There’s no end to the Majorcan upturn in sight: In 2013, Engel & Völkers Majorca reported its best financial year since 2008. The 16 residential property shops on the Balearic island have outdone that performance in 2014: They increased the transaction volume (the overall sale price of all brokered properties) by 28.2 percent to 259 million euros (2013: 202 million euros). The trend of quick decision-making from buyers keen to avoid rising prices is significant in this growth. Whilst the overall number of brokered properties increased, more homes were also sold at the top end of the market. As a result, the average sale price rose in 2014 to 1.2 million euros (2013: 750,000 euros).
Rapid growth of premium segment from 5 million euros across the island
“There has been a considerable market shift. Prior to 2007, a top luxury villa would have been priced at around the 2 million euro mark. However, in today’s market that price bracket has moved up to at least 5 million euros,” said Hans Lenz, Managing Partner of Engel & Völkers Majorca Southwest. This trend originated in the southwest and has since spread to all parts of the island. “Buyer and developer interest in the southwest of Majorca is focused on high-quality properties in this price category.”
There is no discernible upward limit, according to the market expert and Engel & Völkers Majorca spokesperson Hans Lenz. “We are also seeing demand rise all over the island for premium properties worth upwards of 10 million euros. We expect this very strong growth to continue.” The highest sale closed by Engel & Völkers in the southwest in 2014 was for 18.5 million euros. A coastal property in Puerto Andratx also sold for a record price per square metre of 27,000 euros. This puts Majorca in 19th place in the ranking of the world’s most exclusive addresses published by Engel & Völkers in December 2014. The average price for properties sold rose in the southwest from 1.36 million euros in 2013 to 1.9 million euros in 2014. This constitutes a 27 percent rise.
Other Engel & Völkers shops around the island can also look back on a successful 2014 with dynamic sales activities:
In Palma, Engel & Völkers increased its transaction volume by 10 percent. The strong demand is centred here on the Old Town and the trendy quarters of Portixol and Molinar. Penthouses and apartments with balconies and terraces are sought-after, as are views of the marina and the Old Town.
Engel & Völkers recorded a 25 percent rise in transaction volume over 2013 in the exclusive Son Vida neighbourhood. Sale prices averaged here at 3 million euros. The level of property development in the area is currently high. Building plots in premium locations are proving particularly desirable – with a view to building villas in the sought-after top end of the market for between 2 and 12 million euros.
British buyers dominate the market on Majorca’s west coast. Prospective clients are particularly drawn to the picturesque villages of Deià, Soller, Puerto Soller, Valldemossa and Fornalutx. The average price in this region was 1.27 million euros last year.
In the centre and south of the island, Engel & Völkers also registered an intensified level of buying and an increased demand for building plots. Buyers are still predominantly from German-speaking countries and Scandinavia. Nonetheless, Engel & Völkers closed individual transactions with buyers from the USA and South America in these regions. One reason for the increased interest from overseas might be the Spanish government’s “Golden Visa” initiative, which came into effect in 2014. It makes it easier for investors from non-EU countries to receive permanent residency permits. These buyers are mainly interested in properties between 500,000 and 2 million euros.
In the north of the island, Engel & Völkers registered increased interest from UK-based buyers. Prices here for apartments are stable, while prices rose slightly for absolute top-end houses in rural locations. Alcúdia and Bonaire are particularly popular with property buyers. The main interest is centred on apartments from 300,000 euros, right through to highly exclusive villas in the double-digit millions price category.
In the northeast, coastal properties for between 2 and 4 million euros are proving most desirable. Engel & Völkers also recorded increased buyer interest in building plots. The majority of buyers are from Germany.
In the southeast, demand is highest in the region around Santanyí, especially for properties on sale for between 500,000 and 2 million euros. In addition, there is strong buyer interest in properties suitable for rental to holiday guests.
International demand bringing stability to the market
Foreign investors dominate the market for second homes on Majorca. German nationals continue to make up the largest buyer group. There has also been a marked rise in UK interest, due to the strength of the pound against the euro. Moreover, the relative number of interested buyers from Scandinavia is rising all the time. They already make up around 20 percent of the buyer demographic.
“International investors are continuing to show a keen interest in Majorca’s stable real estate market. They appreciate the quality of life offered by the island and are investing in properties set to retain their value. With economic stability in buyers’ countries of origin, this trend is long-term,” said Hans Lenz.
Penthouses and historic properties in a traditional finca style are particularly popular choices with buyers. As are modern new homes with the latest technologies and fittings. An appealing location overlooking the sea or mountains is a key factor regardless of the type of property. If everything is perfect from the exclusive location to high-end finishes and beautiful architecture, the price tag for such properties is usually of secondary importance.
Outlook: Yet more growth
Good land plots in Majorca’s prime locations are becoming increasingly scarce. Around 40 percent of the island is protected by nature conservation laws. In addition, there are strict building regulations in place. Tax incentives, introduced by the Spanish government and aimed at foreign investors, are causing an additional upsurge on the market. “With all this in mind, we expect prices for premium homes in Majorca’s very best locations to rise considerably in the long term,” Hans Lenz concluded.