Mallorca’s stable property market continues to attract foreign investors

The Balearic island of Mallorca continues to prove its reputation as a safe haven for real estate. Since the island was reopened to international visitors in July 2020, buyers from the German-speaking world in particular have kept demand high.

Engel & Völkers Mallorca brokered 217 million euros in real estate by July 2020

“There is positive development on the property market. Prices have not fallen over the past few months, and sales figures have also remained stable,” says Florian Hofer, Managing Director of Engel & Völkers on the Balearics, adding: “Foreign buyers see the island as a secure retreat ideal for a second home, where they can escape the uncertainty of a lockdown in their home country while making a long-term investment at the same time. Moreover, the real estate and construction industry generates valuable income for the local economy and secures jobs.” During the period from January to July 2020, Engel & Völkers on Mallorca achieved a transaction volume of 217 million euros despite the strict legal restrictions in place.

International real estate investments help the local economy and secure jobs

According to the Spanish Ministry of Development (Ministerio de Fomento), the proportion of foreign real estate clients behind transaction volumes on the Balearics was approx. 40 percent during the period from 2012 to 2019. Even during and after the lockdown phase, international buyers and investors were particularly active on Mallorca. Hans Lenz, Managing Director of Engel & Völkers Mallorca Southwest and Chairman of the National and International Real Estate Association for the Balearics (ABINI), comments: “According to the latest statistics published by the Spanish Property Registry (Registradores), the percentage of sales transactions by foreign buyers on the Balearic Islands in the second quarter of this year has remained more or less the same as in 2019. This vote of confidence, mainly from international buyers, not only brings valuable income to the islands, but also secures an estimated 100,000 jobs in the construction and real estate sector, as well as in related service industries.” The largest proportion of clients was from Germany, Austria and Switzerland, followed by the UK and France. Buyers from Scandinavia and North and South America are also showing increased interest in Mallorcan real estate.

In some places, such as the southeast of the island, Engel & Völkers registered an impressive 110-percent increase in client enquiries in June 2020, while in July 2020 the number of enquiries regarding luxury properties here rose by 150 percent compared to the same period in the previous year.  In the exclusive residential district of Son Vida, as well as in the central and southern regions of Mallorca, the number of client enquiries in June and July doubled compared to the same period in the previous year. In the peak season in July 2020, Engel & Völkers on Mallorca recorded on average every day a real estate transaction in the amount of between 300,000 and 12.9 million euros.

The southwest of the island in particular witnessed a rise in brokerage activities for properties in the double-digit millions. During the same period, growing numbers of German, British and Scandinavian buyers invested in real estate in the price category ranging from 2 to 8 million euros in Son Vida and the region around Palma. In addition, Engel & Völkers recorded increased growth in its rental business during the summer months, with rising demand for villas and apartments for long-term rental. “Clients are often signing rental contracts for 12 or 24 months with an option to extend. They want to get to know the island and the different locations better before they decide to purchase a property,” says Florian Hofer.

Virtual property viewings: Peak demand props up real estate transactions

In turbulent times in particular, Mallorca’s excellent infrastructure, healthcare system and  high standard of living make it a favourite location for both first and second homes. Many international buyers and investors were forced to wait for the island to reopen before finally being able to view their favoured property in person. Due to the travel restrictions in place between 15 March and 29 May 2020, the real estate agents at the 18 Engel & Völkers Shops on the island made it possible initially for them to view properties using virtual reality technology as part of a live video tour. “With social distancing regulations imposed, virtual viewings proved to be a practical tool when brokering real estate, enabling the client to gain an initial impression of the architecture and spatial distribution of the property in the first phase of viewing,” says Hans Lenz, Managing Director of Engel & Völkers Mallorca Southwest. The feedback has been thoroughly positive on both the buyer and the seller side: From June to July 2020, Engel & Völkers registered 14,000 virtual viewings on Mallorca. In July alone, the real estate transaction volumes on the island rose to 49 million euros. “Many of our clients cannot wait to finally view the property they have had their sights on, and are then very quick to make a decision to sign the contract. This demonstrates once again that international buyers regard Mallorca as a safe haven for properties in the premium segment,” says Florian Hofer.

Outlook: Real estate market with stable price development and long-term potential for returns 

“The real estate and construction sector accounts for over a fifth of the Balearic Islands’ total GDP. The real estate sector therefore plays an essential role in stabilising the local economy and safeguarding many jobs, especially in the coming winter months,” says Hans Lenz. Mallorca remains one of the most attractive locations in the Mediterranean. “The growing demand for authentic finca estates, contemporary new-build villas as well as high-end apartments and the positive price trend are set to continue to rise during the coming autumn and winter months,” Florian Hofer adds.