and the addition of public lighting and shade awnings.

The larger project will transform San Lorenzo Blvd, into a massive 22,000 m2 pedestrian space. This will connect the area to the old town, completing the transformation of the downtown. It will also add more parking for the low price of €1/day.

These projects have not just made life better and more beautiful for locals and tourists. It has helped to attract hundreds of millions of euros in development money. Beyond the spectacular cultural attractions mentioned above, there are also a raft of new hotels and restaurants.

To name just a few that have opened recently, or are set to open in the near future, there are the Mett Hotel & Beach Resort, Hotel Plaza Ortiz, The Old Town Boutique Hotel, Hotel Silken Maravilla Palace, and a $40 million luxury hotel project headed up by Unicorn Royal Emirates.

Globalia Group has proposed two new projects in Estepona valued at €780 million, including a 1,400-room hotel. The rapid growth of the high quality hotel sector in Estepona has also been recognized by Ikos Andalusia resort winning the TripAdvisor Award for Best Luxury Hotel in Spain.

It was also announced at the recent International Tourism Trade Fair in Madrid (FITUR) that Croma HM Hoteles would open two new hotels in the centre of Estepona. At the same FITUR conference, Estepona mayor José María García Urbano, announced two summer festivals in Estepona, Boombastic Music Festival in July and the World Ham Competition in August.

There have also been developments in food. It was once a truism that you needed to go to Marbella or Benahavís for gourmet food offerings. That is no longer the case. Estepona has its own Michelin recognized restaurant – El Palangre Seafood Restaurant – which achieved Bib Gourmand distinction in 2019.

In 2024 Estepona completely renovated the Mercado de Abastos, formerly a local market built in 1949. It is now being managed by Hazel Gormley-Leahy and Robin Hall, a Michelin-starred chef. Hall will head up the market’s five new restaurants, encompassing 280 seats, as executive chef.

2025 is also set to see the opening of the luxury beach club and Greek/Mediterranean gourmet restaurant Eva Estepona.

Every day seems to welcome new announcements and new openings. There is a real sense in Estepona of cultural, economic and artistic ferment. It is a city that has both come into its own. But it is also still a place of growing opportunities and expanding value, compared to some of the more established markets on the Costa del Sol.

Natural Beauty, Great Weather, Spectacular Beaches

Besides the commitment to beauty and sustainability in the city, Estepona is also blessed with beautiful surroundings and great weather. There are 17 beaches in front of the city, stretching over 21 kilometers.

The largest of Estepona’s beaches is Playa de la Rada, which is 2.6 kilometres in length. It is a beautiful, clean Blue Flag beach, which has showers, lifeguards and beach bars.

In addition, the weather is spectacular with 325 sunny days per year. Summers aren’t too hot, at 25-30 degrees Celsius. Winters are sunny and mild at 13-17C. November is the wettest month but there’s almost no days without at least some sunshine.

These elements have come together with broader forces to create a growing synergy that is driving a strong real estate market in Estepona.

A growing market emerging from Marbella’s shadow

When people in the past have thought about the Costa del Sol real estate and tourism markets, they have typically thought of Marbella. It is the jewel in the crown, after all, and has had decades of international fame and glamour to build this reputation.

More and More, Estepona is finding its own place as a high quality, luxury destination. That is especially true as the city has been so distinctively revitalized in recent years.

At Terra Meridiana we have been real estate agents based in the Old Town for over 20 years. We have witnessed the transformation firsthand, through both personal experience and the accumulation of sales data. This is a market we know intimately.

Sales data

Looking back to the end of the post-2007 crisis, the sales figures tell a clear story. For instance, in the below graph using data from the Spanish government’s Ministry of Development.

What is visible with both Marbella and Estepona is steady growth. These are both established markets with a growing reputation for quality. However, while that is true, it is also true that Estepona closing the gap with Marbella in sales numbers.

This is especially true because while both cities had a post-COVID bounce – up and then down – Estepona finished 2024 on a strong upswing. Marbella still faced volatility and downward momentum.

