Graham Norwood Journalism

Mallorca: A Coast-To-Coast Buyer's Guide

Daily Telegraph

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There's something unashamedly romantic about Britons who buy homes on Mallorca.

In these property-savvy days people usually weigh up hard-nosed factors before choosing where to buy a place in the sun. How much does it cost? Is there a chance of capital appreciation? Are there good rental prospects?

But people don't choose Mallorca that way. They just buy there because they love it.

Take financial services company owner Barry Krite and his wife Jane, for example.

The couple, from Radlett in Hertfordshire, know Mallorca is the most expensive part of the Iberian peninsula. But buying a two bed cliff-side house at Santa Ponsa on the north-west of the island is the culmination of a seven year love affair with Mallorca.

"We've come back year after year, stay at the same hotel and feel there's a little part of the island that's ours. When we thought of buying, we rented a home for a full year to discover the place at our own pace. We fell in love and had to buy" explains Jane.

The couple go for a long summer holiday in their home, and visit at least once a month throughout the year. Their three grown-up children go, too.

"Mainland Spain leaves me cold and I've never had the slightest interest in buying a home in Portugal" explains Jane. "But Mallorca? It's just a paradise" she says.

The Krites are not alone.

Some 11,000 Britons now own a holiday home or are based full-time on the island, drawn by 300 days of sun each year, 25 marinas, 23 golf courses and easier air access than most foreign destinations - over 20 airlines fly there from the UK.

"Britons have always liked the island but the love affair has grown in the past 10 years. There are three times as many British buyers now than in the late 1990s despite prices rising and the island becoming much more up-market in its style" claims Claudia Dubois, a marketing manager for estate agent Engel & Volkers.

The move upmarket has not been accidental.

Magaluf, the sleazy teen haven derided by native Mallorquins, is surprisingly difficult to find despite its close proximity to Palma. There are few road signs to the place because, locals say, the authorities are embarrassed by it. Certainly anyone whose image of Mallorca is one of clubs and drunks should bring themselves up to date because it is now arguably the most beautiful and chic Mediterranean destination.

The north of the island boasts mountain villages and rugged terrain, suddenly more accessible thanks to new roads. The coast enjoys natural harbours such as Puerto Soller, perhaps the hottest local property market in the Med. Millionaires flock to established playgrounds around Andratx, Puerto Portals and the capital, Palma.

Catherine Zeta-Jones and Michael Douglas are well-known holiday homes owners in the arty village of Deia. Near neighbours include finca-owner Andrew Lloyd-Webber and veteran PR guru Lynne Franks. Further towards Soller are villas belonging to Boris Becker and Claudia Schiffer.

Property prices have become as stellar as the cast-list of holiday home owners. Although the market has wobbled slightly over the past two years - some areas of the island have risen, some not, leaving average prices roughly unchanged since 2005 - values over the past decade have soared around 170%.

Part of the attraction to the rich and famous is the exclusivity of the island.

"Mallorca has had for several years a total ban on any development - individual homes or larger schemes - within 25 metres of the coast. Anyone owning directly at the sea now can sit back and smile. A property there, in any condition, is a gold mine" suggests Robert Maunder of First Mallorca, an estate agency.

Building regulations, once unheard of on the island, now ensure new homes are of a high standard; tall towers are banned in a bid to avoid Spanish mainland-style over-development; and many areas have a quasi-green belt designation, meaning detached homes must be in large plots to avoid development becoming too dense.

There are small eco-taxes on tourists, hotels are declined planning permission unless they are four-star or better, and there has been a particular push to attract visitors and holiday home buyers to a growing number of well-equipped marinas.

"Palma now has moorings for thousands of craft. Puerto Portals, Port Adriano, Santa Ponsa, Puerto Andratx and perhaps a new marina at Sant Elm makes the south west part of the island especially exclusive and pretty" claims Maunder.

The yacht-owning set are transforming Palma, too, according to Charlotte Wilson. She worked on Mallorca for a series of estate agents for over six years before returning to live in London last spring (2007).

She keeps in touch with Mallorca through her own three investment properties - two in the village of Illetas on the south coast and one just off the Placa Major, the main street running through the capital, Palma.

"I rent them out for holiday lets and they're booked quite solidly from mid-May until November. Palma is developing very rapidly now with quite a few yachties buying in the old part of the town, close to the port, and pushing up prices. Apartments sell quickly there" explains Charlotte, who now works for estate agency Savills.

"There's probably no other market in Europe that seems so completely international amongst both buyers and sellers. It's unique and it's difficult not to fall in love with the place when you see it and live there in the sun" she insists.

Even so, occasional problems disturb Mallorca's apparent serenity.

