The Balearic Islands have recently benefited from the escape of capital due to high prices and the moratorium for new hotels in Madrid and Barcelona.

According to the data analysed, the real estate investment market in Spain will close 2018 financial year with figures similar to those obtained in 2017, 13,500 million, or slightly lower, and it will continue in expansion until 2020. In the same way, it is shown that Spain remains one of the most attractive countries for real estate investment and is the fifth European destination that captures the greatest volume of investment, on the list lead by the United Kingdom, Germany, France and the Netherlands. In this sense, investment funds are still the main players in the market, especially those of foreign origin.

The commercial sector in real estate is still the one with the highest volume of professional investment, reaching a total of 2,000 million euros.

Residential professional investment has evolved positively in the first half of the year and housing is still the preferred asset for both large funds and small investors, as 25% of operations have been made as investments.

The Balearic and Canary Islands are the preferred regions of the listed real estate investment company (socimi) that Bankinter will take to the stock market at the end of this year, as they have acquired 10 hotels in both archipelagos, what adds up more than 3,400 rooms. From a total of 23 hotels, 10 are on the islands: 5 in the Balearic Islands (4 in Mallorca and 1 in Menorca) and another 5 in the Canary Islands.

The idea is that these hotels allow to give back an annual dividend close to 5% to all the shareholders of the “socimi”, which will be quoted on the “MAB – Mercado Alternativo Bursátil” (Alternative Stock Market).

The main shareholders of Atom are Bankinter’s private banking clients, with a minimum investment of 200,000 euros and a maximum of 15% of their financial assets, but the bank itself, the manager of the “socimi”, GMA, and some institutional investors also take part in the capital.

This situation has contributed to the increase of private investment in construction. The increase in demand and promotion of housing, the latest impulse in the modernisation of hotels; and the industrial and commercial companies’ activity reactivation, have made the money that has been allocated from the private sector to building or refurbishing projects has increased an incredible 60.6% during the first four months of this year in relation to the same period of 2017.

Our foreign investment area offers legal assistance with regard to funds from other countries for investments in real estate and commercial Islands.
Our team has extensive international experience, we also have cooperation agreements with international firms.

 

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During the first semester of the current year, the luxury property buy and sell increased 27% in Spain, as the average price increased 19%.

The most expensive houses in Spain are located near the sea, not surprisingly, three of the top 5 most expensive properties are in Mallorca.

An annual report on wealth has been published recently, reflecting  that the number of personal Spanish wealths shot off to 76% since 2008, concurring with the beginning of the financial crisis. At the moment, Spain stands as the 7th country in Europe with the highest number of people with this economical profile.

Mallorca is going through a situation where its attractiveness seems to have multiplied, something that reflects on the record number of tourist arrivals as well as  on the boost of its real estate market, especially visible in the case of high-end products. Because of this, one of its main investments grows: the luxury real estate market.

According to the same report, real estate together with the stock market are the main destinations of these wealthy people’s money, that can lash out between 1.5 and 12 million euros. The Spanish and international buyer’s need of a second home in a unique environment, such as Andratx and Calvià, in Mallorca, made the Balearic market a protagonist in the luxury sector.

The luxury real estate market in the island is in full expansion. The supply of Premium properties is not very high, while the demand is sustained. Especially, the one that comes from the German market. With this appeal for the Spanish and foreign buyer, the luxury real estate segment is experiencing a great moment given the combination of: high demand, sales growth and rising prices.

Not only are we talking about selling, finding a long term rental property in the Balearic islands, at an accessible price, is at the moment more complicated than at the same time last year. The National Association of Real Estate Agents assures that the average price of rental in the islands has risen 12.4% during the last year and is around 10.6 euros per square meter, per month; higher than the peak of 9.6 euros reached in 2007, already surpassed since late 2017. The price increase that began in Palma’s downtown has already moved on to other neighbourhoods. An example is Son Rapinya, where three-bedroom flats are offered for around 1,300 euros per month.

