Mallorca Property Market 2019
The property market in Mallorca continued to recover strongly throughout 2015, fuelled by a favourable exchange rate which saw Sterling hit a seven year high against the Euro after the Central European Bank announced stimulus measures at the beginning of the year. By the spring, a home in Mallorca was 15% cheaper for British buyers. At the same time, The Sunday Times declared Palma as overall winner of the best city in the world to live, a commuter destination which has it all – accessibility, infrastructure, gastronomy & the beach. Little wonder then, that whilst the domestic market is still dragging its feet, the overseas market has been turned on its head.
Ten years ago, foreign buyers accounted for 8.97% of all property sales in Spain. Today, that figure has risen to 13.10%. However, in the Balearics 32.63% of all property purchases last year were made by foreigners, the highest percentage in the whole of Spain. Just under 19% of our resident population of 1,124,744 are foreigners.
Analysing the state of the Mallorca market from official statistics is not easy. There are numerous bodies providing data, such as the General Council of Notaries, the National Institute of Statistics & the property registries. However, they tend to publish figures for the Balearic Islands as a whole, incorporating Mallorca, Menorca, Ibiza & Formentera. The valuation company TINSA even incorporates data for the Balearics together with the spanish Canary islands. Quarterly reports may be misleading due to the time delay between completions & their entry into the appropriate registry. There are other organisations representing constructors, independent analysts such as CBRE & Fitch Ratings as well as reports from individual estate agencies.
According to the Council of Notaries, sales across the Balearics reached 10,368 by the end of the third trimester, an increase of 19% over the same period the previous year. In Palma, sales had increased by as much as 26% in that period, to 4,685 transactions.
Notary figures indicate that 80% of foreigners are cash buyers but banks are clearly lending with mortgages approved up to 60-70% LTV for non residents though some institutions prefer property in urban rather than rustic zones. In all cases, applicants’ details & existing financial commitments will be looked at carefully. 12 month Euribor is at an all time low, having dropped from 0.323% in January 2015 to 0.058% in January 2016.
Property prices in Spain in coastal regions & islands finally began to rise in the early part of 2015 with the National Institute of Statistics (I.N.E.) showing an increase of 8.4%in Mallorca in the third trimester.
Demand for property in prime coastal areas such as Puerto Andratx is now exceeding supply. You will pay €2.5m there for a detached, sea view villa & those in the best positions need renovation. Apartments are available but there are virtually no plots left for developers to create new communities. Similarly, Palma city has seen a surge of interest & there’s a lack of good apartments in the old town. A “blueprint” two bedroom apartment with original, character features & its own terrace will cost upwards of 450,000 Euros.
Nationality of purchasers in Mallorca
The British accounted for 16.72% of all foreign property purchases in Spain in 2014. Buyers from France accounted for 10.72%, Russian 7.47%, Germany 7.34%, Belgium 6.9%, Sweden 5.97%, Italy 4.73%, Norway 3.98% & China 3.67% with the remainder spread over different nationalities. 32.63% of buyers in the Balearics were foreigners, the highest proportion in Spain whose national average is 13.01%. 34.56% were German, 19.40% British, 7.02% Scandinavian, 5.64% French, 5.05% Italian, 2.79% Swiss, 1.84% Russian, 1.61% Belgian, 1.51% Dutch & 1.31% Austrian. Annual figures for 2015 have not yet been released but figures for the first nine months indicate that 39.5% of all purchases in the Balearcis were made by foreigners. In 2016 we expect to see a larger percentage of British buyers, especially since the Sterling exchange rate is so favourable.
Spain’s controversial golden visa scheme launched in October 2013 was expected to encourage greater numbers of buyers from non EU countries but had a poor response with only 134 permits issued in the first year, one third to Chinese buyers. The law was changed in 2015 so that applicants buying a property of 500,000 Euros without a mortgage can now bring partners & family. They can also apply for jobs & take advantage of the Spanish health system. However, Chinese buyers are still restricted by currency export limits & the Rouble has dropped dramatically against the Euro so the Russian market has collapsed.
Supply and demand – What buyers want
Buyers coming to Mallorca are often looking for that all important sea view. After all, it’s an island. With an area of 1,416 sq miles, it’s more than twice the size of Greater London, with its 32 boroughs.
