Five good reasons to buy a property in Mallorca in 2016
The official sales figures for real estate in Mallorca, Ibiza and Menorca confirm what we have been finding as real estate agents for some time in our daily business – the market for vacation property in Mallorca is increasing significantly.
Two years ago the official bodies (Estadística Registral Inmobiliaria, ERI and Instituto Nacional de Estadística, INE) determined once again, for the first time since the Spanish property crisis in 2008, that property sales in the Balearic islands had significantly increased (+ 18.5%), and 2015 saw the upswing continue with an increase of 14.6%.
It would seem that 2016 is becoming a new record year for the real estate industry. From January to March 3,067 properties were sold in the Balearic Islands, representing an increase of 21.5% compared to last year.
The significant increase in demand, especially for vacation property in Mallorca, begins to increasingly influence prices. According to a market survey of the Center for Real Estate Studies (CRES), the selling price for vacation properties on the biggest Balearic island increased last year, particularly in the south-west, the north and in the capital Palma, by 2% to 6%.
Buying a vacation property in Mallorca, is, as a rule, an emotional decision. You are in love with the island and would like to spend as much time as possible there. A second home in Mallorca is a physical witness to the intimate involvement with this location but there are also compelling rational reasons why the time is now right to invest in Mallorca. We have compiled the most important for you here:
Reason 1: The whole world wants to go to Mallorca
Germans, British and Scandinavians not only love to holiday in Mallorca, they also invest heavily in the holiday property market. The foreign investors are the driving force of the recovery, 35.61%, ie. More than one third of real estate in Mallorca, Ibiza and Menorca was purchased in 2015 by a foreigner.
Thus, for investors from abroad, the Balearic islands are Spanish leaders. Besides the aforementioned nations, which represent nearly 60% of foreign buyers in the Balearic islands, the Italians, French, Dutch, Swiss, Austrians and, more recently, the Chinese (1.4% of foreign buyers in the Balearics 2015) also purchase real estate.
Global demand is good for sales – when one buying country weakens, another takes its place. This is what happened with the British who, for decades, were the leaders in the statistics of foreign property owners. A few years ago, with 22.24% they were pushed into second place by the Germans who, with 33.91% in 2015 became the the strongest foreign buyer group. Source: Colegio de la Propiedad Registradores de, Bienes Muebles y Mercantiles de España.
Reason 2: The island is not getting any bigger
A fact that is so simple that it is already almost forgotten. Because of its insularity Mallorca is already geographically limited in its expansion. High building regulations and a strict Coastal Protection Act preserve the scenic beauty of the island and guarantee property owners value stability.
This limited supply of attractive locations, especially on the coast, is facing a growing demand, which will inevitably have an impact on prices.
Reason 3: Investment return from vacation rental
Fear of properties standing empty and rarely being used discourages some buyers from investing into the holiday property markets. More and more investors, however, are discovering vacation rentals not only as a lucrative way to bridge idle time, but are also specifically buying vacation properties in Mallorca as investment objects – with the bonus of additional personal usage time.
Since the liberalization of tourist holiday rentals in the Balearic Islands in 2013, it is relatively easy for owners of detached houses to obtain a license for tourist holiday rental. Yields are attractive, so that a house in a good location with good quality facilities can quite easily achieve weekly rental prices from 3000 € to 4500 € in the summer months.
Those who are interested in what returns a house in Mallorca can generate with vacation rentals can get an overview of the general costs and revenue from the Porta Holiday Yield Calculator.
Reason 4: Prices are rising – but are still below 2007 levels
After the Spanish real estate crisis in 2008 the official price index for real estate in the Balearics dropped each year, until in 2014 a slight increase was recorded which in 2015 clearly continued. In the first quarter (T1) in 2016 the increase rate was 8.8% compared to the same period the year before. Despite these growth rates, the purchase price index in 2016 (T1) is still almost 25% below the level of 2007 (index 100). Source: Institut d’Estadística de les Illes Balears, IBESTAT.
Thus, the real estate market in the Balearics is unique in Europe – while in Germany, Austria and Switzerland house prices have risen in part by 20% in the last five years, the real estate prices in Mallorca and its sister islands have still not reached pre-crisis levels. The figures show that prices are increasing but that there is still a long way to go – with the corresponding value-appreciation potential for buyers who decide promptly.
Reason 5: For us the most important thing
To summarize: the prices in Mallorca have not increased in recent years as in central Europe but, on the contrary, are still well below pre-crisis levels. That is why the whole world is interested in this little real estate market which, in the future, will not get any bigger. He who buys today will most probably be rewarded tomorrow with a better price, and in the meantime can earn vacation rental yields which at the moment would bring tears to the eyes of any capital market investor.
But the most important thing can not be bought – it is free: The sun, the sea, the mountains just a short distance from the coast, a bustling capital, full of life, a few minutes away idyllic villages where time seems to stand still and, last but not least, the Mediterranean way of life for which the whole world envies us.
And that is the reason why you will eventually say yes with your heart to this investment. We know of nowhere more beautiful in the world. Welcome to Mallorca, Welcome home!