For your investments in Mallorca and the Balearic Islands, we advise, defend and represent our clients at all levels. Our greatest asset is an infrastructure of professional leaders in each field of action, especially Real Estate and Tax, as well as our international vocation and multilingual capacity.

Our team is committed to providing the best work processes to provide our customers with the best results, in a constant quest for professional excellence. We establish external collaboration when circumstances require and are firmly committed to transparency and honesty in our actions.

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There is no doubt that investing in Mallorca’s real estate is a totally successful decision. Palma is the Spanish city where the investment in real estate is more productive, showing a price increase of 16% in the last quarter of 2017, compared to the same period in 2016.

A recent survey comparing prices of housing in Madrid, Barcelona, Málaga, Valencia and Palma, shows that Palma and Málaga overcome Madrid y Barcelona in terms of real estate profitability

The coastal segment of real estate is the most dynamic one because of the increasing interest of people with savings on buying properties to rent afterwards. The areas that are growing the most are still the ones with safer values.

The sale price in some areas like Palma and Calvià have reached historical highs. In the second quarter of this year the average price per square meter was 2,809 euros in Palma, and nearly 3,500 in Calviá. In both areas the prices have been increasing since late 2014, up to 50%. In the islands altogether, the prices have not yet reached its highest (that occurred in late 2008) although they are very close to it.

In relation to the final price of a property we have to take into account the high interest that foreigners have in investing in Mallorca . This demand has caused that the recovery of new constructions is mostly luxury homes. To this we have to add the increasing demand from residents, that once found a job again, are interested in buying a house. Real estate promoters and agents are aware that there is a much higher demand than existing supply, and therefore the high prices.

In the same way, the number of people thinking of buying a second house in the short term has increased eight points in 2018, comparing to 2017. 18% of the Spanish people are in the process of searching for this type of property, compared to 10% last year. 43% of these potential owners think about buying a property close to the sea and 17% in the town centre of a coastal municipality.

Mallorca in general and Palma specifically are living a new real estate boom and the transactions keep increasing, especially with foreign clients that see the island as a good place to invest in again.

At Ripoll & Mateu we work to bring total satisfaction to our customers effectively by offering legal services and personalised assistance.

For foreign investment, we offer legal assistance regarding funds from other countries for investment in real estate and business.

We offer detailed advice in the field of internationalisation by providing services such as:

  • International Trade Consulting, recruitment, setting up companies, subsidiaries and branches.
  • Advice on tax issues: tax incentives for the internationalisation of companies, income earned abroad, international operations, etc.
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On June 26th 2018 the BOIB (Balearic government’s official report) published the first Housing Law in the Balearic Islands, effective from June 27th 2018, and that, according to the Balearic Government, will make it easier for citizens to have access to housing.

The most important aspects of this law are the following:

– The law recognises the citizen’s right to housing and establishes mechanisms to facilitate it, like the increase of the public housing offer for social rentals, and establishing the government’s obligation to facilitate the access of citizens in vulnerable situations (accredited by appropriate entities) to this type of properties or other types if these are not available.

– It will be compulsory for major owners to grant access of their properties that have been empty/ closed for over two years to social renting if there are people in need of housing.

– Major property owners have three months to report all of their properties that have been empty for two years. Not doing this implies a serious penalty: from 3.000 to 30.000 euros.

– A universal and free housing support service goes into operation for all citizens. Its function will be to guide and assist citizens that are in a situation where there is a risk of losing their housing.

– The right of all citizens to basic supplies is guaranteed. Supply cuts can’t be made if the municipal social services recognise the difficult situation of the family.

– In order to encourage public renting, new properties built by public administration will be for renting and can also promote housing with formulas other than ownership (for example: housing cooperatives). The Law details the conditions of use of a social housing dwelling, which must be a regular place of residence. Social housing dwellings can’t be rented, except in some justified cases.

