Mallorca Property Market – The thorny issue of “affordability”

Palma

The dynamic of the Palma property market and, indeed that of most of the Island of Mallorca, is showing increasing signs of it falling in line with other premium locations across the globe. These cities, from New York to London, from Barcelona to Paris share one thing in common, they are premium brands, with limited supply and where demand is bolstered by free flowing international money. (Note: we will need to see how the Barcelona market reacts to all the political upheaval of late)

These are cities have been reinforced by globilisation. They are all united by a series of underlying characteristics – the attractiveness of the urban environment, a high quality of life, a broad offer of amenities, and excellent networks of international connections.

Understandably, with this massive flow of investment, the cultural and commercial offer continues to develop, the local economy thrives and this internationally driven “gentrification” takes ever firmer root. But as is always the case in a free market, these “benefits” come with a price which is another problem shared in these premium locations, namely that there is an increasing segment of the resident population that is finding it difficult, if not impossible, to satisfy their housing needs.

Compare Mallorca with rest of Spain when it comes to average mortgage payments. It is the highest in Spain –standing at 705 euros per month on average, compared to the 536 that are paid on average in the rest of the country. Add to that the problem of the rental market, where rents have skyrocketed driven by holiday rentals, and we can see how access to housing is becoming an important item on the political agenda.

We have already seen the introduction of new legislation associated with the holiday rental market and only time will tell what impact this will have, once the various individual Town Halls decide how the restrictions will be applied in each area. At the moment owners are not releasing their properties on to the longer term rental market, while they wait to see how this will all pan out, but at least, from a political perspective, the idea is that by reducing significantly the number of properties that can be rented short term ie to visitors / tourists, a large number of new properties will come back to the longer term leasehold market which in turn should drive down rental. Time will tell!

What makes Mallorca particularly vulnerable, in terms of marginalising an important segment of the population when it comes to accessing housing, is the economic structure of the Balearic Islands – basically a service economy with a relatively small number of professional / management level employment opportunities and very limited industrial employment. Consequence? A market that does not favor high salaries and employment contracts that are often temporary and seasonal. Low wages, underlying uncertainty in many employment contracts, and high house prices / rents are not good bed fellows!

Solutions? I don’t expect the demand side dynamic to change in terms of the flow of international capital. Nor do I see the supply side “giving” on the other (ie significant increases in new development to help balance the strong demand). So I expect prices to continue rising across the board although, as I said recently, at more modest and sustainable levels. In other words the market on it’s own isn’t going to solve the problem.

This means, in turn, that political solutions are needed. On the one hand politicians will need to work with the employers to see how wages can be increased and employment contracts improved and on the other a drive made to significantly increase the stock of social housing (to rent and buy).

To be fair first steps have been made. Unions and employers in the hotel and restaurant sectors of the market have agreed significant year on year increases in wages over the next 3 years, and it appears plans are about to be announced regarding a major injection of money into the social housing market.

Will it be enough? I fear not but, trying to look at life with the glass half full, I do hope some of these “structural” problems can be alleviated through well planned and proactive public intervention that finds consensus within the private sector. We are all in the same boat and a continuation of the problem of the “working poor” is difficult to justify in the 21st century.

 

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Country Hotels and B&B for sale in Mallorca

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I was offered this county hotel for sale in Capdepera and it made me ask the question as to what the current operational market is now for these sort of establishments?

I don’t pretend to me an expert in this field but I do have anecdotal evidence that competition for these properties has been warming up over the last couple of years and  having considered the market fundementals I am beginning to see why:

  • Visitor numbers to Mallorca have been growing year on year
  • General hotel prices in Mallorca have been rising across all segments of the market, but particularly the mid to higher ends. Country hotels have historically been expensive compared to similar quality offers in standard hotels and while the “offer” and “experience” is obviously different this gap has, in my opinion, affected the competitively of the rural / agroturismo market. With standard hotel prices rising the relative attractiveness of county hotels has increased.
  • The tourism season in Mallorca has extended significantly in Mallorca. While country hotels have generally operated in the lower seasons, the significant increase in visitor numbers and the associated availability of flights from most top European destinations has been of great benefit to the country hotel / Mallorca B&B market. Only a few years ago the general season was really no more than 5 months while now it is circa 9 months.
  • The last few years has seen a significant improvement in the quality and variety of “complimentary” tourist offer (ie beyond the traditional sea and sand, and this has been of major benefit to the country hotel market. Golf, gastronomy, hiking, cycling, bird watching, culture etc are now major draws

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Of course that does not mean that any hotel, or B&B, in any area of Mallorca will work but if the property is right and above all the location then I can see why this market has been flourishing.