However, only 21% of its 345 mile coastline has urban classification. The greatest part of this is devoted to commercial activity – hotels, restaurants, shops, council facilities such as car parks, harbours & marinas. The rest of its perimeter comprises rustica zoned land (where building regulations require a minimum plot size of 15,000 sq metres and upwards), national parks, ANEI (protected areas of outstanding natural beauty) and a few strategic military zones. Understanding the geography of the coastline will help you grasp the relatively restricted supply.
The best front line plots were taken as far back as the 1970s in the wake of the tourist boom. Many of them were granted licences for apartments, a good example being those surrounding Puerto Portals on the southwest coast. Eleven blocks were all constructed between 1970 and 1985 with the last plot taken by the Voramar complex in 1994. A great number of distinctive, whitewashed Moorish-Mediterranean complexes designed by Pedro Otzoup also sprang up during the 1980s. They pepper the entire southwest coastline, notably in Paguera, Camp de Mar & Puerto Andratx.
Today, plots for construction of apartments have all but disappeared in the south west, forcing developers onto smaller, steeper sites where the higher build costs are passed on to the buyer, or to enclosed sites with no views or to different areas of the island with poor infrastructure. Long standing developers now scout for older buildings or brownfield sites in good locations where they can demolish or rebuild.
Detached properties with unrestricted sea views are still highly sought after, especially contemporary style, light filled buildings. Traditional, stone faced buildings or Karig inspired architecture, albeit with modern facilities such as under floor heating, are less in demand.
A survey by a local chain of estate agents in 2015 gave an average premium of 40% across the island for sea views. There are only a small number of properties available with access to the water & again, if you look at the geography of the coastline you will see why. The north west Tramuntana mountain range, with its prevailing winds, renders sea access almost impossible. The relatively shallow bay of Pollensa in the north is surrounded predominantly by commercial enterprise whilst residential areas south east of Palma lie on high, flat topped cliffs.
Mallorca planning & law
On 14 July 2014 the new land law 2/2014 (ley de ordenación y el uso del suelo) came into force allowing owners of rural properties to legalise buildings or parts of buildings which were built without planning permission. They were given a three year amnesty in which to rectify discrepancies & would pay a percentage of the costs involved as a fine, ranging from 15% in the first year to 25% in the third year, in the hope of encouraging early response. In 2015, 1,479 applications were received.
The Ministry of Tourism received 10,250 applications for tourist licences when it introduced new laws governing tourist rentals in 2012. At the end of 2014, only half had been processed. If you offer your house for touristic rental with the provision of services, you must apply for this licence & charge 10% IVA. It is only granted for detached & semi detached properties, not apartments. Otherwise, you can offer your property for “short term ordinary rental” without a licence & without services of any kind but caution is advised as to the wording & placing of ads online. Contract wording must compy with the Spanish Tenancy Act, so you should seek specialist advice. Furthermore, apartment owners must check the community statutes. Fines for unlicenced touristic rentals can be very high. Ministry of Tourism inspectors visited 55 properties in 2013 but this rose to 417 in 2014. They check online sites & can arrive on your doorstep without prior warning. This is a very hot topic which is constantly in the local press, with pressure added by the larger hotel chains. Recent reports indicate that in 2016, the Ministry of Tourism will allow rental of private apartments though how the recently introduced “tourist tax” due from May 2016 can be collected & paid is the subject of debate. Airbnb has already offered to collect the tax on owners’ behalf.
The revised laws on Communities of Property Owners now means new buyers of a property can be held liable for three years of backdated debts by the seller, instead of one year.
Important changes were made in November 2015 regarding exchange of information between the property registries & cadaster, upon which your local rates are calculated. They will now access each others’ data.
Construction & new developments in Mallorca
Figures from the College of Technical Architects reveal a significant upturn in the construction industry in Mallorca. The number of new builds in the first nine months of 2015 (1,557) surpassed the entire year’s figure for 2014 (845) by 84%. The boom years for construction in Mallorca were between 2005 & 2008 when over 70,000 people were employed in the building industry – compared with 35,800 today. When the market crashed in 2008, new builds dropped by 62% & continued to drop year on year to the point in 2011 when the island’s only concrete production plant, Cemex, was producing 50% less than before the recession & exporting its production to north Africa. Be aware that figures for new builds incorporate apartment communities aimed at the domestic market or properties in areas which have no infrastructure (& never likely to have in the future) so they are of little interest to the overseas market. The best plots were taken around 40-50 years ago therefore buyers looking for AAA views in prime or front line locations may have to consider older, resale properties for renovation or, as is increasingly the case, demolition.
