insights · May 19, 2016

Benefits of owning a rental property in Mallorca and Ibiza

Sea view of Cala Llamp and Gran Folies in Mallorca, a prime location for holiday rental property investment.

Owning a buy-to-let property in Mallorca and Ibiza allows investors to cover running costs and mortgage payments through a 20-to-24-week peak holiday season, supported by over 300 sunny days annually. Beyond strong short-term rental demand and steady long-term property value growth, owners benefit from personal holiday use during unlet periods across the Balearic Islands.

Longer-than-usual holiday season

With an average of over 300 sunny days in the Balearic Islands, and over 2,700 hours of annual sunlight, the holiday seasons of Mallorca and Ibiza are longer than in most destinations. The summer on these islands is exceptionally long, easily extending from the end of March to the end of October. As such, the peak holiday season extends to between 20 and 24 weeks each year, offering buyers ample opportunity to recoup their initial investment by renting out their property during the peak season.

Indeed, even the off-peak holiday season can offer attractive opportunities to owners of rental properties, with Christmas and Easter being particularly busy periods in the short-term rental sphere of the Balearic islands. Rental prices can differ during different times of the year, and the owners of rental property can use this to their advantage, offering tailored pricing that suits their own circumstances.

The mild winter weather in the Balearics, together with the long holiday season, allow owners of rental property to tailor their leases. They can rest assured that there will be no shortage of demand for their property.

Growing demand for rental property

Panoramic view of coastal town and marina in Ibiza Blaue Flosse (CC BY-SA 2.0)

It’s no secret that the popularity of the Balearic islands as holiday destinations has been growing for some time. In recent years, airlines including Easyjet, Ryanair, Monarch, and Aer Lingus have all stepped up their programme of flights from mainland Europe to Mallorca and Ibiza, making these islands more accessible than ever. The majority of the island’s holidaymakers continue to be interested in short-term to mid-term property lets, which has driven a steady increase in rental demand.

With growing rental demand comes growing rental prices. Over the past few years, both Mallorca and Ibiza have witnessed an increase in rental prices above the Spanish average. In Mallorca, for example, asking rental prices increased markedly over the course of 2015, outstripping growth across the Balearics as a whole, according to reporting by El País in February 2016. All indications suggest that owners of rental properties on the Balearic islands are looking forward to a bright future.

While, on the whole, the islands of Mallorca and Ibiza offer great possibilities to lucratively rent out your property, different regions and property types offer different types of opportunities, which can be evaluated using CASAFARI Area Insights.

Unique holiday destination

Renting out a property will usually involve occupant-free periods. For those who enjoy a certain financial security, this could be an opportunity rather than a predicament. Being no more than a couple of hours by plane from most European destinations, Mallorca and Ibiza are within easy reach from most holiday home owners.

Mallorca and Ibiza offer a unique package of holiday opportunities, making it enticing to both renters and tenants. Since the second half of the twentieth century, Mallorca and Ibiza have been attracting the international community, both in the capacity of tourist and expat. Half a century after this began, both Mallorca and Ibiza are able to offer a very wide range of holiday facilities – golf clubs, sailing schools, luxury restaurants and all types of nightclubs. Mallorca and Ibiza have something for people of all walks of life, meaning that the renter’s prospective tenants can be of a wide range.

Owners of rental properties can have their cake and eat it. They can take advantage of holidaying in their own home while being able to use the property to create revenue at other times.

Long-term value growth

As we detail more thoroughly on our blog, experts agree that Mallorca and Ibiza offer some of the best property investment opportunities in Europe, and the positive returns on investment are clear for everyone to see. Unlike other holiday destinations in Spain and Europe, Mallorca and Ibiza remain remarkably immune to the overdevelopment and overpopulation that has affected other parts of Spain. Importantly, this has meant, for example, that the islands proved to be somewhat less affected by the steep contraction in property prices after 2008, despite not being totally immune.

Even after the 2008 downturn, Mallorca and Ibiza were among the Spanish communities to recover most quickly from the property price downturn. Note, for example, that Mallorca’s capital, Palma, has witnessed rapid property price growth among Spanish cities, with Ibiza close behind, highlighting why Mallorca is a major find for property investors.

The buy-to-let strategy in Mallorca and Ibiza can offer particular benefits to those who have a long-term view, such as couples and families who wish to one day retire to the comfort of the Balearics, or entrepreneurs using CASAFARI solutions for property investors to capitalize on long-term property price growth. By choosing to rent out their property in Mallorca and Ibiza, owners can be creating a secure nest egg for the future.

Ease of rental handling

While by no means hassle-free, renting out your property in Mallorca and Ibiza is no more difficult than in many other European holiday destinations, and indeed can be easier than you think.

What’s more, laws introduced in 2013 swayed the power balance in favour of the landlord. Before this, long-term tenancies could be forcefully renewed by tenants for periods of up to five years.

To make everything easier, you may want to consider using the services of a well-established letting agent to help you find good tenants, drawing up the appropriate rental contracts and managing the property for you. We also advise you to seek professional advice from your local Spanish-based lawyer with property expertise. Finally, since regulations on renting holiday homes vary according to the different parts of the islands, it is also wise to check local laws with the nearest town hall.

Why is buying a rental property in Mallorca and Ibiza a sound long-term investment?

Mallorca and Ibiza are ideal locations to own and let property, supported by growing rental demand and solid long-term fundamentals. Long holiday seasons allow property owners to generate consistent returns while retaining flexibility for personal use throughout the year.

Property buyers and investors can sign in to the CASAFARI platform to access up-to-date pricing information and real estate market analytics across the Balearic Islands.

Frequently asked questions

How long is the peak holiday rental season in Mallorca and Ibiza?

The Balearic Islands average over 300 sunny days and 2,700 hours of annual sunlight, extending the summer season from late March through late October. This creates a peak holiday season of 20 to 24 weeks each year. Landlords also benefit from off-peak holiday demand during Easter and Christmas.

How have asking rents in Mallorca and the Balearic Islands performed?

Asking rental prices across Mallorca and the wider Balearic Islands have historically outpaced national averages, driven by sustained demand for holiday lettings. Strong short-term and mid-term visitor interest continues to support rental performance across both islands.

Why have property values in Mallorca and Ibiza proved resilient?

Mallorca and Ibiza have largely avoided the severe overdevelopment seen in parts of mainland Spain. As a result, property values on the islands proved more resilient during broader market downturns and were among the fastest to recover, led by key urban markets like Palma and Ibiza.

What should landlords check before letting a holiday property in Mallorca or Ibiza?

Property owners should check local holiday-letting regulations with the relevant town hall, as rules vary across different municipalities. It is also recommended to consult a Spanish property lawyer and partner with an established local letting agent to oversee contracts and property management.

How can property investors analyse rental yields and market prices in the Balearic Islands?

Investors can evaluate market trends and learn how to calculate and find rental yields with CASAFARI. For bespoke integration and granular real estate analytics, developers and data teams can also consult the Area Insights API documentation.