Buying property on the Spanish Islands
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As the love affair between British property buyers and mainland Spain cools, investors are looking towards other markets to fulfil their needs for affordable holiday homes in warm places. Some of those buyers are turning to property for sale in the Canary Islands and property for sale in the Balearic Islands, off the coast of Spain, which have long tempted Brits away from the mainland. The main reason is that the weather is better: the Canaries, for example, found off the west coast of Africa, offer the warmest winter weather in Europe.
Off Spain's east coast, the Balearics also have warmer winters than the mainland. Property for sale on Majorca, property for sale on Menorca, property for sale on Ibiza and property for sale on Formentera has always been more expensive compared with mainland Spain, but the gap is narrowing. The ruggedly beautiful Majorca is the jewel in the Balearics' crown: it is the biggest and most expensive of the islands, and is home to some of the most lavish property in Europe. Its sprawling villas can sell for between €5 million (£3.3 million) and €20 million (£13 million). Catherine Zeta-Jones and Michael Douglas have a holiday home here; Boris Becker and Claudia Schiffer have both owned homes on the island.
The reasons for the island's enduring popularity are more than just down to weather: it has an attractive coastline, good infrastructure, and there are regular direct flights from Britain. The majority of property buyers head for the south and southwest of the island, and it is still possible to find property for those without celebrity-sized bank accounts - prices in the south generally start at around €300,000 (£198,000) for a basic two-bedroom home. According to buying agent Jan Westwood, of The Property Finders, the very best areas on Majorca will cost €800,000 (£530,000) for a top-of-the-range two-bedroom apartment. At the more affordable end of the scale, a good quality two-bedroom unit in a reasonable location with a sea view will cost €400,000 (£265,000), but at that price may need renovation.
"The rental market is very good in Majorca," she adds. "I had a client who bought a two-bedroom flat in central Palma for €320,000 (£212,000) that makes €11,000 (£7,200) a month on rent. Average yields are around the five to six per cent mark, which more or less covers costs, but you're not going to make a mint."
"It's a good second home destination," adds Rupert Fawcett, of Knight Frank. "It is very international, with a high level of service and a good range of properties."
The market is Menorca is a very different one compared with Majorca, generally consisting of families with young children. "There isn't much nightlife, which is why it attracts families," explains Westwood. "It's a very different lifestyle - very low-key. The island dies a death in the winter."
The reason why winters are so quiet on the island is that it can be extremely windy in the winter, meaning the rental and tourist markets are far more seasonal than on Majorca. Property here is generally 20 per cent cheaper, too - though it may also be harder to sell, as the market is a very small one. "I get virtually no requests for property on Menorca," Westwood confirms.
She gets more enquiries for Ibiza - though still not a massive number - which is a very different market once again. The perception of an Ibizan habitue is either of a sleep-when-you're-dead clubber or an ageing hippy. While both are certainly part of Ibiza's varied population, there is also a market for purchasers of high-end holiday villas.
"There are some amazing villas on the market," continues Westwood. "Ibiza attracts the rich jet-set, people who want to get away from it, perhaps those who don't have families and are looking for nightlife." Prices for property on Ibiza are between ten to 15 per cent lower than on Majorca.
Formentera, the last of the Balearics, is the prettiest but the hardest to buy on. "You can buy, but once in a blue moon," Westwood adds. "The market is almost completely closed. It's a tropical paradise but there is very little property available - I would imagine you would have to live on the beach for a year to be able to buy on the island."
Overall, property prices in the Balearics have cooled. "Prices in Majorca have gone up around ten per cent this year. The market is certainly cooling - it's no longer like it was in 2003. I think the reason for this is that the cost of borrowing is going up. There is no buying frenzy here."
On to the Canaries, a cluster of seven islands, including Gran Canaria, Tenerife, Lanzarote and Fuerteventura. The dominant feature is their volcanic landscape: the Teide volcano on Tenerife is the highest mountain in Spain and the third largest volcano on Earth.
Tenerife, according to Leslie Beeson of the Tenerife Property Shop, partners with UK agents Savills, has a north/south divide, with the south of the country enjoying sunnier weather. Predictably, it is here that most sun-deprived Brits look to buy - and, according to Beeson, 42,000 of us have. "Tenerife is re-branding itself as a five-star venue," explains Beeson. "There are more five-star hotels here than all the other Balearic islands put together. It's gone posh - we have all the designer brands, too."
The major advantage of Tenerife, he explains, is that the island has a 12-month rental season. The winter rental market is propped up by what estate agents term "swallows", retirees who head over for the winter, looking for longer lets.
"There is also a high return rate to Tenerife. 70 per cent of visitors have been to the island before, and this means that people tend to re-book the same apartments" - cutting down on administration time and marketing costs. Rental yields, according to Beeson, are between three and 4.5 per cent. "People are managing to cover their costs, but you do have to buy intelligently. Those that approach it as a business do very well out of it."
Like the Balearics, capital growth in the Canaries is also slowing. "I don't predict enormous capital growth this year. We're not expecting the 20 to 25 per cent that we saw five years ago, though we will see healthy gains over the next five years. I expect to see between five and eight per cent - no great shakes, but in the medium-term you will make money."
Gran Canaria is very popular with Germans and less so with British buyers. According to Beeson, it's not a particularly attractive option. "The centre is dominated by 1960s architecture. There are lots of nice beaches, but the type of property available tends to be smaller flats on the 12th floor of a concrete tower block."
Lanzarote, 15 minutes from Fuerteventura, is a much smaller island, with stricter planning. It's a small market, with not a great deal of rental. The Playa Blanca, in the south of the island, has seen the majority of activity. In Fuerteventura, the two main buying areas are in the north of the island: Caleta de Fuste and Corralejo. Though be warned: its name refers to a strong wind that buffets the island, which can turn the lovely sandy beaches into highly painful sunbathing territory. Prices are cheaper in the Canaries, compared with the Balearics, starting at €90,000 (£61,500) for apartments. A good quality two-bedroom apartment overlooking a golf course in Tenerife will cost €262,500 (£180,000).
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First published in Homes Overseas Magazine May 2007.
Some information contained within this article may have changed since it was first published. Homes Overseas strongly advises you to seek current legal and financial advise from a qualified professional.