Matthias Kuhn continues to claim €100m compensation from Soller council relating to his planned construction of 33 luxury villas on the 37,000 square metre site of Sa Muleta, near the lighthouse in Puerto Soller. Acquired in 1999, the site which was destined as an urbanisation, was subsequently changed to rustic zone in 2008 but Kuhn appealed & was granted permission to build by the Spanish Supreme Court in 2014.
The shopping & leisure centre project “Palma Springs” proposed at Ses Fontanelles (in Playa de Palma behind the Palma Aquarium) was finally granted a licence in August 2014 after years of wrangling with environmental groups over the preservation of 130,000 hectares of wetlands & the preservation of the Limonium Barceloi plant. The 88,000 square metre centre was to incorporate a 13 screen cinema & represented an investment of over €230m by the French company Unibail-Rodamco. Construction is still delayed due to licensing objections.
In Coll d’en Rabassa, the French group Carrefour Property have invested €190m in expanding their 110,000 square metre site by another 60,000 square metres. The “S’Estada” site, just minutes from the airport, will be their largest project in Europe, adding 120 more commercial units. The British clothes giant Primark has already signed up, as well as H & M, C & A, Cortefiel, Pedro del Hierro, Women’s Secret & Springfield. It is on course to open in July 2016.
International brands now seem to be fighting for the best locations in the Borne in Palma, where commercial rents reach €15,000 – €30,000 per month. The fifteenth century building “Can Puig” was bought by a group of British investors & the retail space is currently occupied by Zara as well as H & M. German investors bought a listed building in Plaza Espana in Palma & invested €11m to create a Muller superstore which opened in December 2015.
There has been strong interest in the hotel market. The Capuccino group will construct its first hotel in Plaza Cort in Palma. A listed facade has been standing for over two years whilst 17th century cisterns have been preserved in the basement. On the Borne, the well known Bar Bosch which has been operating since 1973, is to be converted into a boutique hotel with a restaurant on the first floor overlooking Jaime III.
Hyatt’s first hotel in Mallorca, the five star Park Hyatt in Canyamel (Capdepera) is due to open in spring 2016. Private investors from Qatar gave €100m towards the project though it is reported costs have escalated to the €250m mark. The current plan incorporates a spa, ballroom, restaurant, tapas bar, bodega, country club & additional villas on the 50,000 square metre site whose architecture is inspired by Valldemossa, one of Mallorca’s mountain villages.
The face of Magalluf is changing dramatically. The Sol Melia group has invested €150m to incorporate condo conversion & refurbishment of seven of its hotels off the sea front in Magalluf, remodelling the entire resort with a new boulevard, conference centre & pools with artificial waves. Cursach Hotels converted the Mallorca Rocks Complex into BH Mallorca at a cost of €15m. The Fergus Hotel Group are upgrading their hotels & the Viva Hotels Group are spending €144m on a new holiday complex. With this brave level of investment, the entire resort is being rebranded.
20% of the hotel projects registered with the Tourism Ministry in 2015 were in Playa de Palma, the coastal area SE of the city. Iberostar, Hipotels, MAC Hotels, Riu & Inversiones Llaut groups are investing a total of €317m in projects stretching into 2017.
Virgin Limited Edition has bought back the Son Bunyola Estate in Banyalbufar on the north west coast for €15m. Sir Richard Branson sold the estate 13 years ago after being refused permission to build a luxury hotel. The 1,600 hectare property has a distinctive manor house overlooking 5 km of coastline. There are also three individual country houses, Sa Punta, Sa Terra Rotja (which the Virgin Group still owns) & Son Balagueret, all of which will be renovated for the 2016 season.
The cruiseship industry
CLIA (Cruise Lines International Association) Europe stated in its 2015 report that European shipyards are under contract to build 29 cruise ships for delivery up to 2018, 10 of which will primarily serve the European source market. This represents an investment of €5.2 billion.
