Mallorca has become established as one of the most chic locations to own a quality holiday home in The Mediterranean. The island is only a two hour flight away from key cities in Europe with hundreds of direct flights into Palma’s International Airport year round. It has a cosmopolitan atmosphere, providing high standards of living at all levels for housing, schools, health, culture, sports and entertainment. These factors, combined with its excellent climate (averaging 300 sunshine days per year), offer a real paradise in the midst of The Mediterranean where the main buyers are German, British and Spanish. In 2006, the island received approximately 9 million visitors making it one of the most successful destinations in the Mediterranean.

Report prepared by local estate agents

In the past 15 years this most elegant Mediterranean city has really come into its own and is now being heralded as the “new Barcelona”. Against the backdrop of the city’s rich history and ancient old town, it offers a huge range of restaurants, cafes, bars, nightlife, entertainment, shopping, boutique hotels, art galleries and museums. In the past 10 years millions of euros have been spent on the restoration of the facades around the old town and the result is a vibrant, beautiful city with plenty to offer the visitor all year round. Palma is easy to get around and everything is within walking distance.

Ideal for Europe’s commuters…

Palma International Airport has become one of the most popular routes for low cost airlines. This easy access has been a key factor in its booming real estate business together with the proximity of the airport to the city centre. Clients in Palma are looking for a sophisticated but relaxed environment to live and will often “commute” to the island for weekends. The majority of property available in Palma is made up of apartments and the most popular are attics or penthouses. Clients want character buildings with original features, high ceilings, large windows etc… Converted “palacios” are particularly in demand.

Going up…

Prices range from approximately €250,000 to €600,000 for a 1 or 2 bedroom flat. Palma’s attraction is reflected in the steady price increases which have increased by an average of approximately 100% in the last five years. In 2006 prices have increased by a further 13-18% and the indicators are that prices will achieve Madrid or Barcelona price levels in three to four years.

The Buyer

The main buyers are British, which account for approximately 30% of the market and make up over 26% of the sales, followed by Spanish, German and Scandinavian clients. The most requested areas are Palma old town, the market area of Santa Catalina, which has now converted into a great area for restaurants, and the harbour area of Portixol. This area extends to the neighbouring areas of El Molinar and Cuidad Jardin. Recently a smart new promenade has been constructed so that people can walk or cycle right along the seafront featuring a variety of restaurants and cafes.

Rental Market

In Palma, rental yields have increased considerably alongside property values and this is probably one of the most successful areas on the island for “buy to let” investments as the rental market is year round in Palma. Over approximately 22% of local agents’ existing clients in this area have bought specifically to let. Demand is mainly for apartments and town houses where owners can expect a rental yield of approximately €2,800 per month for a town house and €1,600 per month for an apartment.

Tips for Investors in 2007

According to local agents, the areas around the Paseo Maritimo, Terreno, Santa Catalina and the old gypsy quarter of Sa Gerreria still have potential for the new investor. Investing in historical developments and buildings with original character also pays dividends and are much in demand.

In the last five years Palma outskirts have developed and extended alongside the new motorway system and in particular the main motorway of the “Via Cintura”, which circumnavigates Palma’s city centre. These areas include the bordering areas of Son Vida, Son Rapinya, La Vileta and the country villages of Puigpunyent, Esporles and Establiments, all of which are approximately 15 minutes drive away from Palma’s city centre.

Last year the population of Mallorca went over a million. The majority of inhabitants are concentrated around Palma.

Excellent Access

Here, the buyer has easy access to all the main highways of the island, the beaches, the airport, the city centre of Palma, main services such as hospitals, clinics and schools. Many areas will have sea views of the Bay of Palma or of the mountains in the villages.

The market is focused on villas, chalets, country house estates and plots of land. There is a huge price range from the exclusive mansions of Son Vida its golf courses and top international hotels, to a small town house in a country village such as Puigpunyent.

Ideal for Families

The average client spend demonstrates that there is a switch from holiday home investments to first home investments for families who want to enjoy the Mediterranean lifestyle.

Son Vida Property

Son Vida is synonymous with luxury property for the most discerning clientele. The area is regarded as one of the most exclusive on the island with the emphasis on security. The average price range can be from €700,000 for a 2 bedroom apartment to €5 million for 6 bedroom luxury villa with sea views/views across the golf course. Over the past 12 months the prices for houses have increased by 10%.

Palma Outskirts Property

Average prices range from approximately €390,000 for a 2 bed apartment to over €1 million for a country house. Local agents price increases of 7% in the past 12 months in these areas highlighting new road developments as a major factor improving access to neighbouring villages.

