Balearic Islands mid-term second home market report

  • 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

Report prepared by local estate agents

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 it was a
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 local agent Daniel Chavarria Waschke; “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”.

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