A 2015 study by the Balearic Ports Authority in collaboration with the University has concluded that the cruise industry is worth an estimated €289.66m annually to the Balearic Islands. Palma ranks as the 4th busiest port in the Mediterranean. In 2015 it handled 1,731,582 passengers, a 29.5% increase over 2014 & 573 cruise ships, 20.6% more than 2014. The 360 metre West Quay, an investment of €40m, makes it possible for five ships to dock at the same time. “Quantum of the Seas” (347 metres) & the largest cruise ship in the world, “Allure of the Seas” (364 metres with a passenger capacity of 5,400) both visited Palma in 2015. Royal Caribbean has already announced that Allure’s sister ship “Harmony of the Seas” will appear in Palma in 2016.
Trends in tourism are of significant interest to the property industry since the great majority of overseas buyers initially spend time here on holiday. The number of foreign visitors to Spain & the Balearics is continuing to rise & 2015 was another record breaking year. Tourism accounted for 15.2% of GDP in Spain whereas in the Balearic Islands it accounted for a staggering 44.8%. Tourism has therefore been a key factor in bringing about economic recovery. In Spain, tourism’s contribution to employment in 2015 stood at 15.3%, a growth of 3.5% over the previous year. In the Balearics, 31.1% of all those employed work in the tourism sector which is way above the national average of 13.5%.
In August 2015, Palma airport handled 3,775,719 passengers, an increase of 0.9% over the previous year. It was the third busiest airport in Spain. In addition, private jet traffic has been increasing steadily & exceeded 10,000 operations in 2015, more than double the figure of five years ago & surpassing other Mediterranean destinations such as Ibiza & Cannes. In 2015, Son Sant Joan airport expanded the number of private jet places from 34 to 48 & well known celebrities such as Halle Berry, Anne Hathaway & Lewis Hamilton all arrived at the private jet terminal.
Mallorca attracted 8,790,080 tourists in 2015. The top nationalities were from Germany (3,237,756), UK (1,985,210), Spain (1,042,036), Scandinavia (641,932), Netherlands (346,074), Switzerland (325,245) & France (323,823). UK travel agents reported in December 2015 that bookings for 2016 to the Balearics were up by 24% compared to the previous year, fuelled partly by the strong pound. British tourists were also favouring non Islamic countries & those destinations not affected by the influx of migrants. A survey conducted by the Air Travel Advisory Bureau in UK also found that 4 out of 5 British tourist placed safety as a prime factor when choosing a holiday destination.
The number of Russian visitors almost doubled from 80,000 in 2011 to 150,000 in 2013. A Russian newspaper appeared on the island & a number of estate agencies employed Russian speaking staff. However, a steep drop in oil prices sent the rouble tumbling against the Euro & tourism out of Russian fell by 70% according to the Russian Tourism Industry Union. This may be set to change in 2016 as Russia stopped flights to Turkey & Egypt.
Most visitors opt for beach stays & the Ministry of the Environment employs 33 rubbish collection boats which patrol coastal waters between July & September. In 2015 they collected 65,305 kilos of rubbish & plastics, more than double the previous year. Specially trained, multilingual “tourist police” patrol 21 resorts, lighting has been introduced on beaches at night & licensing laws regulate massage services & beach hawkers. A number of beaches now offer safety deposit goes, wifi coverage & wooden walkways or ramps for disabled access. East of Palma city, the Playa de Palma coastline saw some changes in 2015 with an investment of €3m to renovate beach bars & to provide additional shower facilities & new sun loungers. At the end of the year, the Tourism Minister finally gave the green light to a €450m investment in the area which will include upgrades to some 70% of the 140 hotel stock. This should lead to 10% of the stock being 5 star establishments whilst 60% will be four or four star plus.
According to the FEHM, the Balearic Islands’ Hotel Association, the winter season for 2015/2016 is the best in 10 years. 29.5% of hotels were open in January 2016 compared with only 17.4% the previous year.
Mallorca also has an extensive selection of golf, hiking, cycling & city break holidays. Specialist agencies offering cycling holidays & action packed weekends reported huge interest following the winning performance of Sir Bradley Wiggins in the Tour de France & Olympic time trials in London 2012. He regularly trains in Mallorca with the British Sky Team at their established base in Alcudia & has described the island as a “Scalextric set for cyclists”. Mallorca embraces an estimated 100,000 cyclists per year & has become the training camp home for some of the best World Tour cycling teams. The Palma velodrome is used for material & aerodynamic testing. Niche groups are also catered for, with cultural tours, spa & yoga breaks, packages incorporating cosmetic & beauty treatments, bird watching trips and sports coaching, especially sailing & tennis.