The picture is similar with population growth. Marbella has grown by just over 50% since the year 2000, from 106,000 people to 159,000. Estepona has grown by a much larger 86%, from 42,000 to more than 78,000.

Taken together it suggests that Estepona is a more dynamic market with more upside growth potential over the coming years. That conclusion appears to be reflected as well in the prices of properties per square metre in the two cities.

Both cities are doing very well, with stably growing prices based on demand and shortages. However, Estepona is growing at a slightly faster rate, from a lower base. That means that Estepona remains more affordable but is increasing in price a fraction more rapidly than Marbella.

According to real estate portal indomio.es, in Estepona as of December 2024, the average price for a residential property was €4,017 per square meter. That represented a year-over-year growth of a sizable 16.54%.

Indomio.es has pegged the average asking price in Marbella in December 2024 at €5,568, with a year-over-year increase of 16.12%. If we look at Indomio’s charts (Marbella on the left, Estepona on the right), we can see that they are very similar.

Dramatic rental price rises

In a pattern similar to the housing price market, Estepona’s rental market has also seen growing price increases. In fact, these have been more dramatic than home prices, which is good news for property investors.

According to Indomio, Rental prices per square metre were €9.50 in 2021, at the lowest price trough during the pandemic. Today, they have skyrocketed to €16.99, which is an almost 80% increase in less than four years.

In part that reflects the fact that landlords of short-term, vacation rentals had to turn to long-term rentals to fill their apartments during Covid lockdowns. This sudden increase in housing supply had a depressing effect on market prices. That pattern ended immediately afterwards as landlords turned again to tourist rentals.

However, if we go back as recently as 2018, the price was €5.80 per square metre. The prices for long term rentals have thus risen almost 3x in seven years. Between December and January 2024, prices rose by 9.75%. That is obviously far above the general rate of inflation.

For those who want to rent long-term, this is obviously a negative. It reflects a lack of housing construction, which is constricting the market. It is behind the significant protests across Spain demanding more housing and restrictions on vacation rentals.

For those who want to purchase an income property, it represents a significant opportunity. However, given the rate of increase over the last seven years, potential buyers shouldn’t assume that this trend of dramatic annual increases will continue unabated.

Vacation Rentals

Many people prefer to rent on a short-term basis to vacationers, not only because it can be more lucrative. It is also a way to cover the costs of owning a second, vacation home while you’re not using it.

This is something that has become controversial in Spain, with protests and a growth in regulations. It’s important to be aware of this changed climate towards vacation rentals as there is the possibility that more restrictions will be applied in the future. That is especially true if you purchase in an urbanization that has a community organization, for instance.

The community organization can vote to decide that commercial activities are forbidden within the urbanization. That may not immediately apply to your property, if you already have a license. But it may mean that you can’t re-sell it as a vacation-rental income property. That could have an impact on the resale price.

With that proviso, vacation rentals in Estepona can be quite lucrative. According to Airbtics, as of 2023, there were 3,678 active Airbnb listings in Estepona. These would be largely concentrated near the beach and in surrounding vacation urbanizations.

The average daily rate for Estepona vacation rentals, according to this research, was €145 with a 61% occupancy rate (or 223 nights booked per year). That translated into an average of €31k per year, netting owners a decent profit even while paying downa mortgage and thus accumulating equity.

It’s important to state that these are average numbers. It includes both very cheap Airbnb apartments and those luxury homes and beachfront condos that fetch hundreds of euros per night. Before purchasing an income property, it’s important to research the neighbourhood and, if possible, the home you’re considering purchasing. Having a knowledgeable and trustworthy real estate agent is key to this.

Demography

Contributing to the strong market is Estepona’s significant population growth. It grew the second fastest of any city in Spain in 2022, after Torrevieja, adding 4.6% that year. It grew by around the same number in 2023 as well.

And that growth is largely from foreigners. According to a report in Sur, 81 percent of the growth recorded was from people with a foreign nationality. Estepona now has a foreign population of approximately 27%, according to the same report. That is slightly less than Marbella, which is almost 30%.

