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Mallorcas 2012/2013 Market Review

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February 18, 2013


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In spite of the pressure on the Euro and the general state of the Spanish economy The Balearics has had a good year according to Engel & Völkers Estate Agency with 20 shops throughout the islands.  Sales were up by over 9% over the previous year and sales volume increased by over 8%. All the islands are reporting sales mainly at the upper end of the market which is underlined by the fact that the average sales price in Mallorca and Ibiza is reported as just below 1 million Euros.   The special tax reduction for new build property, which expired at the end of 2012, has also helped bring in some sales toward the close of the year.

Mallorca Review:

Engel & Völkers has been established here for over 12 years and its’ wide reaching German network has most certainly assisted with German speaking clients including Swiss and Austrians who account for over 50% of all sales and continue to dominate the market.  This group is followed by British and Scandinavian buyers with some Spanish, French and Russians starting to come into the market. However, the single most important developing market on the island is from Scandinavia where 2012 visitor figures show increases of 20 – 25% from Norway, Denmark and Sweden assisted by better flight connections and the strength of their own economies and currencies.

Mallorca retains its reputation for offering quality property in beautiful locations with average sale price ranging from approximately 500,000€ in Palma Old Town and the north east through to 700,000 in the north and west with 1 million€ being recorded as the average sales price in the areas of Palma’s surroundings, south west, south east and central island.

In 2012 major sales of 10€ million in the south east and over 8€ million in the south west indicated that many big investors believe that prices are close to the bottom.  This year has got off to a good start with the first sale of 8€ million in the south west achieving a record 22,500€ per sq/m. The market looks to remain stable and it’s still a buyer’s market predominately of cash buyers.  Negotiation margins have come down to pre-crisis averages of 5-10% and properties in top locations can command their asking price.   The average sales period varies from between 6 months for a really special or well priced property through to 12/18 months.   Some properties this year have sold within 3 months but these are the exception.

The increasing strength of the long term rental market has been successful over the last five years and continues to gain popularity among foreign and local residents alike.  It has also become an increasingly attractive proposition as a buy to let investment opportunity. In 2012 the long term rental business focused on top end quality properties.  In previous years a property asking more than 5.000€ per month was an exception.  However, last year in the south west,  this level of rental yield became a new standard and some top long term rentals hit highs of up to 15,000€ per month.   Renting before you buy appears to be a favoured option among big buyers who can search thoroughly for a property instead of rushing into a purchase over a few weekends.

In the north of the island, where Engel & Völkers operates a holiday rental office for exclusive properties in that area, 2012 was their best year to date with over 14% increase in rental revenue.  Russians and Scandinavians are coming into the market for peak season bookings especially for designer properties close to the sea and with sea views.

New developments for Mallorca in 2013 include direct flight connections into Palma with Vueling from London Heathrow with a new daily service as of March.  Norwegian Airlines will also start a new route out of London Gatwick, Germanwings has announced a new service from Hamburg and Finnair will launch a direct flight into Palma from Helsinki in June of this year.  A new golf course is planned near Sencelles in central Mallorca and the international hotel group Hyatt has announced plans to build a new luxury hotel in Cap Vermell on the north east coast.

Prices in 2013 look set to stay around the same level of 2012 and it will continue to be a buyer’s market.   Strict regulations on building new property coupled with the fact that 40% of the island’s territory is protected, means a better balance of supply and demand on the island which is reflected in its property prices.  It remains to be seen whether Mallorca attracts a flutter of more Russian or Chinese buyers when Spain’s new laws for non EU residents come into force this year.

About Engel & Völkers
Engel & Völkers is the leading international company dealing in quality real estate throughout the world.   The company first entered the Spanish market in the year 2000 and now has 50 shops throughout Spain.  It is the largest real estate agency in Germany and has more than 500 offices throughout 35 countries on 5 continents.  The Engel & Völkers Group has 4,180 employees throughout the world and a total of 28,500 properties for sale worldwide including more than 6,000 properties in Spain.

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