Mallorca Property Market Overview 2010
The property market in Mallorca has certainly been affected by the global downturn but you cannot lump the Balearics together with the rest of Spain, in particular the mainland costas, where over development has led to a vast surplus of new build apartments leading to a dramatic fall in prices.
Unlike the mainland coastal regions, Mallorca has attracted very few speculative investors and still remains what has come to be known as a lifestyle choice destination. It’s a sophisticated and easy place to live permanently. Foreign residents account for 21.7% of its 855,000 registered population, the highest percentage in Spain whose average stands at 12%. This doesn’t include the influx of foreigners who spend three to six months here in second homes, conservatively estimated at 60,000. The Balearic Islands have the third fastest growing population in Spain.
It has taken time for vendors to adjust prices in Mallorca. Predominantly a second home market, a property might easily have taken up to twelve months to shift in the boom times, with vendors not pressed to sell and buyers not pressed to buy. These waiting times have increased, even doubled inland, adding more properties to the rental pool. A number of vendors resorted to setting up lotteries this year, running foul of the Spanish gaming commission, and those who sold sufficient tickets eventually organised their draw in Austria. An enterprising company set up the first public auction in May where only 9 properties sold out of 20, and a second auction scheduled for July was cancelled through lack of interest.
By the end of 2009, official statistics showed apartment sales had reduced by 36% compared to the same period last year, with prices down by as much as 20% in some cases. However, this includes new build apartments in Palma suburbs and inland townships which are generally of no interest to the overseas buyer because they have little or no views and no facilities. Communities with gardens and community pool have fared better. Palma city apartments and quality, seaview apartments in sought after locations in the south west may have been reduced by 15%, which will spark buyer interest.
Prices for fincas and villas inland have readjusted downwards by 15-20%. Diligent buyers who do their research and watch the market carefully are able to seal some excellent deals though this is not the norm. A five bedroom villa in Bunyola, originally asking €1.65m, dropped almost 40% to €1m and sold immediately. Currently for sale in the same area, is a superb, rustic property with 15,000 sq metres of land, which had been asking €3.95m in April 2009. Its price has now been reduced 30% to €2.75m. Inland areas, where the supply of large country homes is limited, eg. rural south west and the south east corner, may not see such large price falls.
The top end of the market which seemed resilient to change has eventually succumbed. There are always buyers for first rate properties in first rate positions. A new, modern-rustic villa of excellent build quality with exquisite views in Cala Marmacen (Puerto Andratx) sold recently for over €8m having received several offers from interested parties. There are other vendors asking high figures on the coast, but in a buyer’s market, they cannot expect to sell on location alone. In general, frontline properties with unrestricted seaviews, and better still with sea access, are still sought after but the price must reflect the condition of the property itself.
Before the economic downturn, the numbers of overseas buyers in Mallorca had been split virtually 50-50 between the British and Germans. By mid 2009, with apartment sales reduced by 30% compared to the previous year, German buyers accounted for 65% whilst the weak pound contributed to keep British buyers at 20%, with the rest spread amongst other nationalities, notably Swiss, Spanish and Scandinavian.
Balanced supply and demand
Many buyers coming to Mallorca in search of a seaview property are surprised not be overwhelmed by choice. After all, with an area of 1,416 sq miles, the island is more than twice the size of Greater London, with its 32 boroughs, and boasts 345 miles of coastline.
However, only 21% of this has urban classification. The rest of its perimeter comprises land designated as rustica (where building regulations require a minimum plot size of 15,000 square metres and upwards), national parks, protected areas of outstanding natural beauty and a few strategic military zones.
The best, front line plots were taken in the 70s and 80s in the wake of the tourist boom. A vast number of them were used for apartments designed by Pedro Otzoup, whose distinctive, whitewashed Moorish-Mediterranean complexes pepper the whole of the south west coastline.
Now, good plots for construction of apartments have all but disappeared in the south west, forcing developers onto smaller, steeper sites where build costs are passed on to the buyer, or to different areas of the island where infrastructure will take time to establish to attract sales. In those urbanisations where you can still build, there is little or no provision for granting of construction licences for apartments.
