Tips for Americans When Buying Property in Mallorca
Waterfront estates attract international buyers to the golden shores of the Balearic island. Mallorca is the second in Mansion Global’s Summer of the Strong Dollar series, an examination of European luxury destinations where American homebuyers can take advantage of their currency advantage. As of 2 p.m. on Wednesday, the dollar had risen 22.16% against the euro since the end of June 2014.
Foreign buyers, often from northern Europe, are lured to the Balearic island of Mallorca, with its top resorts, rugged coastlines and cliffs overlooking the Mediterranean. “It is a market that is doing very well at the moment,” said Jelena Cvjetkovic, agency network manager for real estate brokerage Savills. “In general, the islands in Spain have been more resilient than the mainland.” A report from real estate company Engel & Völkers shows a 28% increase in home sales in 2014 compared to the previous year, with the average sales price of 750,000 euros in 2013 (approx .03 million US dollars at the exchange rate at the end of 2013) increased to 1.2 million euros in 2014 (approx. 1.45 million US dollars).
Taxes, fees and acquisition costs:
When purchasing a home in Mallorca, Savills recommends that American buyers hire a bilingual attorney who understands the Spanish housing market. Since properties in Spain carry the debts of their previous owners, the lawyer should ensure that the house has no outstanding debts. He or she can also help the buyer request a Número de Identificación de Extranjero or NIE, which is an identification number assigned to all foreigners and required to open a bank account. Similar to houses in Tuscany, property tax rates in Spain vary depending on the value of the house and its location. Non-resident homeowners are required to file a tax return and should expect to pay inheritance tax and wealth tax on the property, Savills said. The firm also suggests that buyers set aside 10%-12% of the price for acquisition costs, which includes a 6%-10% transfer fee. Under the Golden Visa program, the Spanish government allows third-country nationals who spend €500,000 (approximately $558,000) or more on real estate to stay. Through this program, homeowners who spend more than 180 days a year in Spain automatically become residents.
In addition to Michelin-starred restaurants and boutique hotels, Mallorca has more than 20 golf courses and dozens of marinas for sailors. “There are high-quality people there who add to the shine,” Cvjetkovic said. The drive from the northern areas to the south takes about an hour. More: Paris is a perfect match for the strong dollar Although the east coast is generally quiet, the southwest is vibrant and offers some of the island’s most sought-after real estate. In Palma, where the airport is located, foreign buyers have converted old townhouses into modern apartments, according to Savills. In Port Andratx, potential buyers will find contemporary properties with dramatic sea views. The west coast of the island, from Valldemossa to Soller, is home to some of the island’s most expensive properties.