Mallorca holiday home market review by local agents

– Spring brings out potential buyers
– Sales double over this time last year
– Buoyant short rental market
– Prices stable – no price increases anticipated
– Some Spanish banks start lending to foreigners once more

This report was written by local estate agents.

Palma de Mallorca, May 2010.

The spring sunshine and an early Easter appear to have brought more optimism to Mallorca’s second home residential market according to local agents who report a surge of increased requests and visits over the first quarter with sales up in some areas by 100% over the same period last year.

The overall picture reflects a similar sales pattern to that of 2008 with the same amount of properties sold but values this year have been lower as many properties have discounted their original asking price and strong negotiating is often still required to close a sale.

German speaking and Scandinavian buyers dominate the market at this time. The British are on the island looking but generally are still waiting for more price reductions which are unlikely to materialise at this stage.

“Most buyers are still searching for “the bargain” says local agent Daniel Chavarria Waschke in Mallorca; …”but owners have in most cases already reduced prices and would rather sit and wait than succumb to further discounts”.

Banks have started to lend again to non residents for up to 70% of the property value and approximately half of the buyers will use the mortgage option for tax relief purposes. Demand is fo-cused on prime property, mainly villas, well located fincas and penthouses, particularly on the sea-front or with good views.

International, national and local investment continues on the island with Palma’s new hospital near completion; the Palma Congress & Exhibition Centre is due to be completed in 2011; the super yacht designer marina at Puerto Adriano will open in Spring of 2011 and the new Jumeriah Puerto Soller luxury (seven star) hotel will open in Summer 2011.

Around the island:

Palma – Old Town & Portixol

Demand is specifically orientated towards apartments, penthouses and townhouses and supply is limited. The aggressive “bargain” mentality doesn’t help general negotiations because owners will only reduce to a certain level and then no more. A well appointed two bedroom apartment with no views will fetch around 275,000€.

There is always demand for really unique, special properties with either views to the sea or over the old town and/or with outdoor space. These types of properties are not so susceptible to market changes and generally hold their value. Main buyers at present are: Scandinavian, German, Swiss and Austrian – some of them focusing on prime property of around 1-3€ million price level.

Rentals – there is a strong demand for long term rentals (minimum of 12 months) mainly because more mid level properties have come onto the rental market as owners do not wish to further reduce their price which leaves the rental option. More choice means more competition and for this reason rentals have come down in price over the last 18 months by about 10-15%. For example, a two bedroom apartment will now yield 1,200€ per month around 200€ less than in 2007.

Palma – Paseo Maritimo/outskirts
In Palma’s Paseo Maritimo area apartments, which make up the majority of the business, have re-duced in price around 15% over the past couple of years and a two bedroom apartment with sea views will command around 500,000€.

Since 2008 prices have also reduced for villas with views of around 25-30% in immediate outlaying areas such as Bonanova and Genova. The average sale period of property in this area tends to be around 9-12 months.

South West Mallorca

The first three months of this year was the best for sales in three years with good future prospects for the peak buying period of May/June – September/October when generally 50% of all sales are made for the year. Around 60% of all requests are for properties under 1 M € although the average sales price remains around 1 € million and the majority of properties sold are villas or penthouses. There are fewer British buyers than in previous years but those that are here are spending more. The market is currently dominated by German speaking clients.

Rentals-Currently, rental yield for a villa varies between 9-12 €/m2 of constructed area. For top quality properties the yield can increase up to 15€/m2 and top properties can still achieve even more. Well appointed apartments with good furnishings achieve approximately 12€/m2 and top apartments with views can yield 15€/m2. Demand for long term rentals is high and the variety of rental properties available on the market has increased over the past 12 months as more owners look to this option as opposed to selling.

North Mallorca

Easter was fully booked with viewings and lots of property requests and activity. Potential clients are mainly interested in prime properties such as villas and fincas in good locations. Currently sales levels are about the same as this time last year.

The market for smaller properties, and particularly apartments, practically disappeared at the end of 2008 but now this market sector is starting to move again. In the past three months sales of apart-ments have been made across the range from 150,000€ to 600,000€. This is very encouraging and indicates that clients now realise that the time is right to come into the market as prices in the north are currently at their lowest level in approximately five years. For example; a three bedroom apart-ment came onto the market in 2008 at 700,000€ and has just sold for 527,000€.

Throughout 2009 bargain hunters were looking around for the larger properties but at this level wealthy owners will sit and wait. However, vendors at this top end have had to be more realistic over the past 18 months. For example; a property in Bonaire went onto the market in 2008 for 6.5M € and is now on for 4.5M€.

The British tend to dominate the short rental holiday market and generally German speaking clients are looking for longer term rentals.

North East Mallorca
This is certainly one area of Mallorca where your money generally goes further. For example, the approximate square metre price for fincas in and around Arta is roughly 30 € per m² and for front-line seaside properties prices range from 500 € – 1000 € per m².

Property requests and general activity have increased over this time last year and there is more con-fidence in the market. Prices have not really reduced a great deal in this area because they never reached the highs of areas such as the south west. The market here is generally more stable and owners are less willing to negotiate.

For example; the average price for a four bedroom villa with views is around 1.7€ million and this represents a price decrease of around 10% from 2008 and well located country fincas are holding their prices with minimal price reductions to close a deal. Up and coming areas include Costa de los Piños, which has always been very popular with the Spanish “jet set” and now large, Spanish owned, family holiday homes are now coming onto the market in this area.

South East Mallorca

Once again, the picture here is similar to the north east where prices have remained relatively stable throughout the last two years. The year started well with sales of a wide range of property from 250,000€ to over 2€ million.

Currently, there is demand for countryside fincas and first line property with most sales around the 400,000-600,000 range and a few at 1 M€ and 2M€. The lower end of the market for townhouses and apartments (which are not front sea line) is still very slow.

Clients are mainly German speaking or Scandinavian. The British are still staying away.
Areas with potential include Colonia San Jordi, particularly for frontline seaside property; Porreres – especially hill top locations and Cas Concos.

West Mallorca

Sales have been slower in this area than in the rest of the island even though there is a great deal of interest from potential buyers. In the picturesque village of Deia, for example, vendors are less likely to negotiate because of the cachet associated with owning a home in one of the most desirable villages in the Mediterranean. The fact that owners are not accepting offers means that the market is stagnating here. Furthermore, many of the wealthy high profile foreign residents want to keep the sale of their property confidential.

However, in Valldemossa pricing is a little more realistic which provides more scope. Here prices range from around 500,000€ for a well presented townhouse to 4-6M€ for a finca estate with land. Main buyers are Germans, British and Scandinavians and the British are generally more willing to negotiate because of the currency exchange rate.

Along the coast to Puerto Sóller and Sóller there is a similar picture of potential clients making of-fers way below the asking price. Here the average price of a villa with views is around 2€ million and these prices have not shifted that much in the past two years unless there has been a “dis-tressed” sale. A well located 2 bedroom apartment with views can still command around 430,000€.

Says Daniel Chavarria Waschke; “It is impossible to say whether we have hit the bottom of the market. However, around the island we are expecting serious buyers over the coming months who want to invest in Mallorca this year, so the prospects look good and we are cautiously optimistic for the coming season”.



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About Mark Stücklin

Mark Stücklin is a Barcelona-based property market analyst and consultant, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008). He can be reached by email on