We know by now that the Marbella property market has been in strong recovery since 2012. We also know that many homebuyers and investors were drawn back into the market by attractive prices that in some cases were 50% lower than at their peak in 2007, that the average price correction was nearer 30% and that properties in the most sought-after locations never really lost value and have begun to increase in price again. Indeed, Marbella has a buoyant, upbeat feel about it again, with business beginning to look brisk on the back of a thriving tourist sector and strongly recovering real estate industry. The rise in demand has been such that any distressed or repossessed properties have long since been absorbed, and the construction of new projects has slowly begun again. The latter, driven by clear signals from the buying public, is focused on modern styles, amenities and technology, creating a new architectural vibe in the area. But how are external factors affecting this region and how is its property market likely to develop in the near future? External factors In a market still largely dependent on foreign cash buyers the gradual recovery of the European economies has played an important role, with a broader than ever client base reducing a previous dependence on top-of-the-market Russian buyers. However, where European and other buyers are snapping up good cash buys on the Costa del Sol and the Balearic Islands, Spain’s ‘Golden Visa’ scheme has so far failed to attract large numbers of homebuyers and investors from countries outside the EU. The stampede of Russian, Chinese and other buyers has so far not materialised, with numbers falling far behind those of similar schemes in Portugal and Malta, yet this doesn’t seem to have affected the Marbella property market much. Here the power of the local lifestyle, the quality and pricing of the properties and the glamorous appeal of the setting are enough to drive a revitalised demand that is growing top-down. Having depended largely on the top end of the luxury market during the height of the recession, the buying public has now widened to include the middle to higher segments, yet most continue to be cash buyers. The ultimate sign of recovery will come when banks start to lend in larger quantities again, yet while such activity has been increasing it is still too strongly linked to the Spanish national economy and the state of the banking system to return to normality overnight. This will be a gradual process in which the first test is the new round of stress tests announced by the European Central Bank (ECB) this spring. The tests, whose results will be published in November, are the final prelude to the European Banking Union, under whose provisions Spain’s banks too will fall under ECB supervision. The new tests aim to assess the ability of financial institutions to withstand a highly unlikely coming together of catastrophic events that would effectively result in a substantial run on the banks. Essentially the purpose of the exercise is to ensure that Europe’s banks have the level of capital resources to bring stability back to the system. Only once this sense of normality has been re-established will banks begin lending again – something the ECB is very keen for them to do. For Marbella it all means that a full-scale resumption of business as usual is still some time off, but the strength of cash buyers, the gradual resumption of mortgages, low ECB interest rates and the strength of the pound vis-á-vis the euro, are enough for now to propel the region to economic recovery and growth.