Residential market update on Mallorca
Country: Spain
12 May 2009 Major investment for Palma by Spanish Airports Authority
Mallorca’s unique location in the heart of the Mediterranean means that it is easily acces-sible and only two hours flying time away from most European cities with direct flights year round. The Spanish Airports Authority (AENA) announced in March of this year a €352m plan to invest in each of the three Balearic International Airports of which €240m will be spent in Mallorca between now and 2012 to improve and expand facilities for fu-ture development. Further investment in Palma’s private aerodrome, Son Bonet, to further develop helicopter and private jet hire. Property & Price Range
In this region, the investor will find an broad range of property from the traditional coun-try house referred to as a “finca” to stunning historic townhouse “palacios” in Palma to idyllic waterfront villas of every description and cutting edge contemporary design. Mal-lorca attracts many artists and architects which produces a great deal of innovative design. Prices range from around €250,000 for an apartment to just under €1m for a luxury villa to literally millions of euros for a finca estate or a prized waterfront property. Local Investment Continues…
The current financial crisis might continue to slow down the real estate market for another 12–18 months. However, this is regarded as a “blip” with continued investment by the lo-cal government in all the islands. Continued investment in transport links
On Mallorca the local government has pledged €4m on improvements to roads, building new rail links and tunnels on Mallorca. A €23m investment project to construct a new jetty in Palma’s West Quay to enable “mega” cruise ships to dock at the same time is cur-rently coming to completion. Over €120m is being invested in the new Congress Centre in Palma, which is scheduled to open in 2011. New Superyacht Harbour
A multi-million euro project to extend Port Adriano (south west) will provide another harbour on the island for super yachts. The project focuses on increasing the number of larger moorings for yachts up to 60 metres and provides new support facilities. The inter-nationally famous designer, Phillipe Starck, has re designed the entire shopping/leisure area of the port which is scheduled to open in spring 2010. Mallorca’s enduring popularity stems from the fact that it successfully manages to com-bine a sophisticated infrastructure and modern facilities whilst maintaining its glorious countryside, mountain ranges, beautiful beaches, authentic villages and traditional culture. Furthermore, the island is internationally regarded as safe and secure and each year wel-comes many famous celebrities, politicians and royalty, including the Spanish Royal
Family. Spring Mallorca Property Market Review 2009 Palma Central
In Palma the market has been booming for the past five years and reached an all time high in 2007 with prices per square metre in good locations in Palma old town or on a seafront position approaching that of prime property in Madrid. This year prices have adjusted to the new market conditions. For example, a typical villa with views can now be picked up for around €1.4m. Well located apartments with views have withstood the current market conditions better than other types of property with small reductions off the original asking price and currently you would expect to pay €500,000 for a good apartment. This spring has seen more positive market movement and inevitably there are some “bar-gain hunters” about looking for distressed sales, which are not so prevalent and certainly not on the scale that might have been anticipated. For the moment prices are not dropping anymore and the market has found its level and stabilised and most property is now taking a year to sell as opposed to 7-9 months at the market peak in 2007. According to Terence Panton, Managing Partner of E&V Palma: “Since January real es-tate activity has gradually evolved more positively with some sales to Swiss, German, Russian and Scandinavian clients. The main vendors tend to be local or foreigners that need to sell, British vendors can be very competitive at present when converting euros back into pounds sterling”. Palma Surroundings
To the southwest of Palma the area covers the residential areas of Son Vida and Arabella Park literally minutes from the city, and the nearby villages of Puigpunyent, Galilea,
Establiments and Esporles.