The Buyer

The average client spend €2 – €5 million for a villa and for a country house it can be anything bet ween €900,000 to 4 million. The average townhouse sells for around €500,000. Apartments are around the €750,000 mark and plots can range from €500,000 to 1 million.

The main buyers are Spanish 25%, German 20% and British 20%. In these areas the Germans tend to be the big buyers and account for just over 41% of total sales.

Tips for Investors in 2007

Even though Son Vida appears at the top of the market scale it is still worth investing here because of the sheer capital growth of property, which has increased up to 150% in the last 5 years. The Valldemossa road provides better access to villages such as Esporles, which could be a very interesting area for investors.

Mallorca’s popular south west region is still highly fashionable and blessed with a mini eco climate, which means excellent weather all year round even in winter when the Traumuntana Mountains protects the area from northerly winds.

This region extends throughout the municipality of Calvia with its six resorts down to Puerto Andratx where many rich and famous have magnificent villas. The region’s importance is reflected in the millions of euros, which has been spent by the local and national government in recent years to improve the road infrastructure to create fast access to Palma. These improvements have just been completed and will most certainly further impact prices in the region.

The Buyer

The main buyers in this area are British (approximately 40%), German (approximately 39%) and Spanish (approximately 20%) followed by the Scandinavians and the emerging Russian/ eastern European market.

Due to the success of low cost airlines into Palma the average time an owner spends in their property has increased by approximately 30% representing 3-4 months a year. Many owners now regularly commute for long weekends. This trend is reflected in the wish list of the potential buyer who is now demanding central heating as a standard feature. In addition, to the latest date security systems or gated communities for “lock up and leave” properties. This factor has extended the season of the established tourist resorts effectively creating new life in these areas.

Property Values

Prices have increased in the past 5 years, so has the average spend, which is now running at approximately €750,000 euros. The bigger spenders tend to be the Germans who spend an average of just under a million euros.

The majority of demand is focused on apartments and villas with prices over last year running at an average of 10-15% and in some cases as high as 20%, particularly for plots of land, which have recently been in great demand.

Rental Market

Approximately 10-15% of all clients will rent their properties and they can expect good rental yields in this area year round which can average from €10-25 euros per sq metre, per month, depending on the property and the facilities.

Demand is high for good quality property and it is imperative that any rental property is of a high quality with heating and air conditioning and includes features such as a swimming pool. However, longer lets are favoured as there is still a great deal of controversy over short lets and the legal implications with the local government.

Central Palma Property Prices

TYPE	BEDS	M2	AV. PRICE €	PRICE INCREASE 2001 – 2005	PRICE INCREASE 2006	€ AV. MONTH RENT HIGH	€ AV. MONTH RENT LOW
Apartment with views	2	100	500,000	100%	18%	1,600	1,200
Apartment no views	2	100	400,000	90%	16.5%	1,200	1,000
Townhouse	3	180	1,750,000	75%	13.5%	2,800	2,300

Palma Outskirts Property Prices

TYPE	BEDS	M2	AV. PRICE €	PRICE INCREASE 2001 – 2005	PRICE INCREASE 2006	€ AV. MONTH RENT HIGH	€ AV. MONTH RENT LOW
Villa with views	4	350	1,100,000	50%	7%	4,200	3,150
Villa no views	4	350	800,000	40%	7%	3,850	2,450
Apartment with views	2	100	450,000	50%	7%	1,100	700
Apartment no views	2	100	390,000	35%	7%	1,000	600
Country house	3	350	1,100,000	150%	7%	3,850	2,300
Townhouse	3	180	600,000	100%	20%	1,980	1,260
Plot price €/m2	–	–	250	50%	5%	–	–

Son Vida Property Prices

TYPE	BEDS	M2	AV. PRICE €	PRICE INCREASE 2001 – 2005	PRICE INCREASE 2006	€ AV. MONTH RENT HIGH	€ AV. MONTH RENT LOW
Villa with views	4	350	2,500,000	60%	10%	9,100	5,000
Villa no views	4	350	1,900,000	50%	10%	4,900	3,500
Apartment with views	2	100	850,000	60%	10%	2,000	1,600
Apartment no views	2	100	700,000	60%	10%	1,500	1,000
Country house	3	350	–	–	–	–	–
Townhouse	3	180	–	–	–	–	–
Plot price €/m2	–	–	425	120%	20%	–	–

This report was written by local estate agents.