– The law also foresees the promotion of new formulas to make affordable housing available to the public. Thus, it conceives the cession of land (as a temporary cession of surface) to citizens’ cooperatives for the construction of housing. The people who, through the cooperative, have access to these dwellings won’t own them, but they will be able to use them for life.

If you need more information about the new Housing Law, do not hesitate to contact us. Our multilingual and multidisciplinary team will be pleased to assist you.

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Balearics is one of the most dynamic real estate markets in the purchase of housing in 2017, the latest data also point to a price increase in the last year slightly above 9%, and 7.3% only during the three months of summer.

The price per square meter stood at 1,953 euros in the third quarter, slightly above the 1.931 euros in País Vasco and a short distance from the 2.004 euros of the Community of Madrid, according to the valuer Tinsa. This unstoppable rise in prices is largely explained by the tourist boom. During the third quarter of the year,Balearic Islands was the largest home sales community, up 21% in just 12 months. In addition, behind Madrid (63,037), Barcelona (51,010), Alicante (32,068), Málaga (28,271) and Valencia (23,644), Baleares was the province where more transactions were recorded (15,158 sales), according to data of the registrars.

The average mortgage in Balearic Islands stands at 145,833 euros, just behind the Community of Madrid, with 184,223 euros, and ahead of communities like Cataluña (138,447 euros) and País Vasco (135,955 euros). In fact, also behind Madrid, Baleares is the second communities with the highest average monthly mortgage fee: 705.21 euros.

During the first eight months of this year 11,000 homes have been sold in the Balearic Islands, a figure that represents a growth of 18.2% over the previous year and based mainly on the sale of second-hand properties.

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According to data from the National Institute of Statistics, 9,065 used homes and 1,935 new construction have been acquired in the archipelago. What stands out is the huge difference between the two categories, since the sale of the former is growing at a rate of 25.2% compared to last year, while the latter are down 6.3%.

In Ripoll & Mateu Solicitors Mallorca, we offer our clients a comprehensive service in everything required for the sale of a property. It is therefore necessary to have the services of a firm of lawyers specialising in real estate law with multilingual abilities to offer totally reliable and understandable advice to the customer.

We specialise in Real Estate Law and legal and tax advice in the process of buying and selling a property in Mallorca.

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The number of foreign tourists that visited the Balearic Islands in the first six months of the year exceeded 5.4 million, 8.5% more than in the same period of 2016, these are the latest data released by the National Institute of Statistics (INE). These data lead us to consider the current situation of the much-discussed Balearic Tourism Law.

The largest number of foreign tourists who traveled to the Balearics in the first six months of the year came from Germany, 36%, and the UK, 29.5%. The main emitting countries were the United Kingdom, with almost 8.6 million tourists and an increase of 9.1% compared to the first six months of 2016; Germany, with about 5.5 million, 9.6% more, and France, with more than 4.7 million, an increase of 4.9%. In addition to all this, it’s well known that relations between Spain and Russia enjoy very good health which means an increase of Russian tourists to our country. Every year over 1.5 million Russians come to spend holidays in Spain and most of them choose Mallorca.

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On July 18, the new Tourism Law was debated and voted on in the Balearic Parliament, which will take effect next week. In the same way, a decree law will be approved that will correct it to allow apartments leased to tourists, but this option will remain prohibited until the insular councils and Palma City Council determine in which areas and under what conditions it is authorized.

The Ministry of Tourism emphasizes the need to enforce the law, especially the large marketers, internet platforms and real estate, in clear reference to the legal uncertainty that until now allowed vacation rental housing in multi-family buildings sheltering in the state leasing regulations despite being prohibited by the Regional Tourism Law. Rental platforms that advertise homes for short leases without the mandatory authorization number and market unregistered flats or houses may be fined up to 400,000 euros.

