Mallorca Real Estate market report Q1-Q2 2013

So far in 2013 we have already seen more realistic pricing from property sellers, and we expect asking prices to fall further in the second half of the year as sellers adjust their prices in line with buyers’ expectations. Already, there is growing competition amongst investors seeking Mallorca’s most desirable properties in prime locations

MALLORCAREAL ESTATE MARKET Q1 & Q2 2013

Rafael CalparsoroDirector Lucas Fox Mallorca

www.lucasfox.comMALLORCA REAL ESTATE MARKET Q1 & Q2 2013

MALLORCA

REAL ESTATE MARKET: OVERVIEW

• Lucas Fox Mallorca has seen its best period of trading since business began, with more sales in Q1 and Q2 2013 than in the whole of 2012

• The Mallorca property market is predominantly driven by international clients looking for a holiday home or second residence

• Mallorca was the most popular tourist destination in Spain in the first half of 2013, with notable increases in British and Scandinavian tourists

• The new Residency Law which will enable non EU investors to get residency when they invest €500.000 or more in property is already attracting a great deal of interest from international buyers

MALLORCA

REAL ESTATE MARKET: SUMMARY

Mallorca property attracted growing interest from international buyers in the first half of 2013. This year has

seen the strongest international tourist levels ever, particularly British and Scandinavian visitors. Tourist numbers from the United States, Russia, North Europe and Australia are also growing. This is translating into strong demand for high quality, luxury holiday rentals and a growing interest in acquiring a second property on the island.

There are signs that sellers are gradually starting to adjust sales prices in line with buyer expectations. “More than ever, we are seeing more realistic price setting by property owners looking to sell” comments Rafael Calparsoro, Director of Lucas Fox Mallorca “The second half of 2012 was a reality check for many vendors, as prices started to drop to the right level. This year, more vendors are open to reducing asking prices and buyers are better able to identify a discount opportunity when they see one.”

“Villas close to the sea, properties on golf courses, large country estates and small country farms, apartments and palaces in Palma Old Town remain the most interesting to international buyers,” adds Mr Calparsoro.


Despite the more realistic pricing levels, buyers are continuing to do their research and want to be sure of the long-term value of their purchase. “These properties are being bought as a holiday home or second residence so buyers are much keener on getting the right fi t for their own lifestyle. We fi nd many buyers return to view properties on the island at least three times before they are ready to make a decision and buy,” Mr Calparsoro adds.

Ahead of the new residency laws expected to come into effect by October 2013, there are indications of growing interest from non-EU investors which should have an impact on the Mallorca property market in the last two quarters of 2013.

“The biggest discounts we have seen are in new build country houses and villas in the 3 to 5 million range,” comments Mr Calparsoro. “We expect greater interest in these discounted properties in the second half of 2013, as buyers become increasingly aware that there will be strong competition for these properties when the new residency laws come into effect.”

MALLORCA PROPERTY

TRANSACTIONS

The Balearic islands, which include Mallorca, saw subdued trading in the first half of 2013, after the usual end-of-year peak in property trading. An annual distortion of trends is evident in both

Spanish and Mallorca property trading as properties change hands at the end of the year to avoid the impacts of another tax year. This translates into a jump in property trading seen in December and January statistical figures.

The Mallorca property trading year often does not really start until the summer, and this has been the case again in 2013. While there has been strong interest amongst international buyers, this has not translated into higher levels of activity yet this year. In fact, across the Balearic islands, overall sales of property has fallen 13% lower than 2012 figures.

MALLORCA PROPERTY SALES PRICES

After a year when prices started to find their level in 2012, 2013 has shown a much more realistic pricing level being agreed between buyers and sellers.

Property prices held steady and in some areas lifted slightly, with prices in the southern area around the Southern area around Llucmajor falling most in price, to €1,665 per square metre. Sellers in Palma de Mallorca are finally showing some signs of being more realistic about asking prices, with sales averages dropping only €24 per square metre in the half year to €1,931 per square metre. West Mallorca around Calvia held steady, with prices reported at the end of 2012, ending the half year on €2,460 per square metre. East Mallorca around Manacor reported a price increase of €41 per square meter above end of 2012, reaching €1,076 per square metre at the midway point of 2013.

Amongst Lucas Fox luxury buyers, the highest demand for properties in Mallorca is for country estates and villas. Investors are looking for plots of land with large country houses or multiple buildings on the one site. In Palma de Mallorca’s Old Town, buyers are continuing to seek out large apartments (of more than 200 square metres) with sea views.