In relation to the property I have been offered  the major plus point for is the location and “situation”. A country hotel MUST have a pleasant tranquil rural situation and this box is ticked! Situated in a quiet hamlet, along a country lane BUT within 2km of the medieval town of Capdepera.

In relation to location generally this area of Mallorca is for me “top drawer” because it benefits from the stunning nearby coastline and beaches, while also having all the rural charm the interior of Mallorca is famed for. Add to that 4 championship golf courses within 15 mins drive, top quality tennis facilities and some of the best cycling routes, then all sports fans can also be catered for.

That just leaves eating, drinking and culture! Yes, you won’t be disappointed!

zimmer-b-800The agency details for this property read as follows:

Beautiful historical country hotel for sale in the quiet countryside outside the medieval village of Capdepera in north east Mallorca.

The hotel located on a plot of 3,365sqm, with a living area is 455sqm and gross constructed of 680sqm (patio 46sqm, terrace 113sqm in front of kitchen and dining room, terrace 46sqm in front of the main entrance, private parking 285sqm in front of the main entrance).

The property has a rental license (VT) granted by the Ministry of Tourism of the Balearic Islands for up to 21 people.

Terrace area 2There is a 12x5m swimming pool in the garden surrounded by palm trees and pebble stone terraces. One of the two terraces is shaded by old fig trees and is equipped with a brick barbecue.

The main part of the building dates back to the 13th century (an historic defence tower), made up of the main house built around a patio with four wings. The open kitchen with fireplace, the dining room, a guest toilet, a storage room, as well as a living room with internet connection, are all located on the ground floor.

On two upper floors there are 10 double bedrooms, 4 of them with living rooms, 1 single bedroom, all with bathroom en-suite.

Swimming pool

The house has central heating in all rooms, so it is also suitable for stays in winter

The Hotel is situated heart of a small historical settlement in the north-east of Majorca located between Capdepera and Canyamel and is accessed via a small country lane. From here it is one kilometre to Capdepera, with its shops, cafes and restaurants. The Golf club Capdepera Golf is also within a few minutes drive from the hotel, as well as a number of other top golf courses:

Distances to golf courses in the area

Golf Canyamel 3,5 km
Golf Capdepera 4 km
Pula Golf Son Servera 7,5 km
Golf Club Son Servera 12,5 km

Stunning virgin beaches and sandy coves can also be found near by including:

Distances to the beaches of the area

Cala Mesquida 7 km
Cala Agulla 6km
Son Moll 5 km
Font de Sa Cala 5,5 km
Canyamel 5 km
Costa de los Pinos 12 km
Cala Torta, Mitjana und Estreta 17 km

All in all this hotel is perfectly located for attracting clients all the year around and is located in one of the most beautiful areas of Mallorca

If you are interested in this property please contact me

For additional photos see rural hotel and B&B for sale in Capdepera

 

 

Palma Port & Marina Expansion Plans – Another boost for the Palma Property Market?

autoridad-portuariaThe Balearic Port Authority announced yesterday the granting of a new 25 year concession licence for Palma marina / port that is to be coupled with a major 50€ million investment that will see large areas of the Marina upgraded including a design that will radically alter and improve it’s integration with the city and the Passeo Maritimo area. An open, free access, pedestrianized axis will link the cruise ship terminal with the city while many of the Marina’s amenities and buildings will be upgraded, benefitting the marina club members and visitors.

The project envisages a 40% increase in the size of the marina, with the construction of a new dock, 3 new buildings and extensive commercial and leisure areas. The new concession will also result in a boost to public finances with fees of 250€ million anticipated over the next 25 years.

club-de-marBorja de la Rosa, president of the Club de Mar Mallorca claimed that these proposals would be a great benefit “not only for club members, but for the whole city of Palma, as the new club would be an example of the new concept of fully integrating a marina with the city”.

