Friday, Aug. 7, 2020


Spring in Mallorca’s Step as 2011 Property Market Opens

Written By:


April 1, 2011


Posted In:

Certainly the most recent signs are positive. There are new capital rules for the banks. The danger of Spain following Greece and Ireland onto the eurozone blacklist has receded. A major US casino group is looking at investing on the mainland. And the property market here on Mallorca is starting to show new signs of life.

In the long term, restructuring a banking sector overburdened by bad property loans is the key. Just last month the cabinet approved a new law which forces banks to reinforce their capital by September or face partial nationalisation – a tough move aimed at improving Spain’s credibility with the sovereign bond markets.

As part of that plan, the government has also granted unlisted cajas or savings banks until March 2012 to organise stock market flotations. At the same time, the number of caja groups has been reduced from 45 to just 17 through mergers and the seizure of two faltering smaller banks by the financial authorities.

Trading on that Springtime optimism, Finance Minister, Elena Salgado, says she now believes it should cost less than €20 billion more to recapitalise Spanish lenders – on top of the €15 billion already spent.

Today Spanish banks fund just 1.5 percent of their balance sheets from European Central Bank liquidity, the lowest in two years – compared with a whopping 18 percent for Greece; a worrying 15 percent for Ireland, and a considerable 7 percent for Portugal.

Desperately in search of further good news, Ms Salgado also pointed out that the Spanish economy shrank by just 0.1 percent during 2010 – instead of by the 0.3 percent officially predicted a matter of months ago. It’s not much, but it’s something.

“Spain seemed to have grasped the seriousness of the eurozone crisis early on – and has been saying, and more importantly, doing, the right things”, accepts Gary Jenkins, head of Fixed Income at Evolution Securities. “That’s why their bond yields have been much more stable.”

So if you’re moving to Mallorca, or looking at a property investment here, your timing certainly seems – insofar as anyone can tell these days – impeccable …

Andrew Spence of the Bendinat Group is certainly among the optimists. “Spring has brought a lot of interested buyers to the island – that’s my experience and it’s been the experience of several of my colleagues in the industry as well”, he told ABC Mallorca.

“When it comes to property investment, there are certain time-honoured values that never change, such as safety, stability, quality of the environment, natural beauty, and a local government that keeps over-development in check. Luckily we have all of those here on Mallorca … they’re the basis of our success.

“The fact is that these invaluable assets are what distinguishes this island from other investment destinations, on mainland Spain and elsewhere. I firmly believe people are starting to return to those core values – and that’s what will bring them here.”

Daniel Chavarria Waschke of Engel & Volkers takes a similar view – and has consistently been of the opinion that improvements to Mallorca’s infrastructure are valuable attractions for investors. “It’s important to be able to see that international, national and local investment is continuing here – giving us undoubtedly the most sophisticated infrastructure of any Mediterranean island ”, he told abcMallorca.

Chavarria Waschke points out for instance that a state-of-the-art new public hospital is now open at Son Espases on the outskirts of Palma – while in recreational terms, the new super-yacht marina at Puerto Adriano is scheduled for completion later this year.

In terms of morale, projects like these are crucial. That’s why, whatever you may think of casinos, it’s good economic news for everyone that the American casino operator, Las Vegas Sands (LVS), is looking at Spain as the location for a new €10 billion to €15 billion “mini Las Vegas strip”.

According to Sheldon Adelson, the company’s chairman and CEO, the project will be a hotel, gaming and leisure development – with, believe it or not, 20,000 hotel rooms and millions of square feet of retail, exhibition and convention space.

Where are they likely to locate? Well, apparently LVS has already been in talks with the authorities in Barcelona and Madrid, with less advanced contacts in Valencia and on the Costa del Sol.

Adelson has admitted that the company will look for “major concessions on planning” for the project – while the obvious attraction for any prospective location will be desperately need jobs, an estimated 180,000 of them during construction and afterwards.

Given the state of the economy, he clearly believes he is in a position to push. “No private sector company has ever made investments on this scale here, and we need the support of government”, he said, calling for the establishment of a top-level committee to support the project – as well as a commitment that the blueprints will receive approval within 60 days, a demand that is likely to prove controversial.

So there is some good news, and we need to make the best of it – and the best of what Mallorca has to offer

“Visitors and investors want quality of life”, points out Andrew Spence of Bendinat. “Each year the quality here goes up in terms of infrastructure, in terms of cultural events, and in terms of facilities such as restaurants, for instance.

“And while it’s true that the off-season period has weakened in terms of numbers of visitors – Spring has shown that there’s still investor interest in good value, and all the indications are that we are in for a good summer this year.”

Share This Article

Related Articles

About Author

Peter Cluskey

Peter Cluskey

An Irish journalist who worked for some years as a war correspondent for the national television station in Ireland – RTE. In recent years, he has specialised in writing about the real estate market worldwide – focusing particularly on the luxury second home destinations. He is a sought-after contributor to a number of international property publications, based on his reputation for well-researched and excellently written articles.