As soon as the new law comes into force, a moratorium on new places will also be implemented until island councils and the Palma City Council decide which rental modalities are accepted in each zone.

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Balearic Islands is currently at the forefront of real estate market price leadership with a 7.2% increase between January and June, compared to the same period last year, according to data from the appraiser Tinsa.

The islands have benefited from the incipient recovery of national tourism but, above all, from the strong increase in the number of foreign visitors who, if maintained at the current pace, could reach 84.3 million visitors in the year, an 11,6% more than in 2016. This fact has encouraged the purchase of the rent, but also as a property of own use by many tourists.

We must emphasize that the evolution of housing prices in the Balearic Islands over the last decade has been much more favorable than the whole Spanish geography, because of its small volume of stock, which also would support the safety of properties in these areas as an investment.
It is a fact that foreign citizens are buying more houses than ever in the Balearic Islands. Last year reached a record high, with more than 53,000 sales, despite the decline of British buyers, French and German. The arrival of Swedish citizens has changed the landscape of buying and selling properties in Mallorca, climbing to the fourth position of home purchases by foreigners.

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To date, Balearic Islands, operate fifteen Swedish real estate. The Nordics offer a personal shopper service: they explain how they want the home and the professionals are looking for it in the real estate market available. 72% of contacts established with Swedish results in a purchase.

For foreign investment, we offer legal assistance regarding funds from other countries for investment in real estate and business. Our team has extensive international experience and cooperation agreements with international firms. We are also members of the Association of International Property Professionals (AIPP).

If you intend to purchase a property in Mallorca from a foreign country you should consider that both the jurisdiction and the processes to be carried out and the roles of professionals involved in it are different.

Throughout the whole process, the presence of a lawyer is essential to be responsible for providing obligatory advice to clients on legal, tax and legal liabilities acquired during the action of sale.

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Last April, the Balearic Islands Tourism Agency Board initiated the Inspection Plan for the accommodation offer focusing its efforts on controlling advertising and illegal commercial offer of holiday rentals in private housing.

With this, the offers published on the Internet are specifically controlled by verifying data that points to an activity outside of the tourism regulations. In addition, the Balearic Islands Government announced joint actions with other public administration offices, such as the national and regional Tax Agencies.

As a result, the first holiday rental inspection campaign in the Balearic Islands produced sanctioning actions to eight real estate companies with fines for commercially offering illegal holiday rentals.

The current tourism law prohibits the sale of touristic stays in dwellings located in residential buildings and at the same time it modifies the rental regulation considering the possibility of offering touristic stays in residential buildings, if a series of requirements are met and whenever it is done in the authorised areas.

And the fact is that the Balearic Islands are beating all records of visits recorded to date. Hospitality companies and holiday rentals search engines reflect a 90% occupancy until October. The same happens with licensed holiday rentals, where the average price for overnight stays doesn’t go lower than 800 euros.

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To deal with the above, in July a new law will change the holiday rentals to tourists in the islands and it will contemplate the following stages:

  • The properties that are already registered with the Tourism Agency may continue to be rented as before, complying with the same rules and maintaining the same sanctioning regime.
  • The apartments located in residential buildings will still not be able to be rented to tourists or commercially offered through touristic channels.
  • The apartments located in residential buildings whose owners want to rent legally should wait for the zoning and also meet the requirements set by the new law.
  • Villas or semi-detached villas can be rented to tourists, if meeting minimum requirements and if obtaining an authorisation from the Tourist Agency in advance. With the new law, the owner must present a document from his city council that proves that his property is located in an area authorised for holiday This process is the same that must be done for apartments located in residential buildings.

Faced with this type of situation, we recommend that you always search for the help of legal experts on holiday rental and completely legal local companies so that you can make use of your villa or holiday rental apartment with total peace of mind and confidence.

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The forecasts of risk measurement agencies say that prices of housing will continue growing in Spain from this year until 2019 to reach 4.7% per year.

