Palma is a stylish and beautiful city that is the best year-round destination for home owners in Mallorca.
It's been attracting property hunters from around the world for years but there's suddenly renewed interest in the market, reports one leading Mallorcan agent. But why now?
Buyer interest in the bottom of the market
It's partly down to a stream of cash buyers from Scandinavia and German-speaking countries looking for any property with character and outside space with either sea views or views across the old city's roof tops.
The general consensus is that prices have hit the bottom (prices have fallen by approximately 10 per cent to 20 per cent since the highs of 2007 when the square metre price of top quality renovated apartments in prime areas of the old town and Portixol hit €8,000 to €9,000 per sq metre, just behind top m2 prices for Barcelona and Madrid.
"Palma, is often referred to as the "Little Barcelona" and makes the perfect Mediterranean location for a "pied a tiere," says David Scheffler, Director General, Engel & Völkers Spain.
"Located only 10 minutes away from Palma's International Airport with daily flights from all Europe year round, it offers an eclectic mix of architecture through the centuries, culture, gastronomy and shopping."
The green shoots of Palma's real estate market have shown signs of recovery since early 2012, he adds.
"However, now client demand and sales, which are up by 30 per cent over this time last year, has gathered momentum for the first time since 2007 to such an extent that we believe prices for some prime, high quality property with outside space may well start to increase by the end of this year."
New boutique hotels and designer brands
This confidence in the city's real estate is attributed to several new factors: in the last 18 months no less than four new boutique luxury hotels have opened in the old town; (Cort Hotel opposite Palma's Town Hall, Palma Suites, the Brondo Architect and the Boutique Hotel Calatrava at the far end of the old walled city) with more scheduled for opening in the next two years.
At the same time, international designer names have launched in Palma with signature designer stores including Mulberry and Luis Vuitton and several one off designer boutiques serving wealthy incoming clientele. Any remaining neglected areas of the old city are being refurbished and cleaned up with new facades.
Areas on the up
A good example of a transformed area is Santa Catalina beside the city's old walls.
This was Palma's original fresh produce market surrounded by a mix of architectural style and now offers a wide range of restaurants, cafes, boutiques and services.
Here, above the iconic 19th century Colonial Cuba Bar building, a new four star boutique hotel is scheduled to open at the end of this year.
This area is attracting buyers that are keen to enjoy its central location and bustling, trendy atmosphere. An average square metre price for a quality renovated apartment here with outside terrace is approximately €5,000.
For example, Engel & Volkers are selling a stylish three-bed bed duplex apartment there over 113m2 with 29n2 terrace and 25m2 roof terrace, for €440,000.
Yacht super-tax to be quashed; and the Golden Visa
New legislation will also have an impact including the withdrawal of the Spanish Government's controversial yacht charter tax next year on superyachts over 15 metres.
This means that Palma's marinas are already gearing up to welcoming back this important sector of the luxury market.
Plus the new "golden visa", which comes into effect in 2014, will allow potential non EU investors to become residents if they purchase a property above €500,000.
Palma has always attracted an international market and this legislation will certainly help encourage those visitors to become investors.
New shopping mall
Finally, new infrastructure development continues with the start of a €230 million commercial shopping centre in Playa de Palma that is scheduled to open in 2015.
Hotspots to watch?
Palma's seaside "Paseo Maritimo" promenade area with views over Palma Bay, the Royal Yacht Club and the Club de Mar where some of the most expensive, privately owned yachts in the world are moored, is now experiencing increased demand as European buyers return to the area with the widespread perception that prices have bottomed out in what was considered some 30 years ago as the best address for local and foreign residents in Palma.
Prices for renovated apartments here range from approx €3,000 to €6,000 per m2.
Earlier this year there was unprecedented demand for the new "Bendinat Mar" first line development in San Augustin, on Palma's outskirts. This project features apartments ranging from €672,000 - 1.164.000 and even though building has only just started; only two of the 79 units are left to sell.
Next month construction will start on the third phase of a brand new, luxury seafront development, Marina Plaza II, located in the fashionable Portixol area, minutes away from Palma's famous cathedral , historic old town and airport.
The new development, which is scheduled to be completed by 2015, will offer 31 luxury units for an asking price of €1m plus and with plans still being drawn up, and all four penthouse apartments in this development (priced between €2-3 m) have already been reserved.
For those with smaller budgets, €250,000-300,000 will buy you a one-bed studio with some outdoor space - or a two-bed apartment with no outdoor space.
Read here to learn more about the property market around Palma and Mallorca generally; or search here for properties for sale on the island.