Tightening of planning laws
As elsewhere in Spain, Mallorca’s local planning departments have come under close scrutiny and authorities are getting tougher by adhering to the letter of the law rather than imposition of fines. In 2008, six illegal buildings were demolished (more than the previous 13 years put together) but in 2009, eight have already gone and 70 cases of properties built without a legal licence are under investigation. In Puerto Andratx, where the mayor, Eugenio Hidalgo, is currently serving a prison sentence for granting construction licences on protected land, there are demolition orders on several buildings, including 24 new, luxury apartments in Carrer Tonya (Cala Llamp) and an apartment block in Avenida Gabriel Roca which was constructed on land designated as a public car park.
Pressure from local resident associations and environmental groups such as Grup Balear d´Ornitologia i Defensa de la Naturalesa has also forced councils to get to grips with eyesores which have been tolerated for years due to complicated legal issues, including the shell of an apartment block on the skyline in Puerto Andratx above the 80s Montamar community and Ses Covetes, 68 abandoned concrete boxes off Es Trenc beach in Campos.
In some coastal urbanisations, such as Cala Blanca and Montport III in Andratx (SW), Muleta (Puerto Soller) and Cala Carbo (Pollensa) the area has simply been re-zoned as protected and development no longer allowed. In some cases, a degree of infrastructure had already been in place, resulting in costly compensation claims. In Son Vida (NW Palma) and ten urbanisations in Puerto Andratx including Montport, granting of construction licences has ceased while councils sort out the mess of failing, basic infrastructure and who is responsible for its replacement and funding.
Investment in infrastructure
Mallorca’s construction sector benefited from “Plan E” at the beginning of 2009, central government’s pledge of €33 billion in order to boost the economy and create jobs. More than 600 building projects were financed, of which 90 were in Palma, from road and cycle path resurfacing to modernising schools and creating access for the disabled to public buildings.
Continuing improvements to the island’s transport systems greatly adds to its appeal. There are now 574 vehicles per 1000 inhabitants. The motorway network is already widespread and in 2009, a further €25 million were invested in widening country roads, notably the stretches Montuiri-St Joan and Porreres-Llucmajor. Work has begun on a third lane to the Palma ring road from Valldemossa to Genova. In Palma, there are 756 vehicles for every 1000 inhabitants and the Via Cintura carries 80,000-120,000 vehicles daily.
Plans are now underway to extend the existing rail links from Sa Pobla in the north to Pollensa and Alcudia, and from Manacor via Son Carrio and Son Servera to Arta in the north east. A steam locomotive running out of Manacor on the original rail track was replaced in 1964 by a diesel locomotive and finally went out of service in 1977. At a cost of €108m, 35 km of track will now be replaced and the service reinstated. €4.3m of €6m made available as compensation to property owners has already been paid out and six train-trams ordered from Vossloh in Valencia. The trains hold between 242 and 347 passengers and can travel at 100 km per hour. Work is due to start at the beginning of 2010.
Palma
Only ten minutes from the airport, Palma is a stylish, intimate city with interesting architecture and a medieval quarter. 19.5% of its 396,570 official residents are non Spanish and of these, 28,271 are from the EU. Finding your way around is easy and public transport is cheap and reliable. It’s also a very clean city. An underground vacuum system whisks away biodegradable rubbish, planning schemes have created more green zones and more and more vehicles have to park underground – the latest carparks guide you to vacant spaces with green lights. Palma city council introduced further designated cycle lanes in 2009, bringing the total to 30 km in and around the city. It also introduced a bicycle lending scheme operating from the Parc de Mar and plans to set up a network of cycle hire points across the capital in the second half of 2010.
In May, the €63m underground bus station opened in Plaza Espana. Two levels down, it occupies an area of 14,000 sq metres with space for 29 stops supplying 25 island routes. Detailed plans were made available of phase II of the tram service (one level underground), which will run every 15 minutes from Plaza Espana along the seafront to the airport as the “Aeropuerto servicio Express”, stopping at Portixol, Coll de’n Rabassa and Can Pastilla. Work on the 10.8km line should begin in summer 2011 and the service should be running by May 2013.
