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Balearic Islands market review - positive outlook for 2013

6th February 2013 Print

In spite of the pressure on the Euro and the general state of the Spanish economy the Balearic Islands have had a good year according to Engel & Völkers Estate Agency. 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.


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 in 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.


In the last 10 years Ibiza has become increasingly fashionable with celebrities, performers and artists of all types and of many nationalities and has become a Mediterranean brand synonymous with lifestyle, fashion and a place to be seen.

These factors have given the second home market a real boost with sales reaching levels of 2007. The two Engel & Völkers offices on the island have sold contemporary style villas, fincas with land and prime located apartments/penthouses with an average sales price of around 1 € million.

The demand for top located sea front villas and fincas with land far outstrips supply so in these cases vendors are in a strong position. Average sales period for prime property is around 6-12 months and 18 months for property in good locations. Generally it remains a buyers´ market with sales closing at around 5-10% of the original asking price.

Some of the most exclusive residential areas of the island are located in the San José area and specifically in Es Cubells and at Cala Jondal in the south of the island.

Here buyers can choose from state of the art, contemporary design villas, to large fincas with views which can achieve prices of up to 9€ million and exceptional exclusive sea front properties are fetching even more. This area continues to be one of the most sought after for rentals, particularly in the summer months.


The island is totally different in character from the others and its’ strict regulations to maintain the natural environment of the island is a big draw for buyers together with its slower pace of life.

Here the Engel & Völkers office in the island’s capital of Mahon has reported a 35% increase in sales in the medium to high end of the market to a range of buyers demonstrating the wider appeal away from the traditional Spanish Catalan and British buyers where French and Russian buyers have been the big buyers last year.

The market is dominated by cash buyers taking advantage of the real estate market which is now offering property of up to 50% less than 8 years ago. The 4% tax break for new properties has encouraged a few to buy before the year end. The average sales price this year is around 750,000 € and prices are not envisaged to increase in 2013 and there might still be some price adjustment particularly for properties that have been on the market for more than a year.

The bulk of the demand remains focused on properties close to the sea, with sea views or on the frontline. Average price negotiation to close a sale is around 15-20% of the original asking price and property is taking about one year plus to sell. Traditionally the most popular areas for buyers have been residential areas offering medium priced property. However, recently there has been a shift to more exclusive residential areas along the South Coast around Binisafua, Alcaufar and Cala Sant Esteve.

Around the north coast, areas in demand include Cala Morell, Sa Mesquida and Port Mahón and specifically Sant Antoni. Rural areas such as the triangle around the south coast between Mahon and San Luis attract the big buyers who are looking for large exclusive “fincas” either on the coast with private access to the sea or with sea views and plenty of land offering total privacy.

German and Russians buyers have started to coming into the market and this trend looks set to continue. Menorca remains a relatively unknown destination for second home buyers and the current favourable market conditions are certainly creating a lot of interest including some international showbiz names such as Tom Cruise who was reported to be looking last summer for a secret Menorcan hideaway.

Says David Scheffler, Director General Engel & Völkers Spain; “Buyers appear to be protecting their money and investing in property which in this region will offer them better returns than in the bank and they can enjoy their investment at the same time.

Although there has been a lot of excitement about the potential of Russians in the Balearics, this market remains in its infancy at this stage. It’s a complicated target group and it’s hoped that the new Spanish tax laws for non EU buyers will assist sales particularly with the middle range buyers”.

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