The situation on the holiday property market in Mallorca against the background of the CORONA crisis

After almost two months in a state of emergency and a still not foreseeable end of the travel restrictions, we believe that the further development of Mallorca’s residential property market will be influenced by two factors from today’s perspective:

Will there be long-lasting changes in supply and demand?

In recent years the market has been characterised by constantly rising prices and a high transaction volume. More and more people have already fulfilled their dream of a Mallorca property and many want to continue to do so, because owning property on the largest of the Balearic Islands is mainly associated with high quality of life. Also, the desire for a Mediterranean country house with a large plot of land and good infrastructure has recently even tended to increase, as we have found out in discussions with prospective buyers. A surprising but understandable side effect of the crisis.    

The sudden and unpredictable standstill of public and economic life is confronting the markets with an up to now unknown situation. It is certain that if this situation lasts for a correspondingly longer time, the pressure on real estate prices will also increase. In retrospect, residential real estate has always shown the highest resistance to crises and thus value stability compared to other real estate classes (e.g. hotels or commercial real estate such as retail and logistics), provided that it met the main criteria of buyers. A contemporary Mallorca finca in a reasonable location and good condition was a good investment in the past. It will also be in the coming years, provided that the demand does not drop significantly and in the long term. At the moment there is nothing to suggest that this will happen. However, the economic effects of the pandemic will increase the selling pressure for some owners and occasionally lead to irrational sales decisions. In our view, however, they will not be representative of the market. These cases have occurred time and again for a wide variety of reasons. 

Even if the number of current finca offers in the east of Mallorca seems to be high, the share of good quality properties was already very manageable in 2019. Legal, structural and location-related deficiencies as well as partly too ambitious price expectations limited the at first sight extensive offer considerably. One consequence of the current situation will therefore be, that price pressure on properties of limited quality will increase. It remains to be seen whether and to what extent the supply of properties coming onto the market this year will differ from the current portfolio. So far, no trend can be detected in this context, as new offers will only become visible in the near future. Some owners have also already decided to postpone the sale of their property planned for this year until next year. 

Date of lifting travel restrictions

From today’s point of view there is no date for the possibility of entry for non-residents to Mallorca and therefore no starting date for property visits. According to media reports from talks with local political and economic representatives, the optimistic forecasts predict currently the month of August, although the island government would like to push tourism from the Spanish mainland as a first step and will only allow arrivals from other countries at a later date. It remains to be hoped whether departure from the most important sources such as Germany and the United Kingdom will already be possible again by the time Mallorca opens up to international tourism. Bilateral agreements between individual countries are likely to be reached. 

Our conclusion

Majorca knows like no other Mediterranean destination how to enchant its visitors with dreamlike beaches, a diverse vegetation and its Mediterranean charm. We are convinced that the demand for attractive properties will continue to exceed supply in the future.