Palma was the first city in the country to have its traffic light system working off an electricity saving scheme. Since June 2009, 10,000 lights throughout the municipality have been functioning off new technology which renders them more visible at night, triggers lower amounts of CO2 emissions and could save up to €200,000 annually. The new, natural gas pipeline which originates in Denia on mainland Spain and stretches 271 km on the seabed came ashore in Mallorca near Ciudad Jardin this autumn. It will deliver gas to homes in Palma and Marratxi (north of the city) by the end of the year and expansion of the gas network continues with lines planned to Alcudia and Manacor in the near future. The power supply company Endesa has been awarded a two year contract to supply natural gas to twelve of Palma’s bus fleet, reducing CO2 contamination and noise levels.
This year, Es Jonquet (just south of Santa Catalina) with its windmills and former fishermen’s cottages was declared an area of protected cultural and historical heritage. In the old city, renovation programmes are still in evidence, with facadism often favoured (a compromise between demolishing and rebuilding, retaining the front elevation) sometimes incorporating the typical Mallorquin, glazed “winter balcony”. Palma Council has enlisted the support of six professional guilds to help the city’s buildings pass the new Technical Building Inspection (ITE), introduced in January. All listed buildings and those built prior to 1900 are affected, a total of 2,475 buildings. It is offering 95% reimbursement of the licence fee if repair work needs to be carried out to comply with the new law.
Work on the 2nd phase of the restoration of Palma’s old city walls will begin next year at a cost of some €3.5m and is estimated to take 18 months. It will include installation of ramps and stairways allowing public access to a unique historic area of 125,000 sq metres. The old renaissance wall where Avenida Gabriel Roca joins the main Paseo Maritimo, will also be cleaned and restored.
Across from Portixol harbour, work on Palma’s 125 million Euro congress centre continues though financing issues have pushed back the completion schedule. It will provide a central auditorium, several conference halls with a capacity of 2,400 delegates, a café and hanging gardens overlooking the bay of Palma. Alongside this will be a 9 storey, five star hotel. The winning design, awarded to Spanish architect, Francisco Mangado, resembles a gigantic fish on the shore, with laminated glass panels like shimmering scales.
A current ban on the construction of commercial centres and department stores will come to an end in 2010, paving the way for construction to exceed 1,300 sq metres in Palma. The sector will be free to grow. However, trading outlets like Festival Park will no longer be permitted on rural land.
In order to stimulate the economy, a government initiative authorised Palma city centre shops and businesses to remain open until midnight once a week during the peak summer months of July through September. The highly successful “Thursday Night Fever” campaign also allowed art galleries and museums to participate and even Palma cathedral remained open for visitors. Local traders’ associations are strongly in favour of late night opening until 2200 Monday to Saturday throughout the summer of 2010.
Prices for apartments in the city reached an all time high in 2008, approaching equivalent price per square metre to Madrid. They have been steadily adjusting downwards and levelled off, with average sale time increasing from around nine months to one year. You can now find one bedroom apartments from €185,000 to €255,000 and two bedoom apartments with outside space from €375,000. Traditional features (terracotta tiling/wooden beams/Santanyi stone window surrounds) and good views can bump up the price to €500,000 whilst apartments in palacios with Mallorquin courtyards or seaviews will be considerably more. One of the most popular areas is Calatrava, a historical area of labyrinthine streets surrounding the cathedral, though only 5% of residents have access to a parking space. Also in demand are La Lonja, formerly part of the harbourside scene, and the area surrounding Santa Catalina market with its café culture and bistros. Prices in Portixol, the waterfront on the eastern fringe of the city, have remained relatively stable due to lack of supply of property. A three bedroom, renovated fisherman’s cottage with a garage and 270 degree views over the harbour recently sold for a figure in excess of €1.75m. Further along the coast, you can now find two bedroom apartments 50 metres from the beach in Ciudad Jardin and Coll den Rabassa for €450,000 upwards, with a €100,000 premium for seaviews.
South West
The southwest corner of Mallorca has the most developed infrastructure, with the best golf courses, marinas and international schools. Its year round life and proximity to Palma city makes it a popular area. The municipality of Calvia has a resident population of 50,777, 29% of whom are foreigners from other EU countries, predominantly UK, Germany, Italy, France and Bulgaria. In order to stimulate the construction industry, the council announced recently that building licences issued before 1st October 2009 (normally valid 12-18 months) would be automatically extended up to 24 months.
