The Property Market in Ibiza and its Relation to the Economy
March 25, 2020
The property market in Ibiza has been seeing years of growth in property prices. Investing in real estate ibiza turned out to be a safe business and even during the last crisis in 2008, prices haven’t dropped as much as in the rest of Spain. The amount of transactions was down due to the crisis […]
The property market in Ibiza has been seeing years of growth in property prices. Investing in real estate ibiza turned out to be a safe business and even during the last crisis in 2008, prices haven’t dropped as much as in the rest of Spain. The amount of transactions was down due to the crisis but continued to grow >80% towards 2019. Ibiza has been popular for a while now, but the popularity of the last years has really added some economic value for property owners. This article is part of our complete guide: “Investing in Ibiza? A Proper Guide to the Ins and Outs” 1. Investing in Ibiza? What Makes Ibiza so Special? 2. The Property Market in Ibiza and its Relation to the Economy 3. Ibiza Visitor Numbers; Who is coming to Ibiza? 4. Ibiza, a brand name (property) market 5. What to buy on Ibiza at which price? 6. What are typical rental yields in Ibiza? 7. Interesting investment opportunities for small and big investors 8. Who buys property in Ibiza? Want to stay updated on all of the releases? Subscribe to the updates at the bottom of this page.
2. The Property Market in Ibiza and its Relation to the EconomyVisitor numbers and property values go hand in hand and therefore we see this as Ibiza’s little economy being heavily dependent on a constant flow of people that come and contribute to the island vibe. They keep the restaurants busy & they push business owners to bring even better entertainment. We are keeping a close track on Home Sales as it reflects the investment market and thus, the general interest for property in Ibiza. A dive into local businesses will show us main activities on the island and their development. In all, enough information to create a holistic view of the performance of Ibiza. Expect to be informed about the economy in Ibiza in better and worse times. As we are currently in the middle of the Coronavirus, Ibiza faces a whole different set of challenges compared to the economic crisis in 2009. What are these differences and what is our view on the future of the real estate market in Ibiza? I will take you through some statistics: 2.a Home Sales 2.b Visitor Numbers and Nationality 2.c Where do People Stay? 2.d Are these hotels well occupied? 2.e What Local Business does Ibiza have? 2.f How is the Business Confidence? 2.g UPDATE: The effect of Coronavirus on the Real Estate Market in Ibiza
2.a Home SalesThe crisis had a big impact on home sales in mid-2007 to 2010. Ibiza was affected by the crisis, but not as much as the mainland of Spain and many other places in the world. Below graphic shows both the Home Sales in Ibiza and in Spain. Ibiza has remained quite stable. Spain in general has seen a bigger dip and is still recovering. Fuelled by global economic health, 2014 – 2017 were really booming years and home sales rose more than 50% towards 2018. As from 2019 we see consolidation due to global economy and increased compliance with property and mortgage laws. However, demand remains very steady and is still 35% up from 2013. In fact, you could say that real estate on Ibiza is quite crisis-proof due to its “PR-Heaven-Status” and low property inventory. Formerly, the island was mainly popular by British, Dutch, Italian and French. Now, people from new markets like Belgium, Switzerland, Scandinavia and Poland. Together they keep a constant focus on the island. Moreover, location marketing is fuelled by celebrities visiting the island and putting it in the spotlight. Ibiza is a strong brand.
2.b Visitor Numbers and NationalityIbiza is popular amongst tourists, investors and second home buyers. Below graphic shows the development of visitors according to the most popular nationalities. The island remains, despite of Brexit, popular. Visitor numbers have increased for about 20% in the past decade. We see a continuing trend of growth amongst de Dutch and French as well. Germans seem to be more steady and haven’t seen real growth or decline in the past 10 years. For years, growth of the island came from above mentioned nationalities, but slowly the mix is getting more versatile. Visitors from Belgium have doubled over the past decade and we also see interesting demand from the Portuguese, Irish and Austrian.
2.c Where do people stay in Ibiza?When these people visit Ibiza, where do they stay? Do they book a spot on a camping or do they book 5-star hotels or maybe prefer a private villa? The market is mixed but shows year-on-year increases for 5-star hotels or villa accommodations. The type of hotels offered on the island has changed in the past 10 years. Less demand for apartments and increased demand of hotels and agroturismos. In 2019, Ibiza counts 15 (!) 5-star hotels. In 2008, there were only 2. As a result, average hotel rates have gone up from €68,30 in 2008 to €132,80 in 2018.
2.d Are these hotels well occupied?The increasing amount of hotels is being supported by the occupancy rates and average room price of the hotels. The occupancy rate of 5-star hotels is even increasing together with the increasing amount of supply which let us make the soft conclusion that Ibiza is increasingly serving the higher-end market.
2.e What local businesses does Ibiza have?The huge demand on visitor side has been rapidly met by entrepreneurs who saw potential turnover in all industries serving these visitors. Of course, the population is increasing as well, but with over 4 million visitors a year against 150k local inhabitants, one can conclude that most of the businesses aim to earn money during the tourist season which runs from May to September. Over the years, the season is slowly extending to April – October. Even winter in Ibiza is becoming increasingly popular due its good weather conditions and the options to enjoy some nature and good food spots. To serve an increased YOY visitor number, hospitality businesses have increased in the past decade. There is about 20% more food and hotel services compared to 2012. Construction businesses have increased with 20% as well. There is a steady flow of new developments and older real estate being redesigned. However and of course all in compliance with the resources on the island. Water is scarce and therefore there are heavy investments in improving water systems and hydraulics. As a result, eco-oriented businesses have a huge preference on the island.
