Mallorca’s resurgent property market

Mallorca’s resurgent property market makes it the perfect choice for an island home with financial fringe benefits, says James Matthews

A haven of sophistication, culture and tradition, the island of Mallorca has long attracted a cosmopolitan pool of holidaymaker to its shores. From deserted white sand beaches to craggy pine-clad mountain ranges, the exquisite architecture of historic buildings to flower-filled fields heavy with citrus trees; the bite-sized island offers every kind of beauty. And it isn’t just the topography that keeps visitors coming back for more.

Interest in property it seems, has never been stronger with previously flat lining prices now on an upward trajectory as of the first quarter of the year. It’s a trend, explains Jacqui Nash of Nash Homes Mallorca, that’s primarily due to the shift in the supply/demand balance. “The reduction in available housing stock is leading agents to actively source properties to market for the first time in many years. Liquidity is returning with prices up by an average of 10% for the best quality homes in the top destinations.”

As to where buyers are heading: “Hot spots tend to be the pristine coastal locations such as Andratx in the scenic south west of the island,” adds Nash. “Palma the historic old town and the fashionable port areas of Portixol and Molinar are sought-after locations for apartments with outdoor space. Son Vida is also experiencing a mini boom with demand for contemporary style properties with sea views. The sale of plots has trebled since this time last year and in the South West, where over 40% of all sales are made to foreigners.”

Favoured areas in the North include Pollensa Town and the Port with increasing interest for the coastal areas of Mal Pas and Alcanada. In the North East prices are stable with exceptional value offerings around the €500,000 mark. “Quite a few overseas buyers are looking for traditional fincas and larger estates with properties to restore,” adds local agent Iris Gruenewald. “The South East is a good stomping ground too for those seeking a larger traditional property with good-sized garden. The area continues to represent excellent value and investors are currently buying a range of properties from €300,000 to €3 million. Location is key. It’s easy to fall into the trap of buying a “better” property in the wrong place. Always ask yourself who will buy your property when you eventually sell in the future?”

The Knowledge

Mallorca is a micro market with its own supply and demand depending on exact location. Disregard general reports on property in Spain.

There is no MLS or central listing system in Mallorca, properties will be spread amongst hundreds of agents and details for the same property often vary.

 In 2015 Capital Gains Tax (CGT) reduced from 21% to 20% and in 2016 it reduces further to 19%.

The recent European Court of Justice ruling states that Spain can no longer discriminate between residents and non-residents. This means that inheritance tax for non-resident property owners reduces from 34% to a range of between 1% to 7% depending on the beneficiary.

Banks are now offering more mortgages with up to 70% financing available and rates as low as 2.75% in year 1 reducing to around 2% in subsequent years.

Whilst the pound has fallen back from its 2015 highs, the first quarter of 2016 started 6.5% ahead of the starting price in 2015. Many analysts predict that it will gain ground again over the autumn and into winter, increasing spending power of UK buyers.

Building regulations are exceptionally well defined in Mallorca, unlike UK where they are often open to interpretation by local council planning committees. However, plot availability is shrinking