How would you describe Engel & Völkers' connection with Mallorca, and what are some of the main highlights of the company's local business?
The connection within the company between Germany and Mallorca, where the first international office opened, is one between the country and the island itself. In other words, there is a closeness not only at the company level, but also at a cultural level. There are currently 19 offices on the island with an annual turnover of close to EUR500 million in sales. In 2021, the figure will be even higher than previously. 2020 should have been a total disaster for the real estate sector due to travel restrictions and uncertainty. However, the strength and robustness of prices was never questioned. This is completely different from what happened in 2008 with a financial crisis, with a public eager for change now understands that Mallorca is a solid and desirable market. Without being able to travel, it is difficult to sell a house. Engel & Völkers has gone through a rapid digitalization, with remote visits done on a regular basis. We have applied technology and shortened the sales process: what we did in four to five visits, we now do with one visit thanks to an array of previous actions on new platforms. It is like a five-year leap but adapted to our work in only a few months. People want to invest in their own quality of life now more than ever, and that has had a reflection in Mallorca's real estate market.
What are some of the trends shaping the real estate business in Mallorca, and what can we expect in the future?
One of our priorities is to simplify the real estate market and to inform about differences between a local market and an international one, with quite different dynamics. That is why Engel & Völkers strongly focused on market research done on the local market at a detailed level. Today, our reports are a source of information for investors, end consumers, and others to know more about where the market is going and how it is taking shape. Mallorca's real estate market does not depend on external financing. It is also characterized by a huge variety of products; there is something for all tastes and budgets, which attracts a large public. 60% of the international market value comprises German, Austrian, and Swiss clients who buy properties in Mallorca. During the pandemic, it was surprising to see that the city of Palma lost little market value compared to other European cities, as a trend toward the countryside and open spaces was expected. In Mallorca, villages were favored and are now totally in trend. Now and in the future, one of the key challenges is access to housing for the local population without restricting the international buyer. The administration needs to step in to find favorable solutions for all in close collaboration with the private sector. Planning for 15-20 years ahead is needed in order to really solve the problem, bearing in mind that the real estate sector is a great generator of wealth for our society. In fact, 75% of the EUR450 million of taxes generated in the first semester of 2021 by the Balearic government stemmed from property transmission tax. This is an unheard amount that confirms how the island's economy and welfare have largely been held in place via the real estate industry.
How do you see the nearest future in the real estate market on the Balearic Islands?
Engel & Völkers works in all market segments: commercial, hotels, rents, and new construction. As resources and space on the islands are limited, there is a great push to reuse resources and work on urban planning to achieve new, smaller housing. This quest in efficiency and intelligent use of scarce resources, mainly aimed to preserve the islands' natural beauty need to receive a much higher priority. For example, in Palma, half of the population lives alone or as couple, and therefore, the minimum size housing unit of 90sqm that was set decades ago by the urban planners of the time does not work anymore. With the change in tourism trends that have been triggered by the pandemic, it is better to invest in quality over quantity. There are surplus buildings that can be reconverted or regenerated into social housing, co-working, offices, or hotels with a differentiated approach. Tourism is and will remain to be the main pillar that sustains the GDP of the Balearic Islands, even if 20% comes from real estate. The tourism industry is becoming more modern, as the original model is failing and needs to be rethought in sustainability terms. This year's season will be again be weak, though the European investor relies on these islands and the strength of the location will attract investment that will fuel this transformation. In addition, we will soon see a regulation of the real estate intermediation activity that will provide a higher level of service and security for the consumer. On behalf of Engel & Völkers and Balearic National and International Real Estate Association (ABINI), we are strongly supportive of this process.
How can the real estate sector in Mallorca propel green and sustainable building?
The real estate sector has traditionally had little consideration for sustainable matters, and now we are in a position where we have to undo things we have done wrong in order to significantly improve conditions. Within the sector, there are customers that are moved by their love in the destination, seek to protect it, and have the resources to be able to do so. We are learning from people who come from abroad and from their methods of sustainability, which are different from ours. With the pandemic, we have begun to take care more strongly than ever of what is ours, of that which is close to us. The Mallorca Preservation Foundation, a member of the Conservation Collective, has been established with this objective and will keep working to raise awareness of the fact that the success of our island, its tourism, its real estate sector, and the happiness of its people lies in the natural beauty of the island of Mallorca, which urgently needs to preserved. Increasing capital is available to invest in sustainability, and companies gain value when they have a sustainability program, so they are starting to work on it increasingly. The Mallorca Preservation Foundation is a vehicle to channel financial and organizational resources to small and middle-sized local conservation projects with a firm guarantee that 100% of the funds raised go directly into the local environment.