The cycle has turned in Ibiza: Upmarket holiday-home prices have risen by up to 10pc in the last year and a half say local agents.

A report from the estate agents Engel & Völkers, an international franchise with offices on the island, and corroborated by my favourite agents in Ibiza Ouwehand & Wall, reveals that prices for prime holiday-homes in Ibiza have started rising for the first time since the economic crisis struck.

Rising prices are being driven by rising demand for homes in the €1 million plus bracket, as Ibiza consolidates as a unique international destination for the jet-set, argues the report.

International buyers are back in force hunting the most sought-after prime-properties in the best locations. Contemporary properties with minimalist designs and sea-views or superb country settings are selling the best, typically within 6-9 months (down from 2 years) and with prices up 10pc since the start of 2010.

Most buyers are international, 40pc of them British, with no need of financing. The percentage of Spanish buyers in Ibiza is declining, reflecting Spain’s gruesome economic crisis.

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The gardens, pools, and paddle tennis courts are all finished, Block ‘D’ has been delivered, Block ‘C’ is finished and waiting for final paperwork before delivery, and Block ‘B’ is just having the final touches done. It should all be wrapped up by the end of the year.

You can still buy one of these fabulous apartments for between €230,000 and €250,000 plus tax, though if you want one of the incredible penthouses you’ll have to fork out €399,000 plus tax.

Stylish, top-quality, sea-front apartments in Ibiza at these prices? If you know anything about the value of property in Ibiza, you will recognise a deal when you see one.

A reminder of the key benefits of Cala Tarida

• Just a minute’s walk to one of Ibiza’s finest, family beaches
• West facing, with amazing sea views towards breathtaking sunsets
• Genuinely high quality design and build
• Irresistible prices and financing terms (up to 80%)
• Excellent value for money

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Inside the Ses Salines natural park at dusk, looking towards Ibiza

World famous party island Ibiza has been demolishing illegal properties with alacrity recently. The other day the island’s authorities demolished a minor-music celeb’s multi-million Euro villa, now they have turned their attention to 14 beach huts mainly used to store boat. They were all knocked down earlier this month.

The huts were built decades ago on the beach in the Ses Salines natural park of Ibiza and Formentera, one of the few coastal parts of Spain that has not yet been blighted by mindless development. They were built without any planning permission on the beach of Es Codola, and in Spain all beaches are public property, so they also fell foul of Spain’s ley de costas, or coastal law.

The huts are reported to have been built with dangerous materials that needed special treatment for disposal, which is the excuse given by the coastal department to explain why it has taken decades to get around to demolishing them.

Demolition work begins on lavish Ibizan villa

The Spanish authorities have set about demolishing another foreign-owned home built with consent from the local town hall, this time in Ibiza. As you might expect from an island world-famous for party glamour, the doomed house has a multi-million Euro price tag and belongs to a music celeb.

The property, a 3,000 square meter Moroccan-style mansion that took 9 years to build, and is reported to have contained a state-of-the-art recording studio, was built and owned by Michael Cretu, a Rumanian-born French pop musician and producer, best known as the creator of the Enigma project and a producer of some of Mike Oldfield’s songs.

Tearing down the property, located in the Ibizan municipality of Sant Antoni, in the North West of the island, is expected to take 3 weeks and cost around 350,000 Euros. The authorities have had to ship in specialist demolition machinery to do the job, which began last week.

The Spanish press reports that Cretu started building his lavish villa without planning permission, which was only later issued by San Antonio’s town hall. He then built a house bigger than authorised, by which time local green activist groups were pushing the authorities to take action against the property

After years of legal action the Spanish supreme court ruled, in 2003, that the property was illegally built in an area of maximum environmental protection with an illegal building licence, and should be demolished. Even a special law introduced specifically to help Cretu keep his property, passed by a former Balearic Government (run by a corruption-scandal plagued Popular Party administration), was not enough to prevent the demolition order.

6 years have passed since the Supreme Court ruling, and the town hall of San Antonio has been fined twice for failing to enforce the demolition order.

Now that demolition work has finally begun on the property, local greens are celebrating a bitter-sweet victory . “They were warned about the illegality,” local Green activist Neus Prats told the Spanish press. “It’s a victory we would like not to celebrate, but it’s historic because it was a brutality. There is no more impunity.”

Cretu’s lawyer has suggested that the property was only demolished because his client was a foreigner and a celebrity. Some local residents told the Spanish press they deplored the cost and demolition of a mansion.

