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Market ReportBalearic Islands 2012/2013

Positive Year For The BalearicsIn spite of the pressure on the euro and the general state of the Spanish economy TheBalearics has, in general, had a good year according to Engel & Völkers Estate Agencywith 20 shops throughout the islands.All areas are reporting sales mainly at the upper end of the market which is underlined by thefact that the average sales price in Mallorca and Ibiza is reported as just under 1 million Euros.assisted by better flight connections and the strength of their own economies andcurrencies.Mallorca retains its reputation for offering quality property in beautiful locations withaverage sale price ranging from approximately 500,000€ in Palma old town and thenorth east through to 850,000 in the north and west with 1 million€ being recorded asthe average sales price in the areas of Palma’s surroundings, south west, east and centralisland.In 2012 major sales of 10€ million in the south east and over 8€ million in the south westindicated that many big investors believe that prices are close to the bottom. This yearhas got off to a cracking start with the first sale of 8€ million Euros in the south westachieving a record 22.500€ per sqm.The market looks to remain stable and it’s still a buyer’s market predominately ofcash buyers. Negotiation margins have come down to pre-crisis averages of 5-10% andproperties in top locations can command their asking price. The average sales periodvaries from between 6 months for a really special or well priced property through to 12/18months. Some properties this year have sold within 3 months but these are the exception.rental revenue. Russians and Scandinavians are coming into the market for peak seasonbookings especially for designer properties close to the sea and with sea views.New developments for Mallorca in 2013 include direct flight connections into Palmawith Vueling from London Heathrow with a new daily service as of March. NorwegianAirlines will also start a new route out of London Gatwick, Germanwings has announceda new service from Hamburg and Finnair will launch a direct flight into Palma fromHelsinki in June of this year. A new golf course is planned near Sencelles in centralMallorca and the international hotel group Hyatt has announced plans to build a newluxury hotel in Cap Vermell on the north east coast.Prices in 2013 look set to stay around the same level of 2012 and it will continue to be abuyer’s market. Strict regulations on building new property coupled with the fact that40% of the island’s territory is protected, means a better balance of supply and demandon the island which is reflected in its property prices. It remains to be seen whetherMallorca attracts a flutter of more Russian or Chinese buyers when Spain’s new lawsfor non EU residents come into force this year.IBIZAThis island has always been popular with artists since the 1960’s. However, in the last 10years Ibiza has become increasingly fashionable with celebrities, performers and artistsof all types and of many nationalities. In short Ibiza has become a Mediterranean brandsynonymous with lifestyle, fashion and a place to be seen.These factors have given the second home market a real boost with sales reaching levelsof 2007. The two Engel & Völkers offices on the island have sold contemporary styleMALLORCAEngel & Völkers opened its first shop on the island in 1999 and its’ wide reaching Germannetwork has most certainly assisted with German speaking clients including Swiss andAustrians who account for over 50% of all sales and continue to dominate the market.This group is followed by British and Scandinavian buyers with some Spanish, French andRussians starting to come into the market.Says David Scheffler, Director General Engel & Völkers Spain; “Buyers appear to beprotecting their money and investing in property which here will offer them better returnsthan in the bank and they can enjoy their investment at the same time. Although therehas been a lot of excitement about the potential of Russians on the island this marketremains in its infancy at this stage. It’s a complicated target group and it’s hoped thatthe new Spanish tax laws for non EU buyers will assist sales particularly with the middlemarket buyers”.The increasing strength of the long term rental market has been successful over the lastfive years and continues to gain popularity among foreign and local residents alike. It hasalso become an increasingly attractive proposition as a buy to let investment opportunity.In 2012 the long term rental business focused on top end quality properties. In previousyears a property asking more than 5.000€ per month was an exception. However, lastyear in the south west, this level of rental yield became a new standard and some top longterm rentals hit highs of up to 15,000€ per month. Renting before you buy appears to bea favoured option among big buyers who can search thoroughly for a property instead ofrushing into a purchase over a few weekends.However, the single most important developing market on the island is from Scandinaviawhere 2012 visitor figures show increases of 20 – 25% from Norway, Denmark and SwedenIn the north of the island, where Engel & Völkers operates a holiday rental office forexclusive properties in that area, 2012 was their best year to date with over 14% increase in

