The dream of owning a property in Menorca
On the rise and perfect for investment. This is the state of the property market in Menorca, one of the Mediterranean’s most beautiful and unspoilt islands. Buying a property on the island is a dream for many and a bargain for others.
Owning a property that you can rent out to tourists, in fact is a perfect way to invest money. In this article we will go into depth about how to buy a house in Menorca and the steps to follow when dealing with taxes and bureaucracy.
Is it convenient to buy a house in Menorca?
Without a doubt the answer is yes. Thanks to it’s small size, Menorca is the ideal destination for retirement, to bring your family for a change of lifestyle or for young, upcoming couples who want an interesting twist in their future.
Also the cost of living, in terms of properties, goods and the services on offer is lower in Menorca compared to other Spanish and European destinations. If we add to this the connectivity of the island via direct flights to European capitals, it comes as no surprise that Menorca is in growth as a second residence for many European citizens.
Nowadays the Menorcan property market is very active, with high percentage growth for those who wish to sell as well as those wishing to buy a property on this jewel of the Mediterranean.
In fact, Menorca closed 2018 in growth in sales and purchases with respect to the housing trade. The 1782 transactions that took place represented a 9% growth compared to the previous year which demonstrates a current highly dynamic market, the highest for ten years, in fact we’d have to go back to 2007 to find better figures.
Limitations on the construction of new housing
One of the things that differentiates Menorca from its neighbours in the Balearics, apart from the outstanding beauty of it’s coastline, is the protection of the territory. If you want to buy a property in Menorca you need to know that unlike Mallorca, for example, Menorca has limited ,over the last years, the construction of new housing.
In this sense, and above all since the designation of the island by UNESCO in 1993 as a Biosphere Reserve, the island and it’s countryside is protected under legislation.
Isabel Petrus, owner of the estate agency Casas en Menorca with more than 30 years experience under her belt explains, «The first thing we recommend to those who wish to buy a house and come and live in Menorca is to get the support of an estate agency».
Llorenç Palliser, head lawyer at the firm Palliser Advocats (palliser.es), with more than 20 years experience in the Menorcan property market, indicates that «Acquiring a property in Menorca requires the back up of qualified professionals (Estate agents of good repute and legal representatives on the island to accompany you through all of the phases of the purchasing process and posterior representation.) taking into consideration that the Spanish legal system is very secure, the urban legislation in Menorca is very strict and gives sanctions for non conformity, to this end it is vitally important to know that what you are buying conforms to the set urban, touristic and environmental regulations».
He continues «This type of assessment is especially important when buying country houses, upon which the grade of protection is much higher».
Buying houses on sale
For those who wish to acquire their property in Menorca in the short term, the best option is to buy a property that has already been built. Fortunately there are many such properties across the island. It is no coincidence that according to The National Institute of statistics, Menorca is the only Balearic Island whose house sales are in continuous growth, mainly thanks to the second hand market.
In this sense, Llorenç Palliser tells us «Whilst the purchase of a house that is already built is the quickest way to get a property in Menorca and taking into account that the availability of land to build new properties upon is scarce, with good legal advice, the construction of a new property or it’s reform shouldn’t scare the buyer off; the legal process is slower in these cases but doesn’t constitute a risk under any circumstances».
What to do if you decide to buy a house or land in Menorca
When you make the decision to buy a property (House, villa, country home, plot of land), it’s of vital importance to discover its legal and physical situation. In this sense says Llorenç Palliser «The legal study previous to the purchase of a property is the most important phase. This can often be overlooked by some Estate agencies».
In this sense he continues «This assessment is very different depending on the type of property you wish to aquire and the zone in which it is located. The legislation changes from one urban area to another as it also does regarding the eventual use of the property (Touristic, residential, farming etc.). Likewise the client should always be offered the possibility to study the structural state of the property to avoid unforseen expenses regarding repairs».
Next we will talk about the best areas to purchase a property in Menorca.
Where to buy a property on the Island of Menorca
Recently constructed villas of 130m2 with a swimming pool, 3 bedrooms, 2 bathrooms in Son Bou, Binibeca and Punta Prima in the southern end of the island which is more protected from the prevailing Tramuntana wind. This is the principal demand for homes in Menorca.