Property Sales Transactions: Mallorca and Spain: 2012-2013Source: ine.es

Mallorca Average Property Sales Prices Q3 2010 – Q2 2013Source: Idealista.com


€ per Square Meter

MALLORCA RENTAL MARKET

According to both Spanish web portals Idealista and Fotocasa, Mallorca rents shot up considerably in the second quarter of 2013, leading into the summer rental months with average increases of €0.65 per square metre recorded in all Mallorca districts. “As most rent averages shot up only in the final month of the second quarter, averages are expected to climb in the third quarter of 2013” comments Rafael Calparsoro

According to the Spanish Tourism Data agency Frontur, in the first half of 2013, 26.1 million tourists visited Spain overall,

Mallorca Average Rental Sales Prices Q1 2011 – Q2 2013Source: Fotocasa.es, Idealista.com

an increase of 4.2% over last year. The Balearic Islands (including Mallorca) and Catalunya were the principal destination for the majority of tourists. British and Nordic residents accounted for the largest growing tourist populations over 2012 figures.

Short-term rental demand is indicated, in part, by levels of airport arrivals to Palma de Mallorca airport. By the end of the second quarter of 2013, 9.28 million passengers had arrived at Palma de Mallorca airport, a drop of only 0.3% on 2012 figures and defying national trends, where passenger arrivals were down 5% as Spanish residents curtailed travel in

the wake of rising sales taxes. Mallorca’s status as a major luxury destination for international travellers protected the island’s tourism sector and helped contribute to the strong local economy.

FOREIGN INVESTMENT INTEREST

Lucas Fox website visitors looking for properties in Mallorca grew 88% in the half year to 30 June 2013, above the second half of 2012. In addition, the number of visits grew 127.39% in the same period. This indicates that not only did a larger number of people search for Mallorca properties this year, but many visited the site and researched properties on multiple occasions, showing a more serious interest in buying and renting property than casual site visitors.

International Visitors to Lucas Fox webpages for Mallorca property 2013Source: Google Analytics for Lucas Fox website

Mallorca Airport Arrivals (‘000s): 2011 - 2013Source: Aena.es

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Foreign interest in Mallorca properties grew fastest amongst UK, Russian and French residents. Investors in North Europe have also showed a much stronger interest this year, with the Netherlands, Brussels, and Italy more than doubling the number of visitor numbers to the website. Website visitors from Brazil, Singapore and India – while not in large enough numbers to be listed in our top ten countries of website visitors – were growing the fastest, all with growth rates in visitor numbers surpassing 300% increases.

LUCAS FOX ANALYSIS AND

PREDICTIONS FOR 2013

“So far in 2013 we have already seen more realistic pricing from property sellers, and we expect asking prices to fall further in the second half of the year as sellers adjust their prices in line with buyers’ expectations. Already, there is growing competition amongst investors seeking Mallorca’s most desirable properties in prime locations” comments Rafael Calparsoro, “We predict a fresh wave of buyer negotiations to commence as North European residents seek to claim properties in prime locations ahead of increased global competition when residency laws are expected to come later this year”.

“The top quality amenities on the island, including highly excellent golf courses, marinas, top class gastronomy and wine, and the island’s natural beauty are putting Mallorca at the top of the list for many international luxury property buyers who want to combine lifestyle demands with a sound long-term property investment,” adds Mr Calparsoro.

“Mallorca is an important office for Lucas Fox that adds to our recognition as the number one independent estate agency dealing with international clients in Spain,” adds the company’s co-founder Alexander Vaughan, “We operate the office along the same lines as our head office in Barcelona, and many of the international clients who initially invest in property on the Spanish mainland end up extending their interest to the Balearic Islands.”

“Autumn 2013 will see us launch our new Lucas Fox Property Lounge in Palma de Mallorca - a new concept in property retail space that will enable us to offer a more personalised service to our clients,” adds Mr Vaughan. “We are also working on new media related projects that will ensure that we stay ahead of our competitors, and continue to offer a complete property service to both buyers and property owners.”

The top quality amenities on the island which include its beautiful marinas, excellent gastronomy, leading golf courses and the island’s natural beauty are putting Mallorca at the top of the list for many international property buyers who want to combine a luxury lifestyle with a sound long-term property investment.
