Competition between islands: why the rich are now looking for a house in Menorca and not in Ibiza

Ibiza is out of control and housing prices are skyrocketing. Villas that were sold for 3.5 million euros a year and a half ago are now on the market for more than five. The madness of prices and the saturation of the island have led many great fortunes to set their sights on Menorca, another much more affordable island with a spectacular setting. The first to notice it were the Parisian VIPs, but for two years, many wealthy Spanish businessmen have fled to it in search of a much quieter and more anonymous environment.

This strong increase in demand, together with the fact that hardly anything is built on the island and very little product is for sale, is pushing prices up. Prices that, although they are far from those that can be reached in Ibiza, are not within the reach of any pocket.

Prices have risen 15% in the most exclusive houses, but, in some cases, up to 50%

"The growing interest of clients with high purchasing power that has focused on luxury housing in Menorca, a market that until recently was still to be explored, together with the limited supply available on the island, has led to a constant rise in last two years, especially in the most exclusive properties. We calculate between 10-15%, even more in some specific points of the island such as Mahón", Alejandra Vanoli, general director of VIVA Sotheby's International Realty, explains to El Confidencial.

The 'boom' for Menorca is relatively recent. "10 years ago the French VIPs arrived from Paris and a couple of years ago Spanish businessmen began to arrive on the island, businessmen who want to be invisible, go unnoticed," says Francisco Arnau, director of Engel & Völkers Menorca, who assures that "500,000 or 600,000 euros to buy a house on the island is currently a simple budget".

This increase in demand, together with the shortage of supply, has resulted in an inevitable direct increase in prices. Sotheby's calculates between 10-15% for the most exclusive properties, while Arnau explains that "not everything has risen equally".

In the opinion of the director of Engel & Völkers, "what has become more expensive are the houses that touch the sea. In the first line we can be talking about increases of 50% in the last two years. And it does not seem that the upward trend is going away to stop. There is a waiting list to buy, but there is no product for sale. Keep in mind that we have not had tourist developments for more than 20 years. There are no free plots on the beachfront. What there are are plots with existing constructions. Who buy, you can throw away the house and make a new one. Of course, you have to have economic potential to do it. But free plots, without any type of construction facing the sea, there are none".

On the fringes of the real estate boom

And it is that Menorca has not succumbed to the siren songs that have taken over much of the Spanish coast, especially during the real estate boom. "The island, due to its nature, has different laws than the rest of the Balearic Islands and Spain," explains Arnau.

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The expert refers to the Insular Territorial Plan (PTI) of Menorca, a model of land use planning whose pillars are the commitment to sustainability and solidarity with future generations on the island, and which, among other aspects, promotes a model of tourist accommodation away from overcrowding and respect for the environment, and a type of building that generates income and employment on the island, but respecting the environment and the spectacular landscapes of the island.

"Menorca is very ecological," continues Arnau. "It has not liked to grow very much and, when we saw that it was difficult not to succumb to the real estate fever, we approved special laws to protect the environment. The PTI, for example, especially protects the countryside, and prevents practically 90% of the land from It can be parceled out. There are also no new tourist developments planned, in such a way that the supply is much more limited than the demand, which, at the moment, is driving prices and we don't know how long they will continue to rise." One fact, the average price of the properties sold by Engel & Völkers exceeded one million euros in 2020, compared to the average of 890,000 euros registered in 2019.

Due to this and other factors, interest in the island has been increasing, while madness takes over Ibiza. "Menorca, like Ibiza, offers one of the most varied environments in the Mediterranean. An exotic and exclusive destination, as well as close. It has paradisiacal beaches with crystal clear water and white sand. A wide variety of gastronomic and cultural offerings as well endless options for water and outdoor activities", says Isabel Moll, head of Sotheby's in Menorca. "Perhaps the most marked difference between the two islands is that Menorca has a more relaxed and family-oriented lifestyle than Ibiza, known for fascinating and frenetic activity day and night."

Also the price gap of the most exclusive properties tilts the balance in favor of Menorca. "In most comparable examples, the price gap reaches 100%. If we compare a newly built villa, of similar qualities and characteristics (square meters, bedrooms, bathrooms...) in a coastal development, with sea views , in Ibiza the price is around 6,300 euros per square meter, and in Menorca, 3,200 euros".

The gap is also significant with respect to Palma de Mallorca. Jan Mulder, broker at REMAX Organge 2 in Palma Mallorca, assures that, while the average price in Menorca is around 2,000 euros per square meter, in Mallorca we would be talking about approximately 3,000 euros. "However, it depends on the type of product and the area where it is located," he insists.

The price gap between Ibiza and Menorca can reach 100% in some cases

The demand for luxury properties is concentrated in two very different types of product. On the one hand, agricultural estates with their corresponding country house and, on the other, seaside houses. "They are very different. Houses by the sea are very scarce, and they do not go below a million and a half euros, while farms in the countryside, for example, it is impossible to buy below two million. Prices start from 3.5 million According to Arnau.

Farms for more than 10 million

The price difference is explained by the dimensions of both products, according to this expert. "Inland farms, agricultural operations, can have 50-100 hectares, with agricultural buildings of up to 2,000 meters, while houses facing the sea are usually smaller houses on plots of 1,000 meters. However," he continues, "the big difference between the two is that those who do not want to have neighbors should go inland, because by the sea you cannot live isolated. The few properties that would allow it exceed 10 million. I always tell clients that they must choose between the sea and neighbors or no sea and no neighbors. You can't do both".

Alejandra Vanoli agrees with Arnau. "The properties with the highest prices are the villas on the seafront and the large country estates with an agrotourism license. Of the latter, location, views or access to the sea, land and profitability are valued. The price range is 10 to 15 million euros. With exceptions for singularity, with higher prices". However, from Sotheby's they establish an average price range between 500,000 and three million euros.

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The first to detect the charm of the island were the VIP clients of Paris, who have been joined, in the last two years, by large Spanish fortunes seeking the utmost discretion and anonymity. "The origin of clients from France, Belgium, Switzerland and the rest of northern Europe is maintained. They are the most interested in the island. In general, they see the island as a safe, paradisiacal destination with a great quality of life. But we have also seen a substantial increase in national and non-European clients, especially Americans, Argentines or Mexicans," says Isabel Moll.

According to data from Engel & Volkers, 84% of home purchases on the island are made with French and Spanish clients. Of that percentage, half corresponded to the French, followed by the Spanish, who carried out 34% of the operations.

"The growing interest of international buyers and investors is reflected in the multiple applications received. Not in vain, properties on the island have significant potential for revaluation by maintaining moderate prices compared to other similar destinations," Gary Hobson assured this summer , director of Engel & Völkers Mallorca. In 2020, the number of online inquiries rose 30% compared to the same period of the previous year.

Precisely, Jan Mulder highlights the appetite that Menorca has aroused among investors. "Especially from Barcelona and Madrid. Mallorca and Ibiza are very expensive and Menorca allows you to buy cheaper and get better long-term returns. In addition, unlike Mallorca, it has a greater range of prices. But, at an investment level, it attracts attention that are more national than foreign".