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Overseas property: how has Covid-19 affected the market in Mallorca?

Spain has experienced one of the most severe lockdown regimes, with rules in place from March 15, subsequently affecting the country's various property markets.

On April 28, Spanish President Pedro Sanchez announced a gradual four-phase transition plan to relax restrictions, taking place between May 4 and the end of June.

Each phase will be implemented around the country depending on the situation in each province and on each island. Every two weeks will mark a new phase up until the end of June when the lockdown is programmed to end.


Sanchez also added in his address that the use of second homes by Spanish residents may be permitted in the final phase of the plan, adding that if all goes well, some European nationals will be able to enter the country to use their second homes at the end of the transition period.

The Balearic Islands have reported some of the lowest Covid-19 infection rates in Spain, so there is hope the government will ease restrictions on the islands ahead of some of the worst-hit regions.

With this in mind, here is a market update on the investor and tourist hotspot Mallorca, courtesy of international estate agency Engel & Völkers.

The legal side of transactions - how has it been affected?

The agency explains that under the lockdown restrictions any contract timing is suspended and that all agreements are therefore automatically extended. In some cases, vendors and purchasers are giving power of attorney to lawyers to sign contracts on their behalf.

Meanwhile, final inspections and handovers are often being arranged via video conference, with some sales going through when lawyers have been given power of attorney.

Engel & Völkers says that to date hardly any buyers have dropped out of sales, nor tried to negotiate their contractual agreements.

Sales and enquiries update

The agency says that while the majority of property transactions have come to a halt, it is seeing steady interest from overseas with a level of enquiries slightly lower than at the same time last year.

It adds that a handful of sales have even gone through recently.

"Many of our clients still want to pursue their long-term plan of investing in property in this region and are patiently waiting until our borders are open once more," says Florian Hofer, managing director of Engel & Völkers Balearic Islands.

"The Balearics have always been regarded as a safe haven in the Med and when this crisis has passed, the revival for island locations with a quality lifestyle in a safe and protected environment will come into their own."

In 2019, real estate was the second most important sector of the Balearic economy, accounting for over 20% of the region's gross domestic product since 2005.

Engel & Völkers reports there were over 4.1 billion euros worth of transactions in 2019. Meanwhile, since 2012, 44% of the value of real estate transactions were made by overseas buyers.

What's the latest on construction?

The agency says that projects in Mallorca continue to move forward after constructors started working again post-Easter.

According to the Balearic Association of Developers (PROINBA), in the past four years there has been a significant increase in building licences granted in Mallorca - from 830 in 2015 to approximately 1,440 in 2019.

Due to the sheer lack of plots for construction, developers have focused on building high-quality luxury real estate, says Engel & Völkers.

According to PROINBA, there is an accumulated shortage of new housing in the Balearics of 15.000 units and the population increase of over 40% since the year 2000 will keep this figure high.

Developers are not experiencing any sign of withdrawal nor reduction in demand and continue with virtually all purchase commitments in place and moving forward.


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