“Is the property-market bubble about to burst in Ibiza, David?” I get asked this frequently. It’s understandable. The property prices in Ibiza have risen a shocking amount in the last three years. Yet properties keep selling quickly.
There are a multitude of factors that combine to generate lift in property market values.
Seemingly, without any effort, Ibiza has managed to create considerably more demand for property than availability. Consequently, buyers feel confident when paying “a little more” each time a property is sold.
What contributes to the rise in Ibiza property prices?
Confidence. This is the main ingredient in a very complex mix.
Buyers from all over the World are looking to have a home in Ibiza. It’s the third smallest Island in the Balearics. With so little space and so few large villas available, we have a large amount of wealthy buyers chasing a small number of luxury Ibiza properties for sale at any one time. Couple this with the fact that many of these Global buyers have very deep pockets. If they have to pay a little more for the house that they want, then they usually do.
The planning restrictions have hardened and now prevent any new planning consents being granted. This was passed this Summer and will run for at least 12 months. A consequence of the planning restrictions is that the prices have risen more on homes that are larger than the new maximum size of 250 SqM of built space.
Applications for Touristic Licences have closed. In order to rent a home out in Ibiza, to anyone other than “Family and Friends”, you will need a Touristic Licence. As you cannot currently apply for one, properties with Touristic Licences have seen a rise in demand because the income generated from Villa rental in Ibiza is enormous. Some very large villas rent for in excess of €80,000 a week! Admittedly, this is usually a fully-staffed monster-villa with stunning sea views. However, even a relatively “normal” villa will rent for between €5,000 and €8,000 a week in peak season. That’s approaching €80,000 for the Summer rental season. Ibiza’s rental market is much more extended than the peak 10 weeks. Expect €120,000 annual rental income.
Because Ibiza is seen as a safe place to stay, much of the demand has shifted from the traditional locations of the wealthy, such as Monaco, The South of France and The Caribbean. We are now finding that we are being asked to find properties for more Citizens of The USA and Canada than ever before. In fact, Brexit has had very little effect on the luxury Ibiza property market. Over the last 3 years, our UK buyers only ever made up 14% of our enquiries, with the largest number coming from Germany (22%), Netherlands (20%), Belgium (18%), Italy (11%), France (9%) with all Others making up 6%.
Overall, Spain has enjoyed approximately 15% rise in sales last year. The Balearic States saw approximately 17% growth (Pub: Spanish National Institute of Statistics) and Ibiza has seen substantially greater growth in the prices of luxury villas and apartments than any of the Balearic Islands.
Will the bubble burst?
Who knows! What I do know is that we have a very polite queue of eager buyers for just the right property in Ibiza. They may not buy immediately as they each have particular needs, but the list of buyers is longer than the list of sellers. This external demand creates internal demand. We see owners of large villas sell up and move to a luxury apartment. The owners of that apartment then buys a mid-market villa and the owners of that villa go on to buy a large old Finca in the middle of the Island. The effect of one sale to a buyer who is new to the Island can set of a chain of property transactions worth €10 million.
With all of these property transactions happening, it’s no wonder that people are still very happy to invest in the Luxury Ibiza property market.