Mallorca property market update - Feb 2010. Go for the prime properties, not the biggest reductions!

Feb. 5, 2010 - PRLog -- Indeed this does appear to be the case, the question our readers will be asking is what this means for them. Have they missed the chance to nab a bargain or are there still opportunities out there?

Well, they can relax to some degree as the "signs of strengthening" are very much an early indication at present and certainly not indicative of an imminent and significant rebound in prices:

   *  The number of new mortgages approved in the Balearics rose in November (latest figures from the National Institute of Statistics). This is reflected in other parts of Spain indicating that finance is finally beginning to loosen up a bit.
   * The number of British buying Euros for property purchases has increased as Sterling has returned to a more competitive level versus the Euro, albeit a way off pre-recession levels.
   * The estate agents we work with across Mallorca have noticed more activity and that enquiries are of a more serious nature. In fact this has been the case since the latter part of last year.

Gradually these positive changes in the market will take hold and at some point prices will no-doubt start to increase again. Before that however we can expect a period of stabilisation during which the number of exceptional offers will decrease. Obviously when markets are on their way down sellers are more susceptible to low offers than when there is some light at the end of the tunnel!

However "gradually" is a key word in this context and at this stage the "light at the end of the tunnel" is more of a glimmer that remains susceptible to further downbeat economic news and negative sentiment. There are still many pressures on the market which are not going to disappear overnight meaning the window of opportunity to buy a good property investment in Mallorca is still with us.

As noted however the number of opportunities will diminish at some point and this will first become apparent with quality properties in prime locations. We commented last year that smart buyers were already very active in the market seeking out opportunities to snap up such properties, a key factor in the negotiations being the confidence level and personal situation of the vendor.

This is still the case, and there are still comparable opportunities out there, but there is no doubt that many owners are more confident now than they were last year and this has an inevitable influence that is not in the buyer's favour.

With this in-mind, waiting for average prices to fall further is an even more flawed strategy now than it was last year. If you are in a position to buy there is more to be lost than gained by delaying your search, and this is even more-so the case if you are intending to buy a prime property which, in our view, is what you should be doing.

Whilst Mallorca continues to stand out as a prime location overall, a significant effect of the recession has been to correct the prices in less well-known areas and of the older outdated resort areas. The market in these areas will take longer to strengthen with prices remaining at their depressed level for considerably longer than for more desirable properties in better areas.

The graph above is a representation of what happens to property prices during recession and recovery. It shows how prime properties fall in value by less and increase more quickly, by greater amounts, when a recovery is under way. The same would be true of property markets anywhere in the world.

It might surprise some however to hear that buying a prime property does not necessarily mean a seven figure budget. There are still opportunities to buy very good 2 bed apartments in prime locations such as Nova Santa Ponsa and Puerto Andratx for under Euro 400,000 - something you'd have been unlikely to find before the recession took hold. As we have stressed many times in the past, such genuinely good opportunities need to be searched for, you don't just stumble across them!

The graph also underscores another point that we have been stressing regularly in our market updates. That is not to judge the quality of a deal by the percentage price reduction. Prices fall by less in prime areas because the owners have more confidence in their asset. Put simply, the supply and demand equation is more in their favour.

This in turn means they are less likely to advertise extraordinary price reductions or negotiate to such a high degree as owners in areas where there are more properties to choose from. So you may not get such a good deal in percentage reduction terms, but the quality of your investment and the return you can expect from it will greater.

The above advice is reflected on some interesting comments from agents in Mallorca noting that experienced German buyers are getting good, but not ridiculous, deals on some very good properties. This compares with many British buyers who are expecting 50% reductions and walking away either with nothing or with poor quality properties of questionable investment appeal. Perhaps there is something to learn in this.

You can read more about Mallorca property buying tactics in our previous market updates - http://www.mallorcapropertypartners.com/mallorca-news/dec....

One way to fast-track your search with on-the-ground expertise and comprehensive coverage is to brief Mallorca Property Partners - click here for more information: http://www.mallorcapropertypartners.com.

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Mallorca Property Partners is the longest-established property finder service in Mallorca. We cover all of the prime areas and all types of properties as well as offering a comprehensively range of supporting services throughout your search and purchase.