The residential property market on the pulsating, sun-kissed island of Ibiza is holding well, despite the lag in many parts of mainland Spain, according to a new report.

Overall the luxury market remains buoyant. There are fewer sales but they are higher value. There’s also reduced demand for the lower end of the market but correct pricing is the key to faster sales, according to the latest report by Engel & Völkers.

This has led to vendors adjusting prices to a more realistic level with current market conditions and a new 'breed' of cash buyer taking advantage of some good opportunities particularly for buy to let investors as the rental market is strong and growing.

“One of the great strengths of the island, is its international appeal which means that when one market decreases, another takes its place. Although the market has slowed down at the lower end, sales figures indicate that the market remains stable,” said spokesman Daniel Chavarria Waschke.

“Furthermore, most price adjustments of around 10% to 15% have been made mainly at lower end but this is more an indication of vendors' over inflated expectations. All our vendors will make money on their properties and at the higher end for top quality, prime location, prices have even increased,” he added.

Meanwhile demand is outstripping supply at the top end of the market. The cosmopolitan appeal of the island is a key factor, combined with the fact that hardly any investors buy with a mortgage so the island is not impacted by the global recession.

This upbeat state of play is echoed by Knight Frank’s recent Wealth Report, which shows strong demand for private jet hire to Ibiza, highlighting its popularity as a holiday destination for high-net-worth individuals. Additionally, more superyachts can be spotted in the harbours than just a few years earlier.

Edward de Mallet Morgan, a partner at Knight Frank, comments that many wealthy buyers in the past had been put off by the misconception that Ibiza was all about clubbing hot spots such as San Antonio. They are now realising the island also offers pine forests, inland lakes and beautiful, tranquil beaches.

Wealthy visitors are also drawn to neighbouring island Formentera, home to quiet Caribbean-like beaches, just a short boat ride away. Music mogul Simon Cowell and Fifty Shades of Grey star Jamie Dornan were both spotted here during the summer.

And it’s not just Europeans who love Ibiza. Travelling on a strong dollar, more Americans are joining the party. Wealthy buyers are opting for sprawling villas hidden in the hills. Popular areas include the small, whitewashed clifftop village of Es Cubells and homes close to the long sandy beach of Cala Jondal, both in the southwest.

For something closer to the action, addresses such as Cap Martinet, Can Pep Simo, Can Rimbau, Jesus and Can Furnet are in walking distance of Ibiza Town, which is full to the brim with bars, restaurants, boutiques and chic marinas. It also has beautiful views of the Old Town, or Dalt Vila, which UNESCO declared a World Heritage Site in 1999.

“Buying in Ibiza is good investment decision. Not only are prices continuing to rise, but growing demand from tourists means rental yields are attractive,” said Glynn Evans, managing director of Ibiza Sotheby’s International Realty. “In general terms, Ibiza’s rental market is very buoyant too. Family homes are extremely popular right now with long-term [rental] prices up 15% to 20% this winter.”

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