José Luis Arrom, Managing Director of Club de Mar Mallorca, explained that the project had overcome all the requirements of the different public authorities due to the strategic and sustainable nature of the project. “From the first moment we knew that the connection with the city and environmental issues were a priority. We wanted a XXI century marina fully adapted to the demands and social and environmental sensitivities of today”.

The works will take place over the next 3 or 4 years. starting in October of 2018.

Consequences for the Palma property market? While clearly the market as a whole is not in any need to any extra boost (!!) and in that sense I do not think it will make a real difference globally, I do think that, at a more local level, there will be a noticeable effect, with those areas of the city closest to the marina, the new access points and commercial leisure areas, receiving an extra “fillip”

Looking for property in Palma? Contact me for a no obligation chat.

Mallorca Property Prices Update October 2017

Son vida villas for sale

As I have been reporting of late, Mallorca property prices continue to rise strongly and, according to the respected web site precioviviendas.com, for the third consecutive quarter, the increase of 4.32% puts Mallorca as the only area in Spain where increases exceeded 4%, and the leading region in property price growth for the last three quarters. That said this growth was somewhat less than the 5.74% registered for the second quarter and 5.12% for the first.

We will have to see if this slowing is part of a trend but even if it is I don’t see this as negative as I believe that over the next 12 months we will see the market move to a different dynamic of slower but sustainable rates of growth. Annual growth rates of over 16% are not sustainable long term so what will follow is a slowing in growth levels BUT not, I strongly believe, any price correction.

You can read in my recent articles about the “fundamentals”  of the market, that these remain, in my opinion, very strong from both supply and demand perspectives. I shift to lower yet still positive real growth (ie above inflation which stands at 1.8%) is what one would expect and hope for at this point in the market cycle. If pushed I feel growth over the next 24 months will be in the order of 8-10% per annum so this is still a good time to buy. I can not see any price “correction” in the foreseeable future.

If you would like to discuss my professional property finding services please contact me.

 

 

Es Capdella houses for sale in Mallorca

Es Capdella village

Es Capdella is one of the most popular villages for foreign investors and residents, looking for a small piece of traditional and quiet Mallorca, yet all a stones throw from the amenities and “buzz” of coastal South West Mallorca.

Es Capdella CalviaThe problem is that the village is small and demand invariably outstrips supply leading to only one thing, rising prices! While value for money can still be found it isn’t always easy to find the right property at the right price. With that in mind a rather liked the look of this property – a project that is true, so not for someone looking for a “key ready” property, but sitting within the urban area, so thus not effected by the much stricter planning regulations found in the rural areas, this project is manageable and easily delivered, offering buyers the chance to build a good sized home to their design and specification.

The basic agency details are as follows:

house and gardenWonderful opportunity to buy a well priced house in the best location in Es Capdella. This is a project! The property needs to be fully restored but can also be extended by circa 120m2 to leave a very spacious 300m2 built area.

Elevated position offering great views! This really is an almost blank sheet of canvas to create your dream Es Capdella home!

If you could be interested contact me and I will arrange a viewing. Contact me

Other opportunities in Es Capdella?

Capdella Town HouseI like this town house. Needs an update, and a wee bit of a rear elevation face lift, but otherwise in perfect structural order and very spacious inside with 4 double bedrooms, large living areas, garage and outdoor kitchen etc. I might also try to improve the communication between the house and the garden, and put in a small pool but all easily done. Lovely views and another quiet location so worth a look. Contact me for more details

IMG_2403This new build villa with it’s classic design is situated in the best location in the village and is the perfect family home for those looking to relocate to Mallorca. International schools are close by. See Es Capdella houses for sale

Looking for a finca / country home but on the edge of the village within walking distance to everywhere? A partner of mine has a really great project for sale. Like the one above it is a refurbishment and extension but on a bigger scale. Over  2,000m2 of land and possibilities of a house of 600m2. Again Contact me.

Capdella sThis villa in the centre of the village but with spacious accommodation and garden is another gem .

This rustic style home in Es Capdella has a plot of 1.200 m² right in the heart of the village. The property is approximately 380 m² built with a spacious living/dining room. fireplace, a fully equipped high quality kitchen, a utility room, in total 4 bedrooms and 4 bathrooms, 3 of them en suite. The villa was built in 2004 and features a double garage, a beautifully landscaped garden and a swimming pool.

