Buy & Let, best option for property investments in Mallorca
Buying a property to let on a short or long-term basis in order to generate a higher return on investment has become an extremely popular option, especially in the Balearic Islands and Mallorca. This can be an attractive alternative to the more conventional methods of investing.
While the English and the Irish have enjoyed phenomenal capital appreciation from property investments (12.7% increase in the UK during 2004 & 9.8% price growth in Ireland), the Germans have had to endure a 1.7% minus return on capital invested which shows little prospect of improving in the short term.
There are many differences between the German and English markets: usually Germans buy a second home for personal use rather than to gain rental income. Germans tend to avoid borrowing to buy property and as the majority rent their primary residence and in any case the negative equity in property locally means they do not have the potential to release equity from their property as people in the UK and Ireland constantly do to fund a second home.
Return on properties in Mallorca
So, Germans who buy properties in Mallorca tend to have the money to do so, without the need for a mortgage or rental income to cover costs and provide an annual return. That said, assuming that one can buy a property overseas and gain a good return on investment (5 – 7% per annum plus capital appreciation) with minimum risk then buying to let could be an attractive option for investor.
On a recent visit to Mallorca I was amazed by the appetite of investors seeking to purchase property to generate rental income and higher capital appreciation. You can find some villas with rental licence by following this link https://www.mallorca-property.co.uk/property-groups/property-with-holiday-licence
This demand is driven by a number of factors, not least:
Buy to let in Mallorca
• Low interest rates and unattractive returns from riskfree investments.
• The property price increases in the local markets and the oversupply of rental accommodation which is driving returns down in the UK and Ireland. It is now becoming difficult to find good value for money investments in local property.
• Through a combination of factors such as easy access to information regarding foreign property purchase through the internet and property shows, low cost flights to many destinations, equity release in existing properties in the local market and probably one of the most important factors, is the past experiences of investors who took the risk and bought in the likes of Spain 10 years ago and are now reaping the rewards with high capital appreciation and good rental income from holiday lets of your Mallorca property.
• The expansion of the EU has opened the door for property investors in markets such as Central and Eastern Europe and with the prospect of these markets growing more rapidly than mature markets over the next ten years, they are proving to be a popular choice among investors.
Who is buying in Mallorca?
The buyers of overseas properties are predominately northern Europeans who want to find a sunnier quality of life where the cost of living is lower and easy accessibility with low cost flights. The English and Irish have witnessed the substantial gains which property can bring and with the opportunities in the local markets declining these investors are now looking to overseas markets.
In terms of overseas investments, Mallorca is viewed as an expensive option (particularly in Ireland) and the message is not getting through that investors can still find good value for money properties and attractive rental income in Mallorca.