Seaview apartments now begin around €350,000 though these will be in older blocks. The majority of apartments in prestigious communities, ie. close to the golf courses in Bendinat or Santa Ponsa, and around marinas such as Port Adriano or Puerto Portals, will cost €450,000 upwards.
Work has begun on a new electricity substation in Santa Ponsa which will take a 237 km underwater power cable from mainland Spain (Morvedre power station in Valencia). The 375 million Euro project is the first of its kind in Spain. The new link will act as a back-up in case of power outages and also cut carbon emissions by 1.2 tons annually. Also in Santa Ponsa, permission has been granted for a new Guardia Civil police station at the Son Bugadelles industrial estate which will incorporate offices as well as an accommodation block on the 3,700 sq metre plot.
The municipality of Andratx has sent out demands for payment to cover the €44m costs of replacing and renewing the entire infrastructure of ten urbanisations which were never legally recognised by the council when they were built as far back as the 1970s. It is planned to install mains water and drainage, underground electricity and telephone lines, resurface roads, create pavements and erect street lighting. The bills affect around 2,500 residents and are based on the maximum area of construction permitted on each plot. Work is scheduled to begin in February by Acciona, and once completed, the council will be able to organise rubbish collection services. In the meantime, owners are faced with sums amounting to €16,000 – €25,000 on average, payable in four installments over the next two years and in order to ensure payment, charges have been entered in the registry against all properties concerned.
The Ministry of the Interior has given the go ahead for Mallorca’s casino in Calvia to move to the Porto Pi centre in Palma. The existing cinema complex, which was the first of its kind on the island, will be refurbished, together with adjacent premises of 3,000 sq metres, providing gaming rooms, restaurant and live entertainment facilities. Opening is scheduled for autumn 2010. The Balearic Business Federation has welcomed the news with enthusiasm as not only should its location bring more custom from the city but the management company will be increasing jobs by 26%.
North West Tramuntana
This is Mallorca’s most dramatic region, dominated by a chain of craggy, limestone mountains, stretching from Andratx to Pollensa. Impressive peaks rising to 1,500 m and plunging sea cliffs are intercepted by sheltered valleys of olive or citrus groves and picturesque villages. Renovated, stone townhouses with a small garden or roof terrace can be bought for €350,000 upwards. There’s a reasonable choice of character properties around €550,000-€750,000, the majority of which are clustered together, either back to back or semi detached. Detached fincas with their own pool are more difficult to find and cost up to €1m and considerably more. Deia property appears to be falling ever more into the hands of non Spanish residents, now accounting for over 41%.
The Tramuntana region has already been submitted to UNESCO’s World Heritage List though acceptance will not be known before February 2011. This year, the government paid €11m for its fourth large estate, the 445 hectare Finca Planicia in Banyalbufar. It has now opened to the public, enabling hikers to follow dry stone wall routes along the coast. Further funds will be needed to open a museum and restore old buildings which will eventually become hikers’ hostels.
Jumeirah, the Dubai-based group famous for creating the world’s first seven-star hotel, the sail-shaped Burj Al Arab, is planning its debut European resort property in Puerto Soller. They are confident that the unique characteristics of the hotel, perched on the clifftop, will be embraced by discerning travellers and by the time it opens in just over a year from now, the current economic cycle should have eased.
North
The journey from Palma to Pollensa takes only 25 minutes. Pollensa’s Club Nautico is planning an extension to its installations which will include lengthening the breakwater to accommodate 43 new moorings. The plan also includes the creation of 20 deep-water moorings for super yachts.
The coal fired power station in Alcudia, with its twin chimneys, is one of the most important examples of industrial architecture in the Balearics, inaugerated by General Franco in 1957. As coal shipments arrived by sea, its site is frontline to the bay. Abandoned for more than ten years, it was slowly falling into decay. A project is now underway to clean and reconstruct part of the station as a working museum, library and auditorium.
Alcudia has been somewhat maligned as “the Magalluf of the north” in the past, but although it still has a small, contained core of eateries and bars aimed at mass tourism, it’s far more restrained and anyone who explores properly will be surprised at what the area has to offer in terms of facilities as well as seaview properties. The walled town of Alcudia has gone upmarket and has some first class restaurants. There’s an attractive marina, clean beaches and all manner of watersports The residential areas of Mal Pas and Bonaire are peaceful corners on the Aucanada peninsula with sunset views over the bay of Pollensa towards the Tramuntana hills. Traditionally favoured by wealthy spaniards, there are some quality villas for sale from €1m upwards. A superb property with a constructed area of 570 sq metres and land of 2,000 sq metres, is currently on the market asking €2.2m which represents excellent value in comparison to the south west of the island.