For family reasons (the mother in law – Ummmmm!) I am a regular visitor to the village (by the way the local hairdresser does the best value haircut in Mallorca!!!) so if you have any requirements let me know!

Stunning Modern Country House for Sale in Alaro Mallorca

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There are times when I need to give a little “plug” to a property! Could be that it is good value, or in a great location or is just a great design! On this occasion the property in question is ticking all these boxes for me!

The house is a wonderful modern finca / county house situated in the spectacular countryside outside Alaro village, nestling below the two mountains that give the area that unique feel. Private but not isolated the property is walking distant (15 minutes) to the village and offers very spacious 5 double bedroom, all with ensuite bathrooms, accommodation, great outdoor terrace areas, pool and gardens.

M and M Alaro modern finca-7853What is often so hard to find is that modern design (interior and exterior) in a rural location in Malorca so if that is what you are looking for I would take a serious look at this one:

The agency details read as follows:

Stunning modern country house for sale in Alaro, Mallorca. Settled perfectly between the Alaro peaks of the Tramuntana mountains, this stunning villa has spectacular views. Extensive outdoor space includes contemporary gardens, a dining area and a stunning infinity pool. Located just 2 kilometres from Alaro town, there are plenty of activities, shops and restaurants to enjoy.

_R6A5220The bespoke villa has outstanding facilities and sensational local views. With a truly impressive exterior and an utterly exceptional finish, expect this Alaro-based villa to take your breath away. The five star villa has a contemporary style designed by award-winning architects Luis and Jaime Garcia-Ruiz Guasp with sophisticated furnishings that have been exclusively designed. The two luxury living areas and large modern kitchen boast a mix of calming natural colours, sumptuous sofas, stunning central fireplace and state-of-the-art appliances. Elegant marble surfaces glisten throughout while large flawless windows offer far-reaching views towards the lush mountains.

MandMAlaromodernfinca-7656-LIt has been completed with an exclusive interior design, which aims to combine modern Mallorcan, Scandinavian and the best of British design with unique pieces by designers including Philippe Starck, Artek, Vita, Men-u by Norman Mailer, amongst others. Additional features are: high quality finishings, under-floor heating, air-conditioning all ecologically powered, extensive gardens, pool surrounded by a wooden deck, and stunning views from every corner of the house. There is 35m2 old casita that could be converted into gym or staff quarters.

final2For more details and images see Alaro Country Houses for Sale 

To arrange a viewing please contact me

For another stunning Alaro house for sale click here. Contact me again for more pictures

Inaccurate Mortgage Valuations in Mallorca and Spain

Valuations

I was very pleased to see this article (see link below) from my friends and fellow Chartered Surveyors, Survey Spain, giving a little more meat on the bones for those of us battling to explain the perennial problem of low and “inaccurate” mortgage valuations in Spain! I have lost count of the number of times I have had to try and explain that mortgage valuers rarely value properties at the purchase price and that just because the valuation is 15 or 20% less doesn’t mean the client is “buying badly” or is “over paying”!

What Survey Spain have been able to do is use their contacts within the Spanish valuation community to actually look at some examples together, and thus see where methodology differences are impacting on the reported figures.

Chartered Surveyors in MallorcaWhat is clear is that the rules and methodology imposed on the Spanish Valuers are largely to blame for the problem. All valuers work within a framework of regulations, like we do as Chartered Surveyors with the “Red Book”, but it should be stating the obvious that those regulations should be there to ensure consistency and accuracy in identifying an estimate of open market value (ie what a buyer will pay for the property in the open market!) rather than some academic exercise divorced from the way the market operates and prices property!

See here for the full article found on the Spanish Property Insight web site – Why are tasador valuations always wide of the mark? 

While to be fair a lot of the differences identified within the article are very specific to the two cases they were looking at, some broad conclusions can be reached as to why  these valuations need to be taken with a “pinch of salt”, if what we are looking for is an accurate “open market” estimate of value!