In response to the demolition, Cretu is now seeking damages of 18 million Euros.

• High end market (over € 1million plus) remains buoyant
• Fewer sales but higher value
• Lower end market slow and reduced demand for apartments
• Correct pricing is now key to faster sales
• Market shift – now German buyers dominate over British (3 to 1)
• Ibiza residential market also stable – demand outstrips supply

Mallorca Second Home Property Market

On Mallorca as a result of the worldwide global recession, the strong
Euro, the Spanish banks’ strict demands on non resident buyers and a
downturn in the British home market, the last six months has registered
a slow down in the lower end of the second home residential market in
certain areas of the island.

These areas have been traditionally popular with the British market and
have a high concentration of apartments such as, for example, Santa
Ponsa (south west), with price reductions from the original selling price
of at least 10% at the lower end of the market (under € 1 million).

In Palma the market is slower for apartment sales under € 500,000
where buyers traditionally bought with a mortgage. However, recently,
as vendors have adjusted prices to a more realistic level with current
market conditions, a new “breed” of cash buyer has entered the market
and is taking advantage of some good opportunities particularly for buy
to let investors as the rental market is strong and growing. The market
here is still very active as Palma attracts buyers from all over Europe
and is not dependent on one nationality for sales. Germans and Scandinavians
are particularly interested in the city at present.

In the South West region (from Palma to Puerto Andratx) the situation
remains stable with even a slight increase in sales over 2007 these sales
are based on fewer buyers and higher values. The average sale value in
this region is currently just under a million euros with the highest average
of € 2 million in the exclusive Son Vida residential area on the outskirts
of Palma to the lower average sale of € 500,000 in Santa Ponsa. The
construction of new apartments has now stopped in this region of the
island and it is therefore anticipated that demand will revive within the
next couple of years.

Inland (along the Tramuntana mountain range) there is increased demand
for well located fincas with land as buyers are looking for traditional
Mediterranean ambience and privacy. In these areas some correctly
priced properties have sold literally within weeks of coming onto
the market.

In the north of the island around Pollensa, where traditionally the most
expensive properties on the island tend to be located, the average sale
is currently just over € 1 million. However, this area also has a high supply
of holiday home apartments, which have been popular with British
buyers. Although this end of the market is slower than in previous years
there are still some canny British cash buyers around that are in a strong
position to get a good buy.

In the North East, sales turnover has increased and they are having their
best year ever. The completion of the new faster highway from Palma
to Manacor has opened up this region and brought new higher spending
clients, who are mainly looking for villas and larger properties and
there is hardly any interest in apartments. As a result the average sale
of property has increased by around 30%. Currently, German clients are
dominating the market with British accounting for approximately 10%
of sales.

Along the East and South East coast the Engel & Völkers office is experiencing
a better year than 2007. Although the number of sales remains
around the same as this time last year each sale is of a higher value.

There is more demand for property of over € 1.5 million – € 4 million. This
year there are less British clients but they have been replaced by more
German speaking clients from Germany, Austria and Switzerland.

Banks have not assisted the lower end market and will now only lend
a maximum of 50% to non resident buyers. Furthermore, they will not
grant mortgages on plots of land or new build promotions. The picture
was very different two years ago when foreign buyers could obtain mortgages
of up to 100%.

To date, German buyers account for 50% of the market and British buyers
now account for around 20%. However, those British buyers who
are coming tend to be the biggest spenders.

Ibiza Second Home Property Market

On Ibiza sales figures remain similar to 2007. Here the demand for top
quality property in prime locations outweighs supply and the market is
very international with important British buyers accounting for currently
for 35% of the overall market. The cosmopolitan appeal of Ibiza is a key
factor combined with the fact that hardly any investors buy with a mortgage
means that the island is not impacted by the global recession.

Here there has also been some price adjustment around 10-15% at the
lower end of the market (under € 1 million) and the north of Ibiza still
provides good value and has potential for market growth.

Says Daniel Chavarria Waschke, Managing Director for Engel & Völkers
South West, speaking on behalf of Engel & Völkers in the Balearics; “One
of the great strengths of the islands is their international appeal which
means that when one market decreases, another takes its place.

Although the market has slowed down at the lower end our sales figures
indicate that the market remains stable. Furthermore, most price
adjustments of around 10-15% have been made mainly at lower end
but this is more an indication of vendors’ over inflated expectations.
All our vendors will make money on their properties and at the higher
end for top quality, prime location, prices have even increased”.

Mallorca, July 2008

Go to Engel & Völkers website