The sorry state of Spain's economy has been widely documented in recent years, with the country's property market taking a particularly significant hit.

As the eurozone struggled to cope with the challenges of the financial downturn and unemployment figures soared, the boom in Spain quickly turned to bust - but it seems that Ibiza and Mallorca could be leading a recovery.

According to Sotheby's International Realty, the property markets on the two Balearic Islands have been performing far better than that on the Spanish mainland, with overseas investors from a whole host of countries queuing up for villas and apartments.

"Ibiza had its recovery year in 2012, light years ahead of faltering markets on the Spanish mainland," said Daniel Chavarria Waschke, the managing director of the company.

"Even off-plan and in-construction property is selling at remarkable pace, usually the hardest product to sell in a typical holiday home market as buyers tend to want something tangible and finished.

"This proves Ibiza's reputation as a safe haven for real estate investment."

With Spain continuing to be a hugely popular tourist destination, investing in property to let to holidaymakers can be a lucrative business if done properly.

So with villas and apartments on the mainland particularly cheap and a growing number of overseas buyers looking to Mallorca and Ibiza, now could be the time to get into the market before prices start to increase again.

Yet while this represents an attractive business opportunity, there are other factors that have to be taken into account as investors protect themselves against the financial risk of buying in a foreign country.

As well as looking at tax laws, visas and mortgage rates, it's important that they remember to invest in policies such as second home insurance to ensure their assets are covered in the event of any damage or essential maintenance work.