All these statistics suggest that there is something of a rebalancing taking place with a relative shift towards Estepona. That also bodes well for the strength of the market in the city over the coming years.

Marbella is shifting more fully towards high-net-worth individuals purchasing large estates and luxury properties. Estepona is capturing a greater share of those with the disposable income to purchase a second or investment property but looking for something lower key than Marbella’s high-rolling lifestyle.

Interest Rates & Economic Climate

Between 2022 and 2024 there were a series of significant increases in the interest rate internationally. This was a response to inflation arising from economic dislocation during the Covid crisis. In Spain, by the end of May 2024, interest rates had hit 4.5%. That was the highest that they had been since 2001, when they were 4.75%.

In some parts of Europe this had a significant negative impact on the housing market. However, because of the particularities of the Spanish market, especially in the Costa del Sol, the impact was negligible. The market continued to boom, and prices rose.

Since May of 2024 interest rates have come down, reflecting the taming of inflation and the need to focus on restoring the European economy. In the heart of Europe, Germany, there is either recession or stagnation. However, in Spain, the economy is growing with surprising strength, reaching 2.8% in 2024. Tourism, which has an outsized effect on sales and prices in the Costa del Sol, grew by a whopping 6%.

As of the end of January, the benchmark interest rate in Spain has been lowered several times to 2.9%. It is expected that the European Central Bank (ECB) will lower interest rates by 0.25% at each of the four meetings that it will hold in the first half of 2025. That will mean an interest rate of less than 2%.

Given overall market conditions in Spain, both the housing market and the economy more generally, we can expect that this will increase housing demand and prices. This is especially true given that it is still cheap by European standards.

Compare Estepona’s €4,000/sq metre to London’s €17,500/sq metre, Paris’s €15,000/sq metre or even Berlin’s relatively affordable €5,500/sq metre. To most Europeans, it seems like a bargain – and a bargain that can generate returns in the form of short-term vacation rentals.

Now, the interest rate seems likely to reach an effective rate of zero, where the interest rate matches or is below the inflation rate. Expect more money to come to the Costa del Sol and thus price rises to continue for some time.

There will also be growth in the construction sector, because of interest rate declines. The Caixa Bank study, linked to above, predicts that construction will grow at a rate of 3.3%, 1% above their predicted, overall growth rate for the Spanish economy.

Along with the interest rate reductions, there have been reforms in the planning law regimes of Andalusia. Combined, these could have an additive impact in the Costa del Sol region on new developments. This would be welcome news, given the long term problem of lack of housing starts throughout Spain, including in Andalusia.

New and Luxury Developments

As noted above, Estepona has seen substantial infrastructure investment that has improved the quality of life in the city as well as its beauty. There are also notable developments happening in housing construction that are worth noting.

Two projects in particular come to mind. There is the Tyrian branded development of elevated villas. As well, there is another branded development led by Palya Invest, which is headed by Spanish tennis star Rafael Nadal.

Tyrian is a luxury residential project located on beachfront property. It has already laid the foundations and will include 40 homes in a four-storey luxury building. It will have services akin to a five-star hotel for residents. Homes in Tyrian start at €3.4 million and even before officially going on sale, they had sold 40% of units off-plan.

The Palya Invest project is slated for construction in the beachfront, Los Llanos neighbourhood of Estepona. They will also include 40 luxury homes, though they will be a mix of apartments and villas. The development will span 36 hectares and is part of two projects – the other being in Marbella – that will inject $200 million into the local economy. It is expected to reach completion by 2027.

In the past, showcase luxury projects such as these would have been located in Marbella. They are a symbol that Estepona’s time has come as a luxury destination for vacationers, second homes and even primary residences.

The evidence suggests that in the coming years, Estepona will see continued growth as well as elevation up the value chain. It is becoming a luxury brand, like Marbella, but with its own distinctive character. Given market trends, it is still a bargain but will shift towards more exclusive pricing. That makes Estepona an excellent investment for the future, with stability and clear value growth.

By Adam Neale | Opinion | April 7th, 2025

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