Mallorca is fashionable among foreigners investing in property

We are always keeping an eye on the real estate market in the Baleares. In the attempt to also keep you informed, here are the most recent numbers regarding the real estate market of Mallorca, as summarised by Mr. Alberto Magro for  "Diario de Mallorca". 

An English translation of the Spanish article of July 21, 2014. 

For the original article, please follow this link

 

Mallorca is fashionable among foreigners investing in property

 

In the last year they have purchased 2.400 assets - The islands have a sale rate that is three times higher then the rest of Spain - The luxury segment has a strong impact - 15% of the purchases are of properties of more than 500,000 Euro, while this segment in general Spain is of only 5% - The industry assures that the investing appetite has been strongly growing since 2012

If Mamaluf is not taken into consideration, Mallorca is fashionable. And not just among the hooligans. The island that has reigned in the tourism of Mediterranean sun and beach for the past three summers is today the most appetising piece for the international investors thirsty for profit. It is documented by three real estate reports by specialised consultants and the Registrars of Property, and confirmed by some of the leading industry agencies in Mallorca. All point to the same thing: the island is attracting foreign buyers at a pace not seen since the crisis began. And different types of them. On one side there is the Central European and Nordic middle class that sees on the island a chance to guarantee an apartment from which to get a return on their savings with vacation rentals for years to come, before using the property as their retirement home. Alternatively, shine big foreign fortunes who have also found in the stagnant property prices on Mallorca a way to increase even more the purchase power of their money.

 

Both phenomena are reflected in data. According to the latest report from the Association of Property Registrars,  in the Baleares the number of homes sold to foreigners in a year has tripled. Only Valencia and the Canary Islands are getting close to these figures. More: one in three homes sold on the islands (30.7%) is in the hands of foreign investors, while in Spain only 11% of the operations have a foreigner as a buyer. And more illustrative of the type of customer that is seduced by Mallorca: in no other part of Spain are foreigners buying more property more expensive than 500,000 euros. In fact, 15% of sales are of this type, compared with 5% average in Spain- no other community is not even getting close to a 10% of purchases of high level. "At the airport, this year, we cannot fit more private jets," summarises the president of the constructors on the island, José Luis Guillem, who says they have partners who have turned the luxury properties for foreigners into their best business.

 

German fortunes

Most of the luxury buyers are Germans, starting with senior executives from BMW to star managers of Siemens and Deutsche Telekom. They are so many that, as a result, 36% of foreign purchases made on the island carry a German passport. British pounds are also finding accommodation near the beaches of the island, although the English are somewhat more temperate: 18% of sales speak the language of Shakespeare and Punta Ballena. After that, in the statistics appears a mix of European languages that represent around 5% of the real estate transactions on the island, among which Swedish, French and Italian, which start to be joined by the Swiss and, little by little, timidly, Russian, Dutch and Austrians. They are many but could be more, says the head of the consular section of Russia in Spain, Konstantin Dorokhin, who explains that bureaucratic traps and legal constraints make that the properties that the Russians want, are not being sold to Russians.

The Germans have less problems - who have gone from considering the island as theirs to making the island their own. It has been like that for decades now, but now the money moves faster and in greater quantity. The reason is explained by Domingo Chaparro, agent of Perera & Partner, who works primarily on the German market in one of its areas of greatest presence: Cala Ratjada. "The last winter went well in sales. Now summer we stumbled over, but we continue to rise, especially with Germans. For them Mallorca is now a cost effective option. The prices are very tempting, especially when in Hamburg or Berlin the cost of housing has doubled in recent years. So there are banks givingloans of more than 100,000 euros there to buy here for a ten-year fixed 2% interest. They then put the property for a few months every year for rent and it gives an annual return of 9%. That covers bank interests and pays community fees, taxes and maintenance, and they have at the same time an apartment for vacations that is paid for their retirement in a few years. "

Chaparro refers to its main customer type: middle class with savings of a lifetime of work, which is what comes to Cala Ratjada. But there is another type of German customer: the one with money, who is accelerating sales in Palma, Calvia, Andratx, or Tramuntana or Costa de los Pinos, for example, where there are luxury mansions rented for reaching 500 to 700 Euros per day. "It's normal that all goes well: we are a stone's throw from all over Europe, not counting the private aircraft that makes it even easier," says the leader of the developers. An analysis that is also supported by Alejandro Grau, director of one of the Islands' largest real estate agency on the island, Solvia, belonging to Banco Sabadell, who draws two different profiles of the investor with deep pockets: the one who is buying mansions for his summers and the one who puts money in iconic buildings and makes them profitable by renting them to businesses: "Among the investors looking for unique assets, iconic buildings, we are detecting an increase in confidence. They are mostly German, but also English and Nordic. "

Thanks to them and their euros in search of profitability in a Mediterranean paradise, the Balearic Islands stand out as one of the only three Spanish communities in which house prices rose over the past year. And the only one in which the square meter prices rose more than 3%, as revealed by the Ministry of Development'sdata collected by a report from the Institute of Business Practice. The result is that the construction sector remains depressed, after 25,000 jobs have been destroyed in this crisis, but at least it begins to see a horizon of trust that the rest of Spain does not even dare to dream of. The builders and developers themselves are saying it, who remember that the Baleares and Navarra, are the communities that are closest to eliminate their stock of unsold homes.

That, little by little, is resulting in a return to construction activity. Solvia, for example, is being encouraged to use the money that was received after the purchase of CAM by the Banco Sabadell to promote their own developments as in locations like Cala Vinyas and the urbanization Las Palmeras. So do island developers specialised in the sale of luxury to foreigners. And large international real estate groups that have specialised in the segment of high class. That is reflected in the figures like the slight rise of work endorsed in the first half of the year, an increase of 4.7%, according to the Association of Architects of Islands.

 

Takeoff Property?

All this puts Mallorca on the ramp of exit out of the housing crisis. Although there is still some way to go. Although the islands are, with Madrid, in a better position than anyone else, 4 years will pass before the huge stock of unsold property is digested and the crisis is over. Specifically, we have to wait for 2018. Or this is how i's being calculated bythe Acuña & Associates consultancy. Mallorca is fashionable for more than Mamaluf, but the excesses were not only ethylic and phallic: the real estate sector also lost control. So Mallorca's real estate is still hangover. And for sale. The buyers are abroad.

Horia Mainescu