The new passenger terminal in Alcudia port is scheduled to be fully operational at the beginning of 2010. The building was completed in September and is now just waiting for power supply company GESA to link it up to the electricity network. At a cost of some €13m, the project involved remodelling the western docks, reclaiming 25,000 sq metres from the sea and construction of elevated walkways. It will be able to serve up to 300,000 passengers a year and four vessels simultaneously. It currently acts as a base for maritime connections between Palma, Barcelona and Menorca. Plans to extend the rail network from Sa Pobla to Alcudia have come under fire by local residents who are challenging the proposed route, parallel to the Inca-Alcudia road. An alternative route has been suggested, passing alongside the S’Albufera nature reserve.
Alcudia town council will also be the first in Mallorca to provide a recycled water system for irrigation and use in hotel toilets. Hoteliers will now be able to cut their costs by 30-50%, prompting a price war between the existing private water companies Acasa and Fusosa.
Despite protests by environmental groups, it seems the Son Bosc golf course will go ahead at Muro. The area already has a championship course in Son Servera, where the Open of the PGA European Tour will be held in May 2010.
The north east of the island around Arta is not well known amongst UK buyers yet is only 55 minutes from Palma on excellent roads. As you leave Manacor northwards, the C715 runs through picturesque orchards and pastureland. There are four golf courses in the vicinity and some of the region’s most secluded beaches are close to hand north of Cala Ratjada. The town is surrounded by the ancient hunting grounds of Mallorcan royalty, with the peaks of the northern Serra de Llevant mountains as a backdrop.
The regional Environment ministry teamed up with German tour operator TUI in a reforestation project to plant 60,000 trees in the hillside territory Ses Bolos in Arta. By 2012, a 126km hiking trail will have been completed between Arta and Lluc, linking the Llevant mountains with the Tramuntana range on the NW coast.
Inland
Mallorca has become a popular training and competition venue for both amateur and professional cyclists, which brings in revenue in the shoulder months. 90,000 cyclists were attracted to the island this year which has over 300 km of signposted cycling routes as well as tracks for mountain biking. Dedicated hotels are now offering cycle hire information, zones dedicated to cleaning, repair and maintenance of equipment, medical and massage services and special food packages for cyclists. The 5th Mallorca Classic Car Rally in March is becoming increasingly popular and this year the BBC TV programme “Top Gear” filmed their well known trio participating in the rally.
Property in the centre of the island is taking longer to shift and for anyone prepared to live half an hour from the coast in quiet, rural communities, there have been some good price reductions. A finca in Sencelles asking €5.5m has now been reduced to €3.95m. Traditional, renovated village properties can now be found asking €300,000 upwards, whilst detached fincas with pool and views are asking €500,000 and more, depending on exact location.
Coastal Areas – environmental awareness
Mallorca relies heavily on the tourist industry and its service sector accounts for almost half of the island’s businesses. Nevertheless, environmental awareness has been top of the agenda this year, alongside its promotion of quality tourism.
In July, responsibility for maintenance of the Cabrera archipelago was officially handed over by central government in Madrid to the Balearic government. Cabrera lies just south of Mallorca, off Colonia St Jordi and comprises 18 islands with a total area of 18.36 sq km. It was declared a national park in 1991 and its surrounding waters are a marine reserve. Funds are now available for improvements to the visitor centre in Colonia.
The Balearic government recently confirmed that it intends to officially request Central government to approve a 50,000 sq km reserve 70 km south of Mallorca in order to protect the endangered blue fin tuna breeding grounds. Over fishing, in particular to supply the Asian market, is bringing the tuna close to becoming an endangered species.
Over the next two years, it is planned to spend €18m on coastal protection, maintaining sand dunes and introducing wooden decked pathways. The island has 554 km of coastline and over 60 beaches with access for the disabled. In 2010 it will be awarded 41 Blue Flags and a further 17 for its ports and marinas. 34 boats patrol Balearic waters throughout the peak season keeping the waters free of non biodegradable rubbish. This summer over 200,000 recyclable, cardboard ashtrays were distributed on the beaches and laws were introduced to phase out plastic bags in the major supermarket chains.