More effort is being made to promote Mallorca as a year round destination with the Palma 365 campaign to boost city breaks. Palma airport operator AENA increased landing fees during the recession forcing airlines to reduce flights throughout the winter months. This resulted in some hotels having to close at the end of the season. However, as the economic situation improves, there is hope that more routes will be introduced. The winter season of 2015/2016 has shown an increase of 15.5% more seats available on inbound flights compared with last year. SkyWork airlines is already offering a continuous service throughout the winter from Berne. Jet2 has also announced a winter flight schedule commencing February 2016 from Edinburgh, Leeds Bradford & Manchester.
Mallorca is Spain’s main yachting hub & unlike the mainland’s unprotected coastline where boats have to “marina hop”, offers countless anchorages & sheltered bays. Palma has surpassed the south of France for shipyard facilities. The decision in 2014 to exempt all charter boats over 15 metres from the hugely unpopular 12% matriculation tax resulted in charter businesses doubling their income last year & the 2015 season saw yacht charter agents doubling the number of vessels on offer.
The Balearics are maintaining their national leadership for boat registration, 708 vessels having been registered over the first eleven months of 2015, a 14.6% increase over the previous year. Private megayachts spotted in Mallorca waters in 2015 included Roman Abramovich’s “Eclipse” (162.5 metres), “Radiant” (110 metres), “Madame Gu” (99 metres), “Phoenix 2″ (90 metres), “Sunrays” (85.5 metres), “Savannah” (84 metres) & “Venus” (78 metres).
Finally, a mention of a sub group of tourists not addressed in previous reports – the gastronomes. Mallorca has a wealth of excellent restaurants catering for every taste but those aficionados of fine dining, seven were awarded Michelin stars for 2016, including “Zaranda” in the south west of the island near Capdella. The establishment gained a second star, becoming one of only two restaurants to do so in the 2016 edition in the whole of Spain & Portugal.
Buying in 2019
- 2019 will be a strong, competitive year for property purchase. The island is no longer dependent mainly on the British & German markets & other nationalities are buying. Supply of good properties is restricted, especially in the rustic zones where sellers are increasingly under pressure to rectify deeds or provide certificates to prove legality
- Choice in AAA locations such as Palma city, parts of the south west, north west coast & the north around Pollensa will be even narrower in 2019 as demands exceeds supply
- Prices bottomed out mid 2014 & have been stable ever since. Mallorca is a micro property market independent from the rest of Spain with surprising differences in price depending on exact location on the island. You will pay an average 40% premium for a sea view
- Location is key, it’s easy to fall into the trap of buying a “better” property in a secondary area with little or no infrastructure. Crucially, ask yourself who will buy your property when or if you need to sell in the future
- Building regulations are exceptionally well defined in Mallorca. However, plot availability is shrinking fast
- Banks will grant non resident mortgages providing you can supply solid evidence of ability to repay. However, the cost of taking out finance in Spain is high. Ensure you have approval in principal before embarking on any search
- Appoint a local lawyer – Balearic laws can differ from other parts of Spain
- Non EU buyers need approval from the Ministry of Defence in order to buy in rustic or protected areas so allow time to go through the formalities
- The Golden Visa scheme granting automatic residency to non EU citizens buying property of 500,000 Euros or more without finance has been further enhanced. Applicants, their partners & children can enjoy free passage throughout the EU as well as the right to seek jobs & access to the Spanish health system
- If you plan to rent out your property on a short term basis, the Balearics Tourism Act 2012 & the Spanish Tenancy Act govern the type of property & contract, whether a licence is needed & how you can legally advertise. These laws are under constant revision so check with your legal advisor before embarking on a search for a property which might yield rental return.
- Contact us today on firstname.lastname@example.org or call +34 971 233 207 for an informal chat on how we can help you buy the right property in the right place. Make a wise investment & enjoy an outdoor lifestyle, a safe, family friendly culture, superlative healthcare & sophisticated leisure choices
© Copyright Jan Westwood 2019