  • The big one, as they say, is deducting 15% for costs. ie they appear to take the open market value and deduct the 15% while we would quote the open market value and simply advise clients that “to this one will need to add up to 15% to cover buying costs”.
  • Covered terraces appear to be dealt with in a variety of different manners (cost or value) that have little or no baring on the true open market value that the space offers the property. Valuation is an art not a pure science but to take arbitrary figures like whether a covered terrace is more or less than 15% of the built area and then apply a “cost of construction” or “end value” valuation to the space, is bizarre to say the least! What any of this has to do with open market values I really don’t know! Their actual values will depend on a whole host of factors – orientation, views, situation of the property etc and these can only be accurately addressed on a case by case approach rather than via artificial formula.
  • With valuers having to guarantee their figures for 6 months, and given the rap they were given for their over inflated valuations prior to the crash, it is hardly surprising that they now “cover their backs” and will want to err on the side of caution when setting the final figure!
  • Point 6 in the article,  ie that the Spanish Valuers are paid very little for each valuation, hides a very key problem and that is “comparable evidence”. All valuations need to be based either on actual sales of “similar” properties OR, as is the case in Spain, where reliable data on actual sales figures are very difficult to obtain, on asking prices LESS a % deduction for “negotiation”. How much that deduction should be will depend largely on the strength, or otherwise, of the market but can average out to circa 5-10% in a “normal” market. The properties used as comparables, quite obviously, need to be as similar as possible in terms of their character and location / situation as that of the subject property. In reality in Spanish valuations you often see properties from different villages / locations, or vastly different characteristics that make you suspect “time is of the essence” in getting the exercise done rather than care, attention and accuracy at the moment of putting a value on the property!!

The long and short is that if you are buying a property, and are taking out a mortgage, hope and pray that the valuations is what you need for achieving the loan that you want but DON’T expect it to accurately reflect the open market value of the property or the price you have agreed to pay!

If you would like a Property Finding Service from a Chartered Surveyor that will not only identify the best properties but help in identifying their underlying values to assist with negotiations  then please contact me.

Saturation in the Tourism Market – what does that mean for the Mallorca Property Market?

DOCU_GRUPO Tourists crowd Palma de Mallorca's Arenal beach on the Spanish Balearic island of Mallorca

Tourist numbers, and the overall strength of the tourism industry, generally follows a pretty similar cycle to that of the property market. This is of course normal where the property market is heavily influenced by foreign buyers and the general economy also strongly biased towards tourism. Growth in the tourism industry generally means more jobs (yes there may be a short lag) and that means more income and mortgage lending to boost local demand. On the international buyer front, the factors that drive a rise in tourism numbers – the health of the economy in the countries from where the visitors come from; the relative attractiveness of other locations (security etc) and the quality of the overall offer – are also all relevant when it comes to property buyers.

So the fact that this year has seen record levels of tourism, it is to be expected that the property market should also have been “chipper”!

So what should I read into concerns of “saturation” in the tourism market, all be it concerns from local residents when questioned about the impact of so may visitors this year?

It goes without saying that if residents are feeling more than a little overwhelmed (2 out of every 3 interviewed felt there was a need to restrict numbers) then, in parallel, there is every chance that regular visitors, such as those that have second homes in Mallorca, and who are an important component of the demand side of the property market, are also going to feel the same. If the attractions of Mallorca – it’s beaches, towns and villages (particularly Palma and emblematic locations like Deia. Valldeossa, Soller and Pollensa), the Tramontana mountains etc – are at breaking point, because of tourist numbers, then the “attraction” of your home here is also likely to diminish. You expect to need to get to the beach early on the mainland to book your m2 of beach, but not in Mallorca, You expect traffic jams and a parking nightmare in cities like Barcelona, but not in Palma. You expect to be stuck behind tourist buses in the Costa de Sol but not in Mallorca!

So “yes” it is relevant that we may have reached a “saturation point” and “yes” it is something that needs consideration. All sectors of society need to come together an discuss a “win win”. The locals must win and so must the visitors. We need more visitors out of season, we need a more diversified economy and we need a greater variety of attractions for visitors. Above all we need a political consensus that is not dictated by any one lobby, be it the large hoteliers or those behind the “free for all” in the residential holiday rental market. We want quality not quantity because that is what Mallorca is all about – a small island (quantity) with buckets of attractions (quality)! We need a model that is environmentally and economically sustainable and dynamic, that is controlled but not strangled!