Compared to Mallorca, which also has marvelous coves, in Menorca you cannot find properties on the front line with the beach. The budget of purchasers typically ranges from 150 up to 500 thousand Euros. There is no shortage of luxury villas in Menorca with sea views and even a private dock, whose prices range from 2 up to 7 million Euros in Cala Llonga, the most exclusive residential area on the Island.
Without a doubt, houses next to the sea or in beach locations are the most soughtafter and also the most expensive. Prices here are always higher compared to other areas due to the coastline laws which have protected the coastline for more than 20 years prohibiting construction of buildings near the sea.
Houses in the main cities on the island, especially Mahón and Ciutadella have more affordable prices which increase if the property has land or is situated in the countryside. The majestic Ciutadella at 1547€/m2 beats the island’s capital Mahón in terms of quality housing. The price per square meter in Mahón currently stands at 1385€, the lowest in the whole island.
House prices in Menorca
House prices in Menorca, as we have previously seen depend on the zones with more demand. We can affirm that the average cost of a decent apartment is 1815€ per square meter. There are more economic houses available, normally in need of work or located far inland, away from the sea. With a good search and agreeing to be further from the sea, you can find properties from 60/70 thousand Euros.
The costs of buying
Another fundamental service offered by the legal assessor is to inform the buyer about the costs of acquiring the property as well as annual maintenance costs.
«Those who buy a second hand house – explains Isabel Petrus – need to pay a tax called Transmisiones Patrimoniales which implies paying 8%of the house price if the price does not exceed 400,000€, and more if the price is higher than this value». Notary costs and property registry costs also apply».
In any case, according to Llorenç Palliser, «The approximate cost of purchasing a property increases to between 11 and 12% due to the taxes and honories of the legal assessor. Once you have secured the property, each year you must pay a tax called Impuesto sobre Bienes Inmuebles (IBI), Municipal taxes (for rubbish collection for example.) and pay the tax Impuesto sobre la Renta no Residente which must be payed within the natural year of the accrual of the property».
«It’s the job of the legal assessor to be clear previous to the purchase regarding the total overall costs that the buyer will accrue in the process of purchasing and maintaining the property». Concludes Llorenç Palliser (realestate@palliser.es).
What is the buying process for non-residents in Menorca?
Llorenç Palliser informs us «This is the process that most surprises the client; with new technologies and the experience of a good assessor, nowadays we can carry out the buying process with or without finance from a bank, without the need for the client to be present in Menorca, from the preparation of the Notarial powers in the clients country of residence to the change in contracts of suppliers such as electricity or gas companies, we can open bank accounts, obtain residency paperwork, sign contracts, sign the sales paperwork before the notary, etc…it’s a safe process and hardly needs the intervention of the buyer».
He continues «It can often be only a matter of weeks from when the client tells us which property they wish to aquire, until we hand over the keys. We keep the client informed of every stage of the process through access to our online platform, translating the most important documentation into the clients own language».
«We are aware of how cumbersome the purchase of a property overseas can become, for this reason we place at your disposal our knowledge and technology through the guidance of top professionals in the field to accompany you through the process from your arrival to Menorca up to the hand over of the property and onwards as the new owners». Concludes Mr. Palliser.
What to do once the property is yours?
If you are not residing in Menorca, it is recommended that you appoint a representative on the island to assist you. In this sense and as Llorenç Palliser indicates «We always recommend Spanish non-residents, for a modest cost, to name a representative, who receives your correspondence, informs you periodically of the municipal taxes that you need to pay, to carry out your taxation paperwork, pay the taxes, to represent you in meetings in your neighbourhood or community, to meet on your behalf with local authorities at the town hall or even look after the property and supervise any work that needs to be carried out in the property whilst you are not present on the island».
Equally and for what concerns the care of your property, Menorca has the availability of good professionals in all the sectors necessary for the upkeep of your property. (Gardeners, Swimming pool management, Maintenance, etc.) Meaning your investment will be kept safe and in a good condition.
In conclusion
The best advice is before you invest any money in a property, go yourself to take a visit and appraise the property personally. It’s normal that the costs could give you a scare at first, but buying yourself a property in Menorca may be the investment you need to open a business focussed in tourism. The return on investment could be as high as 4-5% a year.
In any case it’s important to understand everything concerning the buying process and carry out each phase of the process with due care and attention, maintain contact with your property asessor who will guide you through the process and recommend the most professional estate agencies in the area of Menorca where you wish to buy.