© The Financial Times Ltd 2014 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
March 14, 2014 6:40 pm
The property market on mainland Spain still bears the scars of the financial crisis – a report from Fitch Ratings, released last month, predicts that prices will continue to fall during 2014 and will not bottom out until next year. On the Balearic island of Mallorca, however, the gloom appears to be over.
Knight Frank claims its sales increased 40 per cent last year while Engel & Völkers, with 16 offices on the island, reported a 30 per cent rise in sales over the same period. The agents agree that top-end property prices have now returned to within 10 per cent of pre-recession levels. And it is multimillion euro sales to international buyers that seem to be fuelling the recent upturn. According to figures released by the Spanish National Notary Association, property sales to overseas buyers doubled in the Balearic Islands between 2008 and 2012.
“Mallorca is a favourite with British, Swiss, German and other northern European buyers,” say Jelena Cvetlovic, European associates network manager at Savills. “But Asian buyers, with no tradition of buying leisure properties, have largely been absent while Russians tend to prefer the south of France – it is better served by flights from Moscow and they are able to mix with peers who have already bought there.”
The Spanish government is doing much to encourage more buyers from abroad. A “golden visa” law has recently been passed allowing non-EU buyers purchasing properties above €500,000 to become Spanish residents, and the government has also launched Project Paramount, an attempt by its so-called “bad bank”, Sareb, to cleanse the country’s financial institutions of toxic property. Opinions differ on the scheme’s effectiveness and some doubt the price cuts are as dramatic as advertised.
Mallorca – with the exception of tourist hotspots such as Magaluf – remains a desirable place to own a home. Michael Cunnington, head of MJC Associates, an associate agency of Savills, identifies four main areas that appeal to wealthy buyers. “The southwest, around Andratx, offers homes on golf courses or with ocean views and some stunning modern architecture, while Deia and Soller, in the northwest, have some beautiful fincas. The larger plots on Puerto Pollensa and Formentor in the north attract families; then there is Palma, with its historic old town, galleries, restaurants and shops.”
Modernising a big stone finca was a fashionable thing to do a few years ago but now there are fewer of them for sale, largely because the native Mallorcans tend to hold on to their old family properties. It is also far from being a money-saving option.
According to Alastair Kinloch, a RICS surveyor with Property Works Mallorca, buyers should budget for between €4,000 and €5,000 a sq metre for construction if planning a renovation, plus VAT and architect’s fees. “If you’re employing different tradesmen, make sure they work independently of one another to encourage competition and avoid price-fixing,” says Kinloch.
Knight Frank is selling a modernised, four-bedroom finca in Santanyi, about 20 minutes outside Palma, for €3.65m. Set in an elevated position, the property comes with 2.6 hectares of land, a swimming pool and a summer house. A cheaper, more remote option is a four-bedroom finca with a pool and four acres of land in a peaceful location in S’Horta, on sale with MJC Associates for €695,000.
Two years ago, new construction diminished to the point where the island’s concrete production plant, Cemex, was producing 50 per cent less than before the recession. Now the building sites are busy again. Marina Plaza II is the final phase of an upmarket seafront development in the Portixol area, a few minutes from Palma’s old town. Scheduled to be completed by summer 2015, there are 31 units priced between €1.28m for a three-bedroom apartment and €3.1m for a five-bedroom penthouse, available via Engel & Völkers.
The lively “Paseo Maritimo” promenade area enjoys views over Palma Bay, the Royal Yacht Club and the Club de Mar, where some of the most expensive, privately owned yachts in the world are moored.
Prices for renovated apartments here range from €3,000 to €6,000 per sq metre, and a waterfront plot carries a premium of at least 30 per cent. A seven-bedroom villa on a 3,430 sq metre plot facing the sea, 10 minutes from the harbour at Puerto Portals and 15 minutes from Palma city centre is on sale with MJC Associates at €11.9m.
Elsewhere, plots with sea views are scarce, due to the fact that only about a fifth of Mallorca’s 345-mile coastline is classified as urban – the rest constitutes “rustica” (where building regulations stipulate a minimum plot size of 15,000 sq metres), national parks and other protected areas.
The best waterfront plots were taken in the 1970s and 1980s, and today’s developers are being forced to build on smaller, steeper sites where the higher building costs are passed on to buyers.
Now could be a good time to buy property in Mallorca. “Prices have bottomed out and confidence is returning to the market,” says Cvetlovic at Savills. “It doesn’t suffer from the overdevelopment that went on in other parts of Spain, it is well served with flights from Europe, healthcare is superlative, there are nine international schools,” she says. “It is quite simply a place where wealthy people like to live.”
● Cash buyers predominate, although the banks are lending again
● Of Mallorca’s 1m inhabitants, 60 per cent live in and around Palma
● Palma airport has a dedicated landing area for private jets
What you can buy for . . .
€550,000 A small farmhouse in the middle of the island
€1m A three-bedroom, seafront apartment in a fashionable area
€10m A detached, waterfront villa between Palma and Puerto Andratx
Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.