In terms of property and price range, the area is very diverse from million euro exclusive villas to traditional village townhouses. In Son Vida prices have remained stable with small discounts, if any, to close a sale. Prices here for a luxury villa with views cost any-thing from €1.65m up to €21m and apartments with golf views will start at around €600,000. In the surrounding villages prices have decreased between 10-20% where a spacious townhouse can be picked up for €600,000. In this area there are some magnificent finca estates which can cost anything up to €15 million. Fincas in general here with land can range from €1.5m up to €5m. Land as always, makes an interesting investment and plot prices range from €300 – 650 per m2. Leaving Palma heading south east towards Llucmajor is an area which has, over the past 10 years, attracted substantial local investment with the development of a new road sys-tem making the whole area easily accessible from Palma. In addition, major foreign in-vestment from major international hotel chains including Marriott, Hilton and the five star Son Julia hotel has raised the perception of the area. Local investment continues with plans to refurbish the Playa de Palma area and a new road is planned linking Playa de Palma to the city. Prices here have dropped by an average of 6-13% from the peak of 2007/2008. Now, a well located villa with sea views can be picked up for €1.2m and an apartment with views for around €390,000. A finca or country house with land can now be bought for approxi-mately €950,000 offering privacy and good links to Palma and the rest of the island. The Southwest
The southwest is generally regarded as the area with the highest density of top value prop-erties with an average spend of €1m by new investors. Regardless of what is happening outside the island the level of investment has not changed in this area, if anything it has slightly increased. Furthermore, there is little evidence of “bargains” and owners have ac-cepted that they will have to wait longer to sell their property in the current market condi-tions. Portals
According to the local director in this area over the past six months there have been only three “bargains”, which probably represent the same number of bargains under "normal" market circumstances. Furthermore, there have been hardly any price reductions. Gener-ally, asking prices for prime properties in good locations are stable with well located vil-las achieving prices of around €2m plus. There is overall price stability in this area and al-though owners are a little more flexible to accept offers there are no generous price reductions. Small price reductions tend to be for those properties which are not in a prime location. For example; a two bedroom apartment with no views will have reduced its price at around 7% below the original asking price with an average price of €350,000. On the other hand a well located apartment with views would cost approximately €500,000. Probably the main effect of the global financial crisis in this area is that the market is slower and there is less demand which represents less transaction, but here this factor does not lead to lower prices. There are many wealthy owners who simply do not need to sell and although there are less buyers looking for property the ones who are searching tend to be serious, and often cash buyers. As available land for residential development is so scarce in this region, it still represents a good investment at around €650 m2.
Santa Ponsa
There has been a great deal of new development over the past five years mainly focused around one of the four golf courses in the area and the extension of the marina at Port Adriano. There has therefore been a generous supply level of second home property avail-able and this has impacted the current market situation.
People are attracted to this area because of the excellent facilities, international feel and it is extremely popular with the British, German and Scandinavians. Since the middle of 2008 prices have come down 8-15% depending on the property, location etc… However, much of this is down to a price adjustment from the inflated highs of 2007.
A four bedroom villa with views will sell for approximately €1.250 million and well lo-cated, high quality 2-3 bedroom apartments, in the new communities built 3 or 4 years ago now start from around €350,000, although property might take longer to sell (between 12-18 months). Plot prices have fallen as most investors "wait and see". Urban land is cur-rently valued at around €350 per m2. Puerto Andratx & Paguera
The market at the beginning of the year was quite slow which is not unusual and buyers include German, British and Scandinavians. There has been little significant change in prices in these areas and prices for well located top quality properties remain basically the same. However, there have been some reductions in price for properties away from the front line with no sea views of 10 -13%. For example; in Puerto Andratx, a typical four bedroom villa is now on the market for around €1.4 million with views you can expect to pay €2.8 million and a two bedroom apartment with no view can be picked up for around €400,000 – with views would cost approximately €700,000 Further down the coast, Paguera offers excellent value particularly for first time investors. A villa with sea views is priced at around €1.6 million. Prices for apartments in this area have come down this year and well located two bedroom apartments with sea views can be found for around €495,000. The Easter/May Bank Holiday period has been steady and sales have been made. The spring looks promising with potential clients already booking viewings over the next few months. West Coast Soller & Puerto Soller
The current picture shows that prices are at a similar level to 2008 with some discounts of around 10-15% on villas and fincas. Well located apartments, townhouses and plots of land in particular appear to be holding their prices with little or no change from the origi-nal asking price. Property is taking from 10 months to 18 months to sell. In today’s market, a well located villa will cost around €2 million and an apartment around 400,000. A three bedroom townhouse will cost an average of €650,000 and a good plot will cost in the region of €350 m2. One important development for this area is the new five star deluxe Jumeriah Port Soller Hotel which is scheduled to open early 2011. This project follows on from substantial foreign investment in the island primarily from major international hotel groups including Marriot, Arabella Sheraton, St Regis Resorts and Hilton. Mallorca Inland