It is clear that this is on everyone’s agenda, but now we need to see if there is a will to find a consensus across political lines and between all sectors of the economy!

So is this “problem” about to undermine the Mallorca property market? The short answer is “no” but that doesn’t mean we should not all face up to the problems facing the Island, and the need to address these issues. I firmly expect the market to maintain it’s upward trajectory into 2018 but, if nothing is done, expect “saturation” (along with the associated thorny issue of residential short term rentals) to be driving forces behind a brake in the market in 2019 – 2020. I am not saying a downturn or crash, but yes a “pause for thought” at least!

 

 

Mortgages in Mallorca – should I, shouldn’t I?

Mortgage Brokers in Mallorca

Stating the obvious  a key reason why one might want to consider a mortgage will be for the simple reason of affordability! But beyond that there are some good reasons why a “purchaser” (and I make a very clear distinction here from an “owner”) may want to consider a mortgage.

Unlike in other part of Europe, including the UK, in Mallorca and other areas of Spain it is often very complicated to release equity after a purchase has been completed, not withstanding the amount of equity in the property and the personal financial position of the owner. If you think there may be a reason in the future why you might want to access your capital, without selling the property, it may well be better to take out a mortgage on purchase rather than “waiting to see”!

With interest rates so low it isn’t difficult to see why maintaining liquidity might well open up other areas of investment with higher returns. ie mortgages are traditionally “cheap money”!

Furthermore a mortgage can reduce some important tax liabilities, such as the wealth tax and inheritance tax, as the mortgage amount is deducted from the value of the property, and tax only payable on the balance.

tax-authorities-in-mallorcaTo be fair this is really only an issue for the wealthiest buyers, purchasing “big ticket items” but it is still worthy of note! Taking a look at the current Wealth Tax position in Mallorca will demonstrate the position:

What is the Wealth Tax?

An annual tax, payable on the total value of your taxable assets as at 31st December. The tax is applicable to worldwide assets for Spanish residents but only assets located in Spain for non residents.

How much is the Wealth Tax?

In Mallorca and the wider Balearic Islands the wealth tax rates currently (2017) range from 0.28% to 3.45% of the total value of the assets. This is a progressive tax with the highest rate applying for assets over circa €10,000,000.

That said there are tax free allowances of €700,000 per individual (and an additional €300,000 allowance on one’s main home, IF one is a resident ie non residents only receive the individual allowance of €700,000.

So as one can see it is really only a “blow” for the wealthiest but if you are one of them it is a very relevant “blow” and one where appropriate tax planning is recommended.

For more information on mortgages, tax planning or buying a property in Mallorca please contact me

 

 

 

 

 

 

 

 

Port Andratx Villa Shortlisted for Worlds Best Villa Award

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Really pleased to see this stunning villa shortlisted, along with 13 other properties, for best villa at the World Architecture Festival (WAF) 2017.

Product of the Gras Arquitectos studio, led by Guillermo Reynés, this stunning property, “Where Eages Dare” is located in Port Andratx and offers the most incredible panoramic 360º views over the bay and countryside.

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According to Guillermo “the property is owned by a British buyer who wanted the best possible views with absolute privacy” and it was from there that the idea of making the house “fly” came from – projecting the construction out from the hillside just as a “eagle jumping from it’s nest”!!

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With this design the house distanced itself from the street while gave the design a feeling that it is “floating above the valley”.

Good luck to Guillermo and the team. Great guy, great practice!

Interested in buying a property in Port Andratx? Why not contact us for a no obligation chat as how we can source the best properties for you including:

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A beautifully presented villa in the Port of Andratx with stunning port and countryside views

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A new Mallorca villa in Port Andratx is just a few minutes from the port offering beautiful views of the sea

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A Port Andratx Villa that has been recently completely reformed. The house is overlooking the entire Port of Andratx

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Port Andratx villa located at the highest spot of the area and and offers great panoramic views across the natural harbour of Port Andratx and towards the sea.

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This villa in Port Andratx is located, directly opposite the yacht club, was lavishly renovated and comprises a former summer house that was one of the first houses in this location. From the various terraces you can enjoy the view of the port of Port Andratx.

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A new Villa in Port Andratx with panoramic sea view over Cala Llamp and ready for occupancy by the end of 2017. Offers absolute privacy