The impact of Coronavirus on the Mallorca Property Market

October 31, 2020

Two sides of the coin

The first signs of Coronavirus first appeared in Europe earlier this spring. By the 23rd of March the majority of Europe was beginning on its journey towards the first lockdown and attempt in managing the virus. The coronavirus has had a measurable impact on each sector of both the economy and of society. Some sectors such as the hospitality and tourism factors have been heavily hit while other sectors such as real estate have had mixed success depending on the country in question. Countries and holiday destinations which rely on tourism as their main income have had sharp drops in earning, with the Balearic Islands having to contend with a 98.6% reduction in tourism numbers and spending in the local economy falling by 98.7%. Due to restrictions in place it is mainly tourists from Germany and Italy travelling to the Balearic Islands. As there is a hope that the summer of 2021 will be one of normality there are signs of optimism to be seen in the Mallorca Property Market. There is a renewed sense of optimism amongst real estate agents and property websites as during the lockdown period there was an increased surge of people searching for properties on the Balearic Island. The website fotocasa saw a 40% increase in traffic when compared to the traffic of the previous June, and Idealista saw an increase of approximately 20% in people requesting an online mortgage brokerage. The healthy condition of Mallorca’s property market can be attributed to a few factors. Majorca due the large tourism numbers is characterised by properties that are upper or luxury class, with approximately 1 in 10 being luxury standard, with a sea view, a pool and a per square meter price of 6,000 euros. There are strong regional differences with the two Palma regions having almost half of the property supply being luxury. In the north and south of the island there are more mid ranged properties available. There is a scarcity in the upmarket property sector in these areas which drives up the price for the properties that are already there. An effect of the scarcity of real estate to buy in areas for example surrounding Palma can be explained by that if middle class real estate is sold out or not readily available, it allows for not only the middle class properties to raise their prices, but also those luxury properties above them as they know that there is a queue of investors looking to buy. The increase in prices can also be seen in new builds. There is a surcharge for new buildings in a region and this varies from region to region. The new properties being built for the majority 80% are being designed and built to be luxury and are equipped with expensive and sophisticated furnishings. As the demand for property on Mallorca has been consistently so strong, the price has risen. This can be attributed to the fact that many of the “bargain” properties that were once available, have already been bought and flipped. This means that there are very few properties for sale at the bottom entry level. These higher value properties have one significant impact on the property market as a whole. They give it stability. The owners of these upper listings will not feel the pinch enough to be forced into a sale, as a result the price will stay stable.

Mallorca a safe investment?

Real Estate has historically been seen as one of the safer investment options. It can be a great way to generate a passive income over an extended period of time. Another benefit of investing in real estate is that a well-chosen property can provide excellent returns, tax advantages and leverage. There has been no slowdown in enquiries for properties on Mallorca as it has always been seen as a safe investment for one’s money. The impact of coronavirus on the stock market are unpredictable and the long-term recovery unclear. As a result, many investors and individuals are turning towards Mallorca as a place to invest. The property prices in Mallorca have not fallen. What makes Mallorca attractive to investors is its isolated position away from the rest of central Europe. It has been well distanced from any exponential outbreak of the virus. A lot of home owners have felt more at ease being on Majorca during the lockdown rather than in their home country. Real Estate agents have explained that people who have entered negotiations on properties are continuing to pursue their plan of purchasing their dream home on the island. Engel Volker’s have introduced virtual tours and live video tours to their prospective clients all while updating them on the latest developments. Some of the factors that determine and support the consistent cost of housing is that due to the nature of Mallorca being an island there is a short supply of building lands, and a need for about 16,000 additional units in order to cope with the demand. The population of the Balearic Islands has risen by 40% in the last 20 years increasing the demand for property. Property developers have not faced any problems as the Balearic Association of Developers has increased the building licences awarded by 610 from 2015 to 2019. International Buyers on the Balearic Islands move approximately 40% of the market volume with the majority preferring to buy in cash. The high international demand, coupled with a growing population of locals and a scarcity in supply of housing will ensure a continued stable real estate market in Mallorca as has been displayed for the past 20 years.

Covid Restrictions, a natural filter?

The internet has made it incredibly easy to hop onto a property website and browse houses all over the world. It has also made it easier to book viewings for flats, houses and villas. There is a small cluster of people for whom this is a hobby. Spend an afternoon browsing the latest listing, book a viewing, be shown around a lovely house, and finally leave with no intention of ever buying the house let alone ever contacting the real estate agent again. For some tourists this is their favourite pastime especially when on holiday. A way of scratching an itch for their dream life abroad. The coronavirus pandemic and restrictions in a way are a natural filter for these browsers. From many European countries there are restrictions and conditions that need to be fulfilled in order for you travel. The excuse of I have a viewing for a flat isn’t as convincing as telling someone you have to fly over as contracts need to be signed to conclude your purchase of a house. The international buyers who are now on planes on Majorca are those who really have a genuine interest in purchasing a home, otherwise they would be at home. An added hurdle, or filter is that due to the coronavirus pandemic, airlines have been in many cases forced to increase their prices due to a reduced capacity and reduced passenger numbers. Prices have increased by more than 50% between Majorca and mainland Spain. If you really are interested in buying a second home on Majorca or any of the Balearic island then a flight costing twice as much as usual will not frighten you away.


One demographic tops the charts when it comes to buying and investing in Spanish real estate. 21% of foreign buyers in Spain are British. The reasons for buying a home in Spain vary from person to person. Some see it as their dream retirement destination while others see it as a safer harbour for their investment with the uncertainty of Brexit impact on the English economy and real estate market. It is difficult to predict how exactly the deal between the EU and the United Kingdom will be drawn up. If the EU does not place certain restrictions on UK banks, many British citizens could find themselves in a position where a financing scheme for their purchase would be easier. Thanks to the in 2016 introduced EU Residential Real Estate Credit Directive it is much more difficult for citizens from non-EURO countries to take out a euro currency mortgage. If England doesn’t need to follow this regulation anymore then they will find themselves to be in a much healthier position to buy abroad.

A reason for the continued Interest in Spanish Real Estate for British citizens is that many Brits feel that there is a deadline by which they can beat the negative effects of Brexit and still be entitled to a right to free residency, healthcare and all the other advantages that being an EU citizen entitle them to. This late rush towards the end of the calendar year could even lead to an increase in property prices. A big factor when it comes to determining house prices is where real estate investment companies decide to invest. It is possible to invest in real estate without having to actually own the property by buying shares in a real estate investment company. The company handles the administration and landlord issues. These companies have their pros and cons but they can shape a real estate market by buying big properties or numerous properties at one time. A lot of investment funds and real estate companies have decided not to gamble on the uncertainty of the British real estate market as they are unsure of what is going to happen. As a result, they have look towards other European countries such as Spain. Spain has historically shown strong returns on investment, even during the 2008 financial recession Spain served as a safe investment for investors. The coronavirus pandemic has created an ideal opportunity for investors who are solvent. There are interest rates currently being given by banks that are historically low including fixed rate mortgage for 20 to 30 years. It will remain to be seen how the corona situation develops but one thing is likely to stay the same, a strong real estate market on the Balearic Islands

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