Mallorca and Ibiza: Real Estate Market Remains Attractive

PALMA DE MALLORCA, Spain, November 1, 2012 /PRNewswire/ --

Positive development in the Balearic Islands, despite financial crisis - tax incentives for the purchase and sale of real estate until the end of 2012

Rating agencies are devaluing Spain, the country is in the deepest financial crisis of its history. Yet while the real estate market on the mainland is in deep trouble, things are looking better on the Balearic Islands. In an interview, Kai Dost, managing director of the estate agent Dost & Co. (http://www.dost-co.co.uk/), and a 20-years connoisseur of the real estate market in the Balearic Islands, explains why that is and where the journey is heading.

Why is the development of the property market in Mallorca and Ibiza so different to that on the mainland?

Kai Dost: "Looking at the market for holiday homes, there are four reasons. Firstly, over 85% of these second homes are owned by foreigners, and for tax reasons they are rarely financed with loans. Secondly, the restrictive environmental policy means that building land is limited. Thirdly, the Balearic property market has a very diverse base: if the German market falters, the English one is there to fill the gap, and Scandinavians are playing an increasingly important role. Eastern Europeans are also discovering Mallorca and Ibiza for themselves. This stabilizes prices. And fourthly, the group of buyers in the Balearic Islands is traditionally more conservative. For decades, I have observed that during economic crises, the prices in other second-home markets slump dramatically, while here the market tends to stagnate and not much is sold."

Has the crisis not affected the Balearic Islands at all, and why should one invest here of all places?

Kai Dost: "Of course, there was also a real estate bubble that burst in the Balearic Islands, but it was relatively small and has generally only affected the market for local, first-time buyers who finance their purchases with cheap loans This, together with the euro crisis, did indeed cause some uncertainty in the market for holiday homes, but business has now recovered to put prices on a par with 2005. These are reasonable in comparison to the insane price increases between 2003 and 2007.

After this adjustment phase, we are expecting the prices in the middle and upper segments to trend upward slightly, as suggested by the fact that northern European property prices are currently reaching astronomical levels. The Balearic Islands provide a good alternative to this, with lower but stable prices. The interest is palpable. In August alone, 32% more real estate sales were recorded on Mallorca than in August 2011."

What should potential buyers pay particular attention to?
Kai Dost: "The three principles of real estate investment also apply in Mallorca and Ibiza: location, location, location. But there are also specific factors. Unfortunately, there are many opportunists on the islands who pose as private persons brokering real estate or assisting with building alterations. Caution is advised, as the local authorities do prosecute the increasingly successful property sharks and tax evaders. Potential buyers should therefore ensure that they receive good, detailed advice from experienced professionals who know the market's peculiarities inside out.. "

Are there any tax incentives to buy right now?

Kai Dost: "There is a benefit in secondary incomes from new properties, as VAT for this has been reduced from 10 to 4 per cent. A current real estate buyer will only pay 50 per cent of the future capital gain on the sale, regardless of when they sell. However, this regulation will only apply up until the end of this year."

Is it advisable for German real estate owners in the Balearic Islands to sell at the moment?

Kai Dost: "If you are currently toying with the idea of selling, you should do so this year if possible. At the moment, you pay 21% tax on capital gains in Spain, but nothing in Germany.. On 1 January 2013, the new Double Taxation Agreement will come into force. Then, in addition to the 21% in Spain, you will have to pay full profit tax in Germany as well. While it is true that taxes already paid in Spain will be deducted from the tax payable in Germany, the amount that then additionally goes to the German tax authorities may still be considerable. "

About Dost & Co.:

The real estate agency Dost & Co, managed by Kai Dost from Hamburg, exclusively sells high-quality, unique residential properties with a high recreational value. It has six offices on Mallorca and Ibiza. To provide a first class service, each sales representative manages only a few properties.

Contact:
Kai Dost
Camí de Son Rapinya 34 A y B
07013 Palma de Mallorca

Tel: (+34)971-60-99-89
E-mail: kai.dost@dost-co.com

Further information at http://www.dost-co.co.uk/