In recent years there has been increased interest in the interior of the island where larger properties surrounded by land provide privacy for owners which is simply not available on Mallorca’s coastline. The offices in this area report that correctly priced properties for the current market obvi-ously attract more attention. Generally prices have come down between 10-12% and al-though there have been many speculative offers coming in way below the asking price which owners will simply not entertain and prefer to wait. A large four bedroom country house with views and land will cost an average of €3m and a three bedroom townhouse will cost around €450,000. Property is now taking between a year and two years to sell. However, the encouraging factor is that there are many serious clients currently looking in this area. The North Pollensa
The north of the island attracts many discerning clientele whom this year will find that they can buy more for their money. For example, a four bedroom villa in a good location now has an average price of €1.7m representing approximately a 6% decrease in value over 2007/2008. The apartment market has witnessed decreases of around 17% with av-erage price for a two bedroom apartment with views of approximately €250,000. Townhouses have seen price decreases of around 20% achieving an average price of around €550,000. Fincas and country houses are maintaining their prices although some will offer a slight reduction to close a deal. Now, you would expect to pay just under €2 million for a well located finca. Plots of land have also come down in price by approxi-mately 28% costing around €300,000 for a 1,500m2 plot. Coastal properties still achieve premium prices together with well located fincas with good views and plenty of land providing complete privacy. There is increased demand for contemporary designer houses. Although the market is slower, particularly for properties over the €3m bracket, there is a great deal of serious interest. Puerto Pollensa
Prices rocketed in this area over the past five years. Currently, a well appointed, four bed-room villa with views has come down marginally by approximately 10% in price and will cost an average of €1.7 million. In the apartment market prices have come down around 25% with a good two bedroom apartment with views selling for an average of €300,000. Recently, there has been a strong demand for the exclusive end of the market with clients willing to spend large budgets on penthouses with views to the sea and close to the beach, which average €640,000. Alcudia & Puerto Alcudia
In this area there remains a healthy demand for premium property, usually front line, which has retained its value. Similarly, well located fincas and good plots are much sought after and generally property is taking between eight months to over a year to sell. Some prices have decreased in this area at around 10-20% depending on the property and location. For example, a four bedroom villa with views now has an average price of €1.2 million. A two bedroom apartment with views will come in at around €290,000 and a plot of 1,000 sq metres will now fetch an average price of approximately €380,000. Northeast
Says Dieter Funk, Managing Partner for Engel & Völkers in the northeast; says; “In the latter half of 2008 the market died in this area and 2009 started with a small trickle of ac-tivity. Although property prices have come down by approximately 10-25% since last year, owners are reluctant to negotiate well below the asking price. In recent weeks we have seen more interest from clients and the general reduction in prices in this area has meant that there are more “bargain hunters” about and negotiations are now quite tough in order to close a deal”. Southeast
Says Nils Haase, Managing Partner for Engel & Völkers southeast: “After a successful 2008 the market at the beginning of this year got off to a slow start. Demand in compari-son to last year definitely dropped off. However, the enquiries we have received to date have been much more serious, specific requests. Currently, the buyers’ perception of price they should pay tends to be poles apart from what the vendors want to sell their property for and therefore there is an increased need for negotiation and both parties must to be flexible in these times to close a sale. We originally thought that after the financial problems of last year we would have more property for sale on our books. Fortunately, this hasn’t been the case and there is no evi-dence in our area to suggest that there is more real estate on the market than in previous years. Correctly priced real estate has already sold this year and we are optimistic for the future. The area still attracts an international clientele although the market at present is domi-nated by Germans. Attractive fincas in the countryside start from around €700,000 and seaside apartments start at approximately €300,000”. Conclusion
Says Daniel Chavarria Waschke, Managing Director, for Engel & Völkers Southwest: “It’s too soon and would possibly tempt fate to say that 2009 might just turn out to be brighter than we thought. Right now there is interest in property across the board, in the south west average sales are still over €1 million. However around the island property below €500,000, including apartments is now starting to move. Although Engel & Völkers has a reputation for sell-ing exclusive top end property the company is focused on its entire market range to main-tain sales levels. The spring indicators of increased market movement, serious interest, cash buyers and the general fall in prices combine to make Mallorca attractive to the potential investor more than ever. At the end of last year the Financial Times highlighted Mallorca as one of 10 top locations to invest worldwide and the last few weeks have demonstrated that the is-land is still very much on the international radar”.
See Also: Mallorca, Spain
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