Regardless of all the problems and challenges COVID19 has created, the island’s premium real estate sector is experiencing a steady flow of buyers as Mallorca continues to attract overseas buyers who regard the island as a safe haven to own a second home where they can escape the threat of a lockdown in their country of origin and make a steady long-term investment. Furthermore, the real estate and construction sectors generate valuable income for the local economy and secures jobs.
Engel & Völkers Mallorca with 18 property shops on the island, closed the period January to end July with sales transaction volume of 217 million euros. Furthermore, when the borders opened on July 1st, there was a surge in sales transactions in July alone that totaled 49 million euros. Many clients were literally waiting to visit and sign for their properties and this movement has bucked the trend of a traditionally slow month.
Says Florian Hofer, Managing Director Engel & Völkers Balearic Islands; “Since June, we have seen a trend for buyers not to hesitate as they are anxious to complete their long-term plans. Our overall experience at this time is that the earlier buyers can move in, the better. This sales activity is maintaining market stability and prices are holding, particularly in the premium segment. The island’s stable residential market is underpinned by excellent infrastructure that raises Mallorca’s status as a safe and secure Mediterranean destination”.
Comments Hans Lenz, Managing Director of Engel & Völkers Mallorca Southwest and Chairman of the Balearic Association of National and International Real Estate (ABINI): “According to the latest statistics compiled by the Spanish Real Estate Registry, the number of sales transactions by foreign buyers in the Balearic Region have remained the same as in the second quarter of 2019. This vote of confidence by mainly overseas buyers not only brings valuable income into the islands but also will secure an estimated 100,000 jobs that are involved in the construction and real estate sectors plus ancillary services”.
Overseas buyers fuel demand
The majority of buyers during and post lockdown have been German, Austrian and Swiss followed by some British (particularly at the top end) and French.. Most of the Engel & Völkers property shops in Mallorca report a high level of enquiries. In some areas such as the southeast, there has been an extraordinary surge in interest with 110% more enquiries in June and 150% more inquiries in July over the same months last year. In the exclusive residential area of Son Vida, the central and southern regions of the island, enquiries doubled during the months of June and July over the previous year.
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Since Spain’s borders opened in July, Engel & Völkers Mallorca has averaged one sales transaction per day from 300,000 up to 12.9 million euros. In the southwest, Engel & Völkers reports less activity at the lower end of the market (under 500,000 euros) with more interest in the premium end of the market and in recent weeks there has been increased sales activity in the 10 million euro price bracket. On the outskirts of Palma in Son Vida, German, British and Scandinavian buyers have bought property during this period between 2 to over 8 million euros. Some clients are making a lifestyle change and want a permanent base where they can raise their family.
Principal requirements for the purchase of real estate in Mallorca
In general Engel & Völkers Mallorca reports that sales are being made in all price segments throughout the island. Not surprisingly, the majority of buyers want property with outdoor space, central heating, a home office with views. The island’s high speed internet connectivity is widely available and this is being picked up by clients who are now more focused on being able to work remotely from Mallorca if necessary.
Properties that offer privacy are in demand for those who want a refuge where they can relax and feel protected. Villas beside the sea or with sea views and a private pool are also highly requested. In the north’s Sierra Tramuntana area, rural property with land has been selling well during this time along with seaside villas.
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At the other end of the spectrum, in the southeast, northeast and central Mallorca, there’s a growing demand for authentic village lifestyle and specifically for refurbished traditional townhouses with modern contemporary interiors and a small pool with prices varying between approximately 700,000 to over 1 million euros.
In the capital of Palma there is steady demand for apartments with terraces and outside space either in historic old town buildings or beside the sea along the Paseo Marítimo or around the Portixol harbour district.
Central Palma - apartment with terrace and views over the Paseo Marítimo. 290,000 euros
Health & Safety
Overseas buyers are also attracted to Mallorca’s high level of security and safety underpinned by a modern and efficient health system with multi-lingual staff and leading specialists. Client feedback confirms that many clients would prefer to stay in Mallorca in case of a future lockdown.
Other factors such as the excellent infrastructure with a modern health service and international schools are playing an important part in the decision making.
The challenge of selling via video/virtual tours or detailed presentations has maintained and inspired buyer interest. Engel & Völkers report that virtual tours attracted, from end June until end July, 140,000 hits and 14,000 tours. This has given the potential clients a high level of knowledge of the market and the product. Some sales have been made on the strength of a virtual viewing. For example, in the Illetes resort (southwest), a beautiful sea frontline apartment with large terraces and open sea views was sold in lockdown for 1.9 million euros on the strength of the virtual video tour together with the guidance and local expertise of the sales agent. The feedback from the majority of clients is that these tools provide them with detailed information so that they come prepared to make a decision in days as opposed to months. Due to the considerable response from our clients, we can see that this technology is here to stay as an essential element in the marketing of real estate.
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Long term & Short term Rentals
The demand for long term rentals for villas and apartments has also increased during this time and clients are signing contracts for longer periods of time usually for an initial 12 month or 24 month period with the option to extend. The increased activity in the rental departments in the southwest, central and north areas have been driven by the fact that many rental clients want to experience island life before committing to purchase and some want a “bolthole” in their favourite holiday island that is private. Long-term rental business in Palma continues to perform at similar levels to last year with an average rental period of 12 months from 1,000 euros per month upwards. During this period, there has been a strong demand for short term rentals of villas and fincas where clients can enjoy the island within their own controlled personal space.
The ongoing travel restrictions in Europe with flight cancellations have caused some disruption for clients that have had to rebook with new dates. However, clients generally regard these factors as short-term obstacles. To date, those clients with ongoing option contracts in process are moving forward to complete either in person or via their lawyer.
“We support the local government in their efforts to create a safe corridor for visitors once again. The current travel restrictions will impact accessibility to the island in the short-term but this doesn’t appear to have deterred clients’ long-term plans. We envisage that ease of travel will be an ongoing problem in the near future and we simply have to work with what we have as best we can and maintain regular communication with our clients as the situation develops”, comments Hofer.
“The real estate sector, which currently accounts for over 20% of the GDP in the Balearic Region, will play a significant role in helping to maintain the local economy over the difficult winter months ahead”, concludes Lenz.
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