Despite their proximity (just 87miles of Mediterranean separate them), Mallorca and Ibiza share surprisingly little in common. Both boast breathlessly pretty coastlines—rugged coves with crystalline turquoise waters—and both suffer from areas of blight caused by the ravages of mass tourism. But Ibiza’s adoption by hippies in the 1960s and 1970s has bequeathed a Bohemian, slightly mischievous air to the pine-covered island, which continues to attract creative and free spirits to its shores. Although larger and more sophisticated, Mallorca is topographically more dramatic and also has the international schools, direct flights from all European capitals and Michelin-starred restaurants to attract families and businessmen, along with a smattering of celebrities.

There’s no doubt that the devastating duo of the credit crunch and the collapse of the pound against the Euro have combined to stall many an Englishman’s dream of owning a home on the islands. In the boom years, property prices—in particular on Mallorca—rocketed, with prices per square foot in the Gothic and Arab-influenced houses of Palma’s centre or casco antiguo, reaching if not beating those in Madrid.

Today, the story is, of course, a little different. Spain’s current economic woes are well known: unemployment has soared and the construction industry is in a perilous state. Newspaper headlines are all but reporting the Spanish property market in freefall, but few are extrapolating the mainland statistics from those of the Balearics. Agents concur that yes, times are tougher, and vendors are having to be more flexible on asking prices if they’re determined to sell in this climate; however, continued demand from all corners is blocking any hopes of snapping up complete bargains.

Mallorca

‘The British market is down by 50%,’ says Jan Westwood of The Property Finders, a buying agent on the island. ‘Few want to admit that, but it’s true. However, we’re not seeing a collapse of prices on Mallorca because the gap is being filled with other nationalities.’
 
Robert Maunder of First Mallorca, which specialises in the glamorous, yachting centres in the south west of the island, echoes this: ‘During 2008 we managed an increase in sales on 2007 but it was the slowest yearly growth we’ve experienced in the past 14 years. German buyers have overtaken UK buyers, although top end British buyers are still in the market.’
 
In a report published by Engel & Völkers this month, prices have softened to varying degrees around the islands, taking from between 6% and 30% off the peak. ‘But the big discounts are only really available on the mass-built development properties in Palma’s suburbs,’ warns Mrs Westwood.

‘Don’t expect to extract big bargains from vendors of large country properties with sea views: if they don’t need to sell, they’ll wait until someone pays the right price.’ Louise Foster of Knight Frank’s associate Vogue Properties agrees: ‘Don’t expect a bargain, because 75% of our clients [in the north end of the island around Pollensa] don’t need to sell. However, there are exceptions: we’ve just exchanged at €425,000 on a house that was priced at €795,000. For that reason, 2009 is a great year to buy.’

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One of the sources of pride and faith in the future of the island and its property market derives from the stringent local government controls that restrict new developments. Mallorca was highlighted in the Financial Times at the end of 2008 as a safe investment because of the island’s balanced supply and demand. It’s one of the easiest places to fly to from all over Europe: most capitals are just a two-hour flight from Palma and a further €240 million has been committed by the authorities for further expansion of the airport.

‘But what people often don’t think about, and one of the island’s biggest plus points, is the security,’ points out Miss Foster. ‘One client who sold up and moved to the South of France was horrified by having to have alarms even in his garden— he hadn’t realised how liberating it was to live in a crime-free area.’

Areas to look out for include country houses in the valley of Sóller, which lie among the orange and lemon groves and sometimes offer sea views; Andratx for those who want to be close to the yachting action; and Pollensa for rural seclusion with good restaurants close by.

Ibiza

In less than a week, the official summer season of 2009 will open in Ibiza, marking the beginning of a four-month-long series of dinners, dances and open-air parties to which the world’s bold and beautiful will undoubtedly flock. The names of people who summered on the island last year reads like a list from the Cannes Film Festival: Leonardo di Caprio rented a house, Dolce & Gabanna’s yacht was moored in the harbour beside Robert Cavalli’s, Kate Moss was in town visiting her resident friend Jade Jagger and the former Household Cavalry officer turned- singer James Blunt, who calls the island his home, flitted back and forth.

It’s these visitors who also turn into prospective property buyers, and their arrival normally signals the start of the selling season. But Cathy Ouwehand, an Australian expatriate who’s lived in Ibiza for the past five years and is Savills’ new associate on the island, was flooded with property enquiries six weeks before the official season began. ‘I haven’t stopped for the past month,’ she says. ‘And I can’t answer all the villa enquiries that I’ve had. It seems that the word is out that there’s value for money now on the island and deals to be done.’

Talking to the main agents on the island would suggest that there’s even less room for price negotiation on Ibiza than there is on Mallorca. ‘Prices at the top end of €3 million plus have held well, but those priced between €1.3 million and €2 million have experienced a small decrease of about 10%,’ say Engel & Völkers. ‘But Ibiza is also considerably cheaper than Mallorca,’ adds Montse Amat de Gray, Knight Frank’s associate. ‘You get a lot more value for your money in Ibiza.

A top-end villa on Mallorca would cost €15 million but the same one in Ibiza would be €5 million,’ agrees Miss Ouwehand. Perhaps its relative affordability is what’s sustaining demand, and therefore prices, on the island. Aylesford sold more properties last year in Ibiza than they did in Mallorca. ‘Most of our vendors plan to rent out their properties this summer in the hope that some of the renters might convert into buyers,’ says Charlotte Wilson. ‘The hedgefund boys who typically would have taken a house for two months are now trimming that down to three weeks, but they’re still coming,’ she adds.
 
Areas to look out for: coastal views over pretty coves around Cala Moli; Es Cubells in the south of the island; interior villages in the north for seclusion (most houses are deliberately tricky to find down dirt tracks with no signposts).