A study by the Ministry for the Environment in Madrid in November 2007 reported 730 infringements against the coastal regulations in Mallorca. The majority involved pools, carparks or hotels fallen into disrepair or ruin. Investigations began into the position, size and licences of Mallorca’s 107 beach kiosks or chiringuitos. This summer, it was announced that only two were due to be torn down. Furthermore, licence renewals previously granted for six years will now be granted for fifteen years.
The massive regeneration project at Playa de Palma (the coastal area SE of the city) is slowly moving forward. It will be overseen by West8, a Dutch company of 75 architects which was responsible for remodelling the waterfront in Toronto as well as city parks on Governer’s Island, New York. The project involves demolishing old hotels and injecting life into 6 kilometres of seafront between Arenal and C’an Pastilla and has to take into account the wetlands of Ses Fontanelles behind the beachfront which will now be protected. Funds for the initial phase of the project have been received and firm plans have been promised for May 2010.
In Colonia St Jordi on the south coast, a UK company specialising in sports training camps has invested €2.5m in a 50 metre, 10 lane Olympic pool for off season training. The company organised the training schedule for the British Olympic Swimming Team in Mallorca before the Bejing Olympics and hopes it will train potential swimming stars for the 2012 London Olympics.
In Porto Colom, work begins in 2010 on the new 4.5 km promenade.
The yachting industry
Mallorca is the main superyacht hub of the western Mediterranean, providing yacht servicing companies and a skilled workforce in the shipyards to repair and refit throughout the year. The summer of 2009 saw countless megayachts cruising Mallorca’s waters, from the 92 metre “Tatoosh” owned by Microsoft co-founder, Paul Allen, to the 119 metre “A” owned by Andrei Melnichenko and reminiscent of a luxury submarine.
The island now has 16,000 berths in 32 harbours. Eight of these were expanded in 2009 (CV Puerto Andratx, Cala Gamba, S’Estanyol, Colonia de Sant Jordi, Porto Colom, Cala Bona, CN Cala Ratjada, and Puerto Soller), providing up to 4,500 more berths. In Porto Colom, moorings were increased from from 52 to 130.
In Port Adriano, an €80m expansion project by Ocibar (a local company controlled by Banca March and the Zaforteza family) is well underway on the new breakwater quay which will provide 33 more berths. Superyachts will be able to berth by May 2010. 40% of the berths available for sale as long-term concessions until 2037 have been taken up by European owners.
The second phase, towards the end of 2010, will see the commercial area up and running. The marina will be able to accommodate 82 more 20-60 metre berths in total and there will be 472 new parking spaces. An underground car park for 260 cars will be operational in 2011. The designer Phillipe Starck is leading the team in the design of the service areas and shoreside facilities which will encompass 4,000 sq metres. He has even had a hand in designing the bollards.
Permission for the project took several years, as the company had to satisfy Brussels, as well as Madrid and Palma, that it was complying with environmental regulations and not destroying any underwater meadows of the protected Posidonia seagrass which are key to the stability of the island’s sandy shorelines. Another move to protect the Posidonia grass, was the introduction of nine “eco mooring” areas in the summer of 2009, including Cala Blava, Sant Elm, Porto Petro and Punta Avancada off Pollensa. They provided 400 swinging moorings which were used by 15,000 yachts.
The Balearic Island Ports Authority (APB) confirmed in November that the old port of Palma (Muelle Viejo) just off La Llonja is to be converted into a business and leisure centre, as well as providing berths for large yachts and pleasure boats. It was used this year for the first time by 18 large sailing yachts taking part in the Superyacht Cup, a prestigious regatta traditionally held in Antigua, providing glamorous, sponsor driven entertainment.
The cruiseship industry
In 2008, Palma ranked as the 10th busiest homeport in the world with 1,131,000 cruise passengers, surpassing Southampton, New York and Singapore. In August, central government gave the green light to a €23m project to extend Palma’s West Quay by 430 metres to enable two cruise ships of up to 380 metres long and 30 metres wide to dock at the same time on the same quay.