2.f How is the business confidence?The increased number of businesses have also brought increased competition. Still businesses, are increasingly positive with a peak in 2016. In short, Ibiza has a healthy business climate and is very popular, also in relatively new tourist markets. Home Sales are stable and local business are in general positive. The island is moving slowly into an all-year round destination. Property owners have seen their property values increasing in the past years. On April 5th we will release a virtual fly-over the real estate market in Ibiza, to see what to buy in Ibiza at which price in the current market.
2.g Update: What is the effect of Coronavirus on the Economy in Ibiza?As mentioned above, Ibiza thrives on tourism. Ibiza visitor numbers showed a year-on-year increase, mainly due to holidaymakers and second homeowners. On top, the high season is slowly extending from the golden 100 days towards 150 days and even the winter months are getting quite popular for a quick getaway. Now, during the corona crisis there is a 99% decrease in flights. No holidaymakers or second homeowners are allowed to travel to the island. You can imagine that this is an enormous hit on the economy for an island that thrives on tourism (related businesses). We are in a situation that can’t be compared to the 2008 crisis where the property market was the Big Bad causing the global crisis. In today’s crisis, the property market is also the victim. However, looking at business cycles, a little downturn was to be expected. We saw a trend in the past year, so pre-Corona, property owners slowly started adjusting their Pricing. From a Sellers’ Market we turned into a Buyers’ market, meaning buyers having the power. What will be the effect on the short and the longer term? Short-Term Outlook (150 Golden Days) No flights means no tourism, it is as simple as that. Living in Ibiza Town, I will not book a hotel in Portinatx (30km away) or Cala Comte (20km). We do day trips. This results in hotels suffering most in this crisis. Once there is a plan to re-open, taking into account social distancing, we might go back to support the local restaurants. Still, there are a lot of restaurants in tourist zones and solely targeting tourists. Those will have a hard time as they most likely will not open at all. Firstly, all the hopes are on managing health & health system. Secondly, getting some planes and boats moving, all with the aim to find a balance between health and economy. There are talks that the first allowed to move to the island are overseas property owners. This group doesn’t need to stay in hotels and can maintain social distancing. Once there is a social distancing plan for hotels and airlines, traditional tourism can slowly start moving. The plan is aimed to commence in August. These are all speculations, but a fact is, that people can’t wait to come back to the island. ‘Mijn Tips Ibiza Vrienden” (A Facebook page in Dutch named My Tips Ibiza Friends) has posted a poll asking their Dutch members what their travel plans are. 60% say they will come as soon as possible. 17% is making plans for autumn and the rest, 18% is not sure yet and waiting. To be very honest with you, from the moment the lockdown was announced, we haven’t received any buyer interest for a period of 3 weeks. Very normal, everyone was in a kind of shock and needed time to adjust to the new situation. Now, after 5 weeks in lockdown we are again receiving quite a lot of interest… Buyers have started looking for deals and bargains, because they know that at some point they can come back to enjoy to the tranquil beaches & lifestyle. Long-Term Outlook Looking at the past crisis in 2008 and its recovery, Ibiza has done much better than the rest of Spain. In the period 2007-2013, transaction volumes went down 33% compared to 66% in the rest of Spain. In its recovery phase, it took Ibiza to reach and even exceed pre-crisis levels by 8% in 2017. At this point, so when Ibiza was exceeding pre-crisis levels, Spain in general was still 35% behind from their pre-crisis peak. On the longer term, Ibiza is in hands of the travel restrictions. Consequently, there won’t be many property transactions on the short-term, because people can’t do in-person viewings and have a smooth sales process. However, as mentioned above, they are enquiring, they are exploring the market. Many of us had a proper wake-up call. Freedom and joy are not taken for granted. Our generations have not experienced wars and were mainly focussed on future development, more business, more money. They forgot about what really matters and that is time. Spending and valuing the time they have with their family and friends was always a given, now it will become a priority. For many, Ibiza is a place of joy and that will always remain the same. Think about the bigger picture. In the past 20 years, Ibiza had a huge influx of British, Dutch, French and Italian second home buyers. It is an interesting destination for those seeking a max 2-hour-flight-away getaway. According to Knight Franks’ Wealth Report 2020, Spanish, French and British wealth is expected to grow even more in the next 5 years, respectively 24%, 21% and 31%. Moreover, there is an increased interest for the island from relatively new markets, like Sweden, Switzerland, Romania and Poland. There is so much more market share to gain here for Ibiza. Put that in perspective of the merely 1.500-2.000 properties on the market and you’ll do the math for the property prices. When we take into practice what we have learned in the 2008 crisis; people won’t sell their property unless they need the funds. The more expensive the property, the less likely prices will drop as owners will keep and wait till the next rise, just because they can afford. Next week (April 23th), more about Ibiza and its popularity in numbers. Is it fad or a steady trend? Want to stay updated on all of the releases? Subscribe to the updates at the bottom of this page.
Looking to invest in Ibiza? Who is investing in Ibiza? What could you buy at which price? What are rental yield opportunities? Why is the island so popular? In the next 8 weeks, we are going to provide you with answers to all of these questions. We love statistics and data so be prepared for […]Read more