villas, fincas with land and prime located apartments/penthouses with an average salesprice of around 1 € million. The demand for top located sea front villas and fincas withland far outstrips supply so in these cases vendors are in a strong position.Average sales period for prime property is around 6-12 months and 18 months for propertyin good locations. Generally it remains a buyers´ market with sales closing at around5-10% of the original asking price.Some of the most exclusive residential areas on the island are located in the southaround Es Cubells and Cala Jondal where properties range from ultra moderndesigner villas to large fincas with land and sea views. These properties can achieveprices of up to 9€ million or even more for exclusive sea front locations. This areais also one of the most in demand for rentals, particularly in the summer months.The area of Talamanca, which overlooks Ibiza town and port remains popular withprices ranging from 600,000€ to 5€ million. Nearby is the exclusive Marina Ibizasuper yacht harbour which has increasingly becoming a magnet for the internationaljet set. Last year, the New York based Cipriani Group opened its first restaurantand bar in Spain in the Ibiza Gran Hotel overlooking this marina joining otherstylish establishments including the Blue Marlin bar and restaurant and the newLio restaurant and cabaret show operated by the Pacha Group.Fincas with land and privacy in the centre of the island around Santa Gertudis are idealfor year round living. This area is well located with easy access to Ibiza Town and theairport and offers buyers the opportunity to enjoy the peaceful, relaxed lifestyle of Ibiza.Areas such as San Carlos in the north east, which is close to some of the island’s bestbeaches, was historically popular with “hippies” back in the 1960’s and now is in demandwith buyers looking for the typical “Ibiza” style.Access to the island was improved last winter for the British market with regular directflights from London City Airport with British Airways.In 2013 prices look set to increase by 10-15% at the top end. Ibiza remains uniquelycosmopolitan and international with buyers from all over the world. Last year, Germanspeaking and British buyers dominated the market. At the same time, we started to seeRussians and Arabs entering the market and they are now showing serious interest forthis year.MENORCAThe island is only a short hop away from Mallorca and Ibiza and yet totally different incharacter and feel. Menorca’s strict regulations to maintain the natural environmentof the island is a big draw and its peaceful environment together with a slower pace oflife appeals to the second home market. Here the Engel & Völkers office in the island’scapital of Mahon, has reported a 35% increase in sales in the medium to high end of themarket to a range of buyers demonstrating the wider appeal away from the traditionalSpanish Catalan and British buyers where French and Russian buyers have been the bigbuyers last year.with Russian buyers so far these buyers have been at the top end and would thereforethese regulations would not influence their final buying decision.The island’s international airport offers regular connections from all over Europe fromEaster through to the autumn and there is also a regular ferry service from the SpanishMainland and the neighbouring island of Mallorca. However, in the winter months thereare fewer direct flights with access mainly from Mallorca via ferry or air.Menorca’s local community and tourism council works hard to retain the natural beautyof the island and it is renowned for its beautiful beaches and crystal clear waters fullof marine life. However, Menorca remains a relatively unknown destination for secondhome buyers and the current favourable market conditions are certainly creating a lotof interest including some international showbiz names such as Tom Cruise who wasreported to be looking last summer for a secret Menorcan hideaway.The market is dominated by cash buyers taking advantage of the real estate market whichis now offering property of up to 50% less than 8 years ago. The 4% tax break for newproperties has encouraged a few to buy before the year end. The average sales price thisyear is around 780,000 € and prices are not envisaged to increase in 2013. Furthermore,there might still be some price adjustment particularly for properties that have been onthe market for more than a year.The bulk of the demand remains focused on properties close to the sea, with sea views oron the frontline. Average price negotiation to close a sale is around 15-20% of the originalasking price and property is taking about one year plus to sell. Traditionally the mostpopular areas for buyers have been residential areas offering medium priced property.However, recently there has been a shift to more exclusive residential areas along theSouth Coast around Binisafua, Alcaufar and Cala Sant Esteve.Areas most in demand around the north coast include Cala Morell, Sa Mesquida, PortMahón and Sant Antoni. Rural areas around the south coast between Mahon and SanLuis attract big buyers looking for exclusive “fincas” with privacy that are located eitherbeside the sea with private sea access or with sea views and plenty of land.German and Russians buyers have started to coming into the market and this trend looksset to continue. Although the new tax laws for non EU citizens might well assist sales

MallorcaMallorcaRegion Average Sale Price in €Region Least /most expensive price per m 2Palma Old Town 500,000Palma Surroundings 1,000,000Southwest 1,000,000West Coast 850,000North 850,000Central Region 1,000,000Northeast 500,000Southeast 950,000South 900,000Nationality of Buyers on MallorcaSpanishFrenchRussianScandinavianGerman, Swiss,AustrianPalma Old TownPalma SurroundingsSouthwestWest CoastNorthCentral RegionNortheastSouth2,500 / m 23,000 / m 22,500 / m 21,600 / m 21,800 / m 2900 / m 21,000 / m 21,800 / m 28,000 / m 215,000 / m 222,500 / m 218,000 / m 25,600 / m 27,000 / m 210,000 / m 26,800 / m 2Puerto de AndratxSouthwestSanta PonsaDeiáPortalsSóllerWestPalmaSurroundingsPalma SurroundingsPalmaOld TownPalmaCentral RegionSouthLlucmajorIncaSanta MariaPuerto PollensaPollensaNorthPuerto AlcudiaSoutheastArtàNortheastSantanyíBritish

IbizaMenorcaRegion Average Sale Price in €Ibiza 1,000,000Region Least /most expensive price per m 2Region Average Sale Price in €Region Least /most expensive price per m 2Ibiza 15,000 / m 2Menorca 14,550 / mMenorca 780,00022.000 / m 2 1,481 / m 2San CarlosNationality of Buyers on IbizaNationality of Buyers on MenorcaCala MorellAustrianDutchIsland of IbizaSanta EulaliaBritishBelgianCiutadellaIsland of MenorcaItalianGermanMaòSpanishGerman, SwissSan JoséTalamancaFrenchSant LLuísEivissaRussianBritish

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