The cruise industry is a dynamic source of economic activity and the UK is the largest source market for cruise passengers in Europe with 1,477,000 residents taking cruises during 2008, representing 33.3% of the total European market of just over 4.4 million, a 10.5% increase over the previous year. It was also the third largest market in terms of cruise industry direct spending with €2.3 billion, a 13% increase over 2007.
The European Cruise Council remains cautiously optimistic that 10% growth year on year is still sustainable though to some degree the cruise market is driven by new ships. Over the four-year period from 2009 to 2012, 38 cruise vessels are scheduled for delivery for worldwide trading of which 18 ships with 38,900 berths (46%) are primarily for the European source market. However, the dearth of new orders over the last year means that the forward orderbook now stretches for less than four years. This trend, if continued, will have consequences both for the supply industries and for the ability of the industry to satisfy future growth in demand and can only be reversed by banks’ willingness to free up financing.
Outlook for 2010
Although the travel industry expressed concern for significant losses to the Mallorca tourist industry at the beginning of 2009, recent figures show much better performance than expected with 9% less visitors, and Palma airport remained the third busiest airport in Spain.
It would seem the region has fared better than others in “la crisis” though the Balearic government is aware that although people will continue to escape to the sun irrespective of global financial outlook, it still has to look for innovative campaigns for 2010. It has even employed world famous tennis player Rafael Nadal, who was born in Manacor and lives on the island, to promote sports tourism.
Together with IBATUR, the Balearic Island Institute for Tourism, it is also financing Mallorca’s first International Film Festival due to be held annually from April 2011, between the Cannes and San Sebastian International Film Festivals. Headed by top Spanish film director, David Carreras, it aims to to attract major commercial sector sponsors from the world of tourism and entertainment.
The Balearics will play a key role in Spain’s Presidency of the European Union by hosting 13 major summits in 2010, the most important being the European Defence summit in February. Mallorca is a competitive business destination, with established convention and congress centres. The British held over 400 conferences here last year.
As investment in the island is slowly gathering pace, whether the property market has bottomed out remains to be seen. The decline in prices seems to be generally slowing and there are reports of the first green shoots of recovery in the ailing economy. As we enter a new decade, there’s genuine, long term optimism for the Mallorca market.
Selling in 2010
If you genuinely wish to sell, make sure your asking price is realistic. Published prices are no indication of real transactions. Confirm with several reputable agencies what is actually happening in today’s market. You might consider what you are prepared to accept and allowing for selling expenses, set a fixed price in Euros. That way you will not waste your time or anyone else’s time.
Ask yourself how long you are prepared to wait. Unless the price is realistic, you may wait 18 to 24 months and there are no indications that the market will rise again. The lower end of the market (up to €500,000) may not pick up until the latter end of 2010.
It’s no longer the case that location alone will command top prices as discerning buyers will have researched and compared properties carefully and are looking for value. They will still pay for a quality house in a fabulous location, but considerably less now for a tired house in the same spot.
Don’t expect to sell your property in 2010 at a price you set in 2008.
Buying in 2010
Buyers should continue to have the upper hand throughout 2010 for property in most locations.
Sterling exchange rate forecasts indicate a positive though gradual change ahead for British buyers. Finding a British vendor returning to UK may help negotiations while sterling remains relatively weak. In the meantime, other nationalities are stepping in to reap the benefits of a buyer’s market, especially for prime property. Buyers with generous budgets should be looking to buy before proposed tax changes take effect in July 2010, of some significance if buying land as I.V.A. (VAT) is set to rise by 2%.
Cash purchasers will have a distinct advantage and more negotiating power. If you intend to arrange finance, do your homework first and be completely prepared because in today’s market you have to move forward quickly. A seller may step away from the sale if the legalities take too long and they think they are selling too cheaply.
Buyers in Mallorca are mainly lifestyle purchasers. Short flight times within Europe enable them to maximise the use of any property and many consider it their “home from home”. Property in Mallorca is not cheap but it’s undeniably cheaper than it used to be, and as a medium to long term investment you get an excellent package – an outdoor lifestyle, a safe, family friendly culture, superlative healthcare and sophisticated leisure choices. These factors influenced the Financial Times report that placed Mallorca 5th this year on a list of the world’s top 10 real estate investment locations.
