Signs of recovery in the Mallorca Property Market?

May 23, 2009 - PRLog -- Clearly this is a question of importance to anyone considering buying a property in Mallorca at the current time. They will be concerned not to enter the market before prices have dropped as far as they are going to go. At the same time however they will not want to wait too long and miss out on the best discounts while prices are depressed.

This is a difficult call. There is no certain way of knowing when a market has bottomed out, and the factors influencing the market for properties in Mallorca show some powerful influences that could push prices down further, and also some that are counteracting this and supporting prices.

* Forecasts from the UK and other European countries that there would be a return to grown in 2009 seem optimistic. On April 22nd the International Monetary Fund forecast the U.K.’s economy is likely to contract 0.4 percent in 2010, while in Germany the economy is forecast to shrink 1 percent. The British and Germans are the predominant buyers of property in Mallorca so it seems likely the negative effects of the recession will continue to some extent through this period.

* Across the Spanish property market as a whole prices have been most affected in the coastal areas with a high proportion of holiday properties. These are non-essential items, and when times are tough many owners look to sell their holiday homes and prospective buyers hold back. This means the recessionary effects felt in other sectors of property market are magnified. Average prices across the Balearics and the Canaries combined fell by 9% in 2008, a greater fall than in other regions (figures from Tinsa, a leading Spanish real estate appraisal company). The pace of decline accelerated into 2009 with Tinsa’s index showing prices across Spain having fallen by 10% to January (year-on-year figire). The comparable fogure in coastal areas was 12.6%.

* Credit is still tight and obtaining mortgages continues to be difficult. Whilst lending restrictions might have relaxed slightly since last year, problems associated with the over-supply of property on mainland Spain place a huge burden on the banks. Consequently the banks are cautious of making new loans and it is difficult to see how the situation can improve significantly until the property market stabilizes.

* Sterling continues to be realtively low against the Euro making purchases for UK buyers more expensive. It has strenghtened slighlty over the last month or so but remains wway below the exchange reate UK buyers enjoyed in up to the 4th quarter of 2007.
   
These factors indicate the market still has a way to go before that precious low point is reached, so why has the property market in Mallorca picked up in recent months?

Of course there is the seasonal factor. The market is always quiet in January and February and astarts to pick up in the Spring. Aside from this however the answer lies in a more detailed study of Mallorca as a market that is distinct from the Spanish mainland and the other Spanish islands. A strict planning regime has ensured that Mallorca has not suffered the over-development that has been prevalent in coastal areas on the mainland. Furthemore demand for property in Mallorca is no longer reliant on beach-apartment holiday homes in package-tour resorts. Mallorca is often stated to be one of the most desirable places in the world to own property and in which to live. It is increasingly exclusive and sophisticated drawing buyers from all parts of the world.

Mallorca Property Partners, a leading Mallorca property finder (http://www.mallorcapropertypartners.com/mallorca-property...) and advice service, observe “ … most of the activity at present is with properties in good areas and in the mid and high-range price brackets. Buyers in the market understand the solid investment potential these properties offer at a time when holding money in the bank generates little return and stock market investments remain volatile and risky”. But why not wait for prices to fall further?

Mallorca Property Partners go on to point out the significant variance between final selling prices and average prices quoted in various market reports. “The owners' circumstance is a far more powerful influence now than it would be in a normal market environment. Depending on their situation some owners are negotiating just a little, and some are accepting very significant discounts on the asking price. Average prices may have a bit further to fall, but some of the opportunities available right now are as good as you are likely ever to see in Mallorca.”

To illustrate this point, Mallorca Property Partners have close to a hundred price reductions and Mallorca Property “bargains” on their website. These range from low cost apartments to multi-million Euro sea view villas and country houses - you can view them here http://www.mallorcapropertypartners.com/blog/category/sel...

Furthermore the exchange rate and tight credit market is not necessarily such an issue for all buyers. UK buyers in a solid financial position can consider taking a Euro mortgage, even if they do not need one, as a hedge against further currency fluctuations. The pound is broadly forecast to regain ground against the Euro this could work in the favour of buyers who can then pay off all, or part of the loan at a later date when the pound is stonger. Ironically the chances of someone obtaining a mortgage when the finance is not essential are noticably higher too.

For these reasons, waiting for average prices to reach their absolute floor could mean missing out on some great deals that are avilable in the market right now. So, to return to the original question. It may be a bit early for talk of green shoots in Mallorca or elsewhere.  But there is certainly activity in the property market and the signs for Mallorca returning to solidly increasing prices when things do turn around are positive.

The most astute buyers will recognise the potential disadvantages of waiting and relying on market and press reports that are really too general to give an accurate appraisal of the current opportunity. Rather they will be searching for property opportunities ongoing until the right one arises. One option is to open a watching brief with Mallorca Property Partners to keep a lookout for you. With comprehensive coverage of all the key buying locations this could noticably increase your chances of success in finding the best deal. You can register with them via their website at http://www.mallorcapropertypartners.com/.

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MPP is a leading search and advice service specialising solely in property in Mallorca.

We are long-established and offer a wide range of services as alternative to the time-consuming process of finding the best properties and professional contacts.