Last year (2007) some 50,000 locals - 8% of the population - took to the streets of Palma under the slogan 'Let's Save Mallorca' protesting at plans for another 14 golf courses, more new roads, a theme park and yet more marinas. They also oppose Palma airport's expansion to double capacity to 30m passengers a year by 2015.

Some believe this may herald a backlash against development, and a newly-elected regional government in the Balearics has recently suggested it will limit new building. But this may do little except make Mallorca still more exclusive than it has already become, pushing up prices as supply falls further behind demand.

Of more immediate important to the unwary buyer may be the eccentric way properties are marketed.

Many homes are on sale simultaneously with several agents, often at different prices. It is difficult to judge the exact value of a specific property as some vendors decide their own asking prices. 'It's not unusual for sellers to get our valuation, then add 20% if they're not in a rush to sell. Many are retired and don't have to move, so they wait and see if their asking price is achieved,' says Sandra Sofio of Engel & Volkers.

The downside is that if you find a dream property and discover it has been on sale for two years or more, you cannot assume you can barter the seller down.

This quirk does not seem to deter British and German buyers - who traditionally like new-build or modern homes - nor those from Scandinavia and the former eastern bloc who tend to favour the historic fincas which are now rare and high-priced.

Agents report business in 2007 was higher than in 2006 despite the US and European credit crunches and worries over Spain's national property market.

One reason behind the surge is the favourable exchange rate, according to Peter Ellis of Foreign Currency Direct, an exchange company.

But there is another reason for the interest in Mallorca, of course. People just love it.

Ultimate guide to Mallorca:

Palma: The prettiest properties are modernised old stone houses and flats in the charming but tourist-swamped Cathedral quarter, although most 'buy to let' type apartments are in blocks built since the 1960s. The city centre is 15 minutes from the airport; expect to pay £130,000 to £400,000 for apartments but up to £1m-plus for houses. A short drive outside the city there are pretty and atmospheric villages like Puigpunyent and Establiments only 25 minutes from the airport, with large well-appointed apartments from £200,000 and country houses hitting £600,000 or more.

South-west: It's 30 minutes from the airport and has an excellent infrastructure - but it also has Magaluf, clubs and all-day English breakfasts. Escape by aiming for resorts like Portals and Santa Ponsa, although the real hot-spot is Andratx. "It's a genuine fishing village with trawlers, pretty harbourside cafés and restaurants, pleasure boats and yachts. The area enjoys the island's best weather, being south of the mountain range" explains Peter Maunder of First Mallorca. Expect to pay £300,000 upwards.

North-west: Once this was hard to get to but tunnels and roads from Palma mean it's a 45 minute drive from the airport and prompts Sebastian Boelger of estate agency Engel & Volkers to declare: "There are no inaccessible or remote parts of Mallorca now." Proof of this is the turning of tiny Soller, a quiet fishing port a decade ago, into a property boom town: apartments with sea views fetch £350,000-plus and houses in the town itself can be an eye-watering (and possibly over-priced) £2m or even more.

Inland: This rugged, mountainous area has opened up since 2005 thanks to new motorways and much-improved rail services. Therefore small villages that were once amongst the cheapest on Mallorca, such as Llubi, Alaro and Santa Maria, now have rising demand, rising prices and a busier feel to them. Engel & Volkers says 30% of buyers looking inland want plots to build their own homes, while the others search for the quintessential Balearic finca - and need £500,000 or more to buy it.

East coast: Those seeking the best value head here. It's up to an hour from Palma airport, although buyers should remember temperatures can be 10% lower than on the west and as a result some east coast ports are quiet in winter. The northern part of this area is prettiest, with largely unspoilt towns like Arta and Capdepera vying for attention with brasher resorts such as Cala Bona and Cala Millor. Small flats in dense schemes start at £100,000 while restored period houses will cost you £1m-plus.

How to buy

Transaction costs are higher in Spain than in most countries, dearer still on Mallorca.

Usually a 10% deposit is paid by the buyer when a contract is signed. Sometimes buyer pay legal fees, too - using a notary is mandatory on Mallorca, costing 2% of the purchase price. The buyer is also charged for Spanish Land Registry and search fees, up to 1%t. There may also be local transaction taxes up to 7%.

Once you own a property, and assuming you do not live in it permanently, you must pay an annual property tax each 31 December based on your home's value - there is a sliding scale from 0.2% to 2.5%. For some properties there is also tax payable on rental income, and when you sell, there may be 35% capital gains tax on profits.

Annually, you also have to pay a rubbish collection tax to the council and an additional community fee if you buy a home in a development or condominium.

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