Mansion Global

Tips for Americans Buying Real Estate in Mallorca

Waterfront estates are luring international buyers to the Balearic island’s golden coasts

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Built in the mid-19th century, this estate in Valldemossa features seven buildings. Agent: Alejandra Vanoli - Mallorca Sotheby's International Realty.

Mallorca Sotheby's International Realty
Built in the mid-19th century, this estate in Valldemossa features seven buildings. Agent: Alejandra Vanoli - Mallorca Sotheby's International Realty.
Mallorca Sotheby's International Realty

Mallorca is the second in Mansion Global’s series Summer of the Strong Dollar, an examination of European luxury destinations where American home buyers can capitalize on their currency advantage. As of 2 p.m. on Wednesday, the dollar had risen 22.16% against the euro since the end of June 2014.

Price Trends:

Foreign buyers, often from northern Europe, are lured to the Balearic island of Mallorca for its top resorts, rugged coastlines and cliffs that overlook the Mediterranean Sea. “It’s a market that’s doing very well at the moment,” said Jelena Cvjetkovic, agency network manager for real estate brokerage Savills. “In general in Spain, the islands have been more resilient than the mainland.” A report from real estate firm Engel & Völkers noted a 28% increase in home sales in 2014 over the previous year, with the average sales price up from 750,000 euros in 2013 (about $1.03 million using the exchange rate at the end of 2013) to 1.2 million euros in 2014 (about $1.45 million).

Port Andratx, $12 million: This seafront estate includes a covered terrace with a swimming pool and views of the Mediterranean. Agent: Monika Baier, Mallorca Sotheby's International Realty. View full listing. MALLORCA SOTHEBY'S INTERNATIONAL REALTY

Taxes, Fees and Purchase Costs:

When purchasing a home in Mallorca, Savills recommends that American buyers hire a bilingual lawyer who understands the Spanish housing market. Since properties in Spain carry the debts of their previous owners, the attorney should ensure the home has no outstanding debts. He or she can also help the buyer request a Número de Identificación de Extranjero, or NIE, which is an identification number assigned to all foreigners and is necessary for opening a bank account. Similar to homes in Tuscany, property tax rates in Spain will vary depending on the value of the home and its location. Non-resident homeowners are required to file a tax return and should expect to pay an inheritance tax and a wealth tax on the property, according to Savills. The firm also suggests that buyers set aside 10%-12% of the price for purchase costs, which will include a transfer tax of 6%-10%.

RELATED: Tips for Americans Buying in Tuscany Through its Golden Visa program, the Spanish government allows non-European Union nationals who spend €500,000 (about $558,000) or more on property to establish residency. Through this program, homeowners who spend more than 180 days of the year in Spain will automatically become a resident.

Port Andratx, about $14.5 million: Perched above Cala Llamp Bay, this modern villa includes a four-level home with eight bedrooms, five baths and an elevator. Agent: Monika Baier, Mallorca Sotheby's International Realty. View full listing. MALLORCA SOTHEBY'S INTERNATIONAL REALTY

Lifestyle:

In addition to its Michelin-starred restaurants and boutique hotels, Mallorca boasts more than 20 golf courses, as well as dozens of marinas for yachting enthusiasts. “There are high-profile people there who add to the glitz,” said Cvjetkovic. It takes about an hour to drive from the northern areas to the south. More: Paris a Perfect Match for the Strong Dollar Although the east coast is generally quiet, the southwest is lively and features some of the island’s most desirable real estate. In Palma, where the airport is located, overseas buyers have taken to converting old townhomes into modern residences, according to Savills. In Port Andratx, prospective buyers will find contemporary estates with dramatic ocean views. The island’s western coast, from Valldemossa towards Soller, features some of the island’s priciest properties. View full listing (pictured top) Listings on Mansion Global as of June 24, 2015 Write to Gina Faridniya at gina.faridniya@dowjones.com