This will have a positive effect on bank’s balance sheets and the behavior of mortgage companies. In this sense, the specialists affirm that there is therefore no risk of a mortgage bubble, since for every four euros that were granted in 2007 today is allocated one euro for this purpose. The president of the European Central Bank (ECB), Mari Draghi, ruled out any danger in the euro area of a new housing or credit bubble.

The average price of second-hand housing has been in the Balearic Islands at 2,272 euros per square meter in April, a figure that represents an increase of 6.83% over the same month last year. Palma has been the second city where the price of used housing has increased the most from year to year, with 6.84%, registering an average price of 2.227 euros per square meter, just behind Barcelona.

Balearic Islands is in the sights of foreign investors looking to buy a home. Last year, the volume of transactions by international buyers – mainly European – exceeded 1.6 billion, which was a historical record and a 50% increase over two years ago. The luxury property is the most sought after by European buyers, more interested in purchasing than in renting, which has caused a significant increase in the average price in the last year in several areas of Mallorca

It should also be considered the boom of purchase by Swedish citizens. Property sales to Nordic citizens with high purchasing power have increased by up to 30% in the last three years. In the last four years the number of transactions on the island captained by these citizens has increased by 100% and the trend continues to rise. A demand that has skyrocketed mainly in Palma, where it has gone from three to thirteen specialized real estate agents in Scandinavian market in approximately ten years.

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Among the top areas for the Scandinavians are Palma center, the old town and the municipalities of the Part Forana, especially Serra de Tramuntana. There’s a neighborhood in Palma in which all Swedes want to live, Santa Catalina. Some people call it Little Sweden. The investment boom in the Palencia neighborhood has been spectacular in recent years.

If you are going to acquire a property in Mallorca do not hesitate to contact Ripoll & Mateu Solicitors Mallorca. We advise, defend and represent our clients at all levels. Our greatest asset is an infrastructure of professional leaders in each field of action, especially Real Estate and Tax, as well as our international vocation and multilingual capacity.

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The High Court considers that the capital gain tax is unconstitutional in these cases, very common since the outbreak of the economic crisis. We must consider that the tax is not annulled but its automatic application in cases where there’s no revaluation of the property.

Last February, the Constitutional Court (TC) has already the unconstitutionality of the capital gain tax on the increase in value of the Urban Nature Land (IIVTNU) of Gipuzkoa, when in the transmission of a property would have been sold at a loss. With the new sentence, the Constitutional extends this doctrine to the whole national territory. According to the judgment of the Constitutional Court, the seller of a property can’t be required to pay a tax that levies an increase in value which, in fact, has not occurred.
The TC values that the constitutional principle of economic capacity is violated since the tax is not linked to the existence of a real increase in the value of the property, but simply to ownership of the land over a period of time. For all this, the Court declares the unconstitutionality and nullity of arts. 107.1, 107.2 (a) and 110.4 of the challenged law. All those taxpayers who sell a house and obtain a profit from the transaction, must continue to pay it.

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In view of the foregoing, it’s estimated that the number of properties on which the repayment of the surplus value could be reclaimed because it was transmitted for a value lower than that of acquisition would be around 550,000 properties. Any natural or legal persons who have paid the tax by virtue of the transfer of a property to losses in a non-prescribed fiscal year can claim the payment of a non-corresponding capital gain.

What is needed to claim?

1.- Appeal to the council, although it may subsequently be necessary to resort to the courts.

2.- A technical report performed by an independent expert, which proves the loss of value produced between the moment of purchase and that of the sale. A specific technical report is required on the property transmitted, which shows the variation of the market value of the land between the moment of acquisition of the property and the transmission.

3.- The deeds of purchase and sale of the last and penultimate transmission of a property.

4.- Statistics of average prices of the residential market of the municipality or the postal code where the asset is located.

Contact us if you are faced with the need to claim a capital gain overpaid or have questions about the status of your property.

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