Mallorca, Menorca and Ibiza form part of a territory blessed with beautiful nature and extraordinary Mediterranean quality of living. The Balearics Islands, form an area that is a world leader in the Tourism Industry, with mature and professional companies running a business in respect with the environment and the myriad of visitors that arrive every year.
Out of this loyalty and love for the Islands, a second home market emerged firstly in Mallorca over 40 years ago. The interest in purchasing a home in the Balearic Islands quickly spread and the same desire that continues to drive the Tourism Industry has kept the property market in continuous development and improvement over the last decades.
Over the past six years there have been many changes on a global economic level and there has always been a great debate on the strength and resilience of the second home market in the Balearic Islands.
Thanks to the work of the Notaries’ Association in Spain we now hold valuable information that provides a clear picture and understanding of what exactly happened during the crisis years and how new developments are taking place in the market that indicate what can be expected in the coming months. The big headlines in the international Press indicated a disruption in line with the situation in Mainland Spain and this of course took a toll on the confidence of Mallorca, Menorca and Ibiza as a safe place to invest.
As the above graph indicates, the only episode with a negative trend in the number of properties sold to Non-Resident purchasers in the Balearic Islands is the months leading to 2008. From there, the recovery of the real estate market was immediate and already in 2010 the number of properties sold to foreigners was equivalent to 2007, the best year recorded. Since then the market has been a steady increase in number of sales that is positioning itself 30% above 2007.
Engel & Völkers is also recording a strengthened demand for property in the year 2014. In Mallorca, Engel & Völkers has experienced an increase of 63% in the first quarter of 2014. The path seems to be clear: the number of sales to Non-Residents will also increase in 2014.
So what happened in 2008? The global financial turmoil had an effect on the behavior of purchasers; there were greater problems to worry about: keeping companies afloat, saving personal careers, adjusting to a new, unexpected and scary situation. Of course, buying a holiday home was no longer filling a top position in the priority list and on top of this, the Press was continuously sending alarm messages. As we now know, this halt was in fact very brief.
Taking a close look at how the buyers groups by nationalities developed in the last six years, it is interesting to see how the rippling effects of home economies and behavioral patterns translated into numbers.
The strongest crash in 2008 was produced by UK purchasers, which were doubling the number of German purchasers before the crisis. The recovery of the UK buyers’ market is only starting to recover as of 2011. The reasons were pretty clear from early on: British economy and housing market in the UK were taking a big hit, the exchange rate had taken a very negative trend making it much more expensive to buy for Brits and in order to make things even more difficult, Spanish Banks were no longer prepared to extend loans of property purchases.
In comparison, the extraordinary increase in German buyers has surprised many and shown in numbers, becomes almost overwhelming. The confidence of German purchasers barely took a toll in 2008 and for an economy that has a very strong culture of saving and is always concerned about inflation, investing into real estate in the Balearic Islands was a sensible solution. The desire to purchase a home away from home in the country’s favorite holiday destination remains unbroken. The lifestyle quality and social network created by purchasing a residence in the favorite locations in Mallorca, Menorca or Ibiza make this experience so attractive that we daily see this group growing in number and motivation.
Since 2011 a new trend became visible. Scandinavian purchasers with Swedish buyers well in front decided to focus on the Balearic Islands for real estate investment. There are a number of factors like the strengthened crown that helped this movement, but above all there is always the word of mouth amongst friends that fuels these growths.
Finally, the myth of the Russian market, something that is included into uncountable conversations and questions directed to experts, becomes clear in the figures provided by the Notaries’ Association. The Islands have not positioned themselves in such a way in the minds of Russian purchasers in order to create a movement. As a matter of fact, the Russian purchaser is in general quite unaware of the Balearics as a second home market, especially so when compared with other regions in mainland Spain or Southern France. With a steady increasing amount of Russian Tourists arriving to the Islands every year and with a slowly but steadily growing number of Russian families that have decided to move permanently to Mallorca, there will surely be a soft increase in this buyer’s market. Nevertheless, there is nothing that can indicate an explosion of sales to Russians.
As a conclusion it is safe to say that the crisis in the Real Estate Market for second homes in the Balearic Islands only lived for one year. Today, the figures we are seeing prove the fact that the amount of persons interested in enjoying an investment in Mallorca, Ibiza and Menorca is growing as this report is being elaborated. The Spanish Residents property market has always lived as a separate entity and there will undoubtedly be many obstacles ahead until a full recovery takes place, nevertheless it is becoming clear that in prime locations, there has never been a real crisis, even in local market.
Engel & Völkers will continue to provide helpful information and facts, in order to present a transparent and unbiased view on the Real Estate Market in the Balearic Islands.
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