Mallorca property market update, Dec '09:
How best to judge the market to your advantage

Too many statistics ...

This months Mallorca Property Market Update tries to cut through the sea of statistics and widely differing perspectives on the state of the market, and to give some more practical advice to help buyers assess whether this really is a good time to buy properties in Mallorca.

Judging by the divergence in the opinions put forward by the many and varied commentators on the Mallorca property market, it is far from clear as to whether the market has reached its low-point or has further to fall. Indeed some estate agents still argue passionately that the market has not in fact fallen at all!

One can hardly be blamed for being confused by these reports. At best they give little assistance in the question outlined - is now a good time to buy or not?

It certainly seems the European economy, and critically the Spanish and UK economies are, at best, in for a long-haul out of recession. This undoubtedly puts continuing pressure on prices.

It is true also that property transactions in Mallorca have picked up in the second part of 2009. This activity is focused on the best investment opportunities and these are in the prime areas. The volume of transactions is still be low but owners of prime area properties are undoubtedly in a stronger position than others and this will show more clearly when the market strengthen more solidly. Smart buyers are paying attractive purchase prices now to put themselves in this position.

The good opportunities are still out there. But if you are selective in seeking out properties in these prime locations you will find there are not so many that represent a good investment opportunity for the future - certainly not in the short to mid-term.

So in our view the question "is it a good time to buy" requires a qualified answer. It is a good time to look for good property opportunities. If you go about your search the right way you may well find the ideal property at an exceptional price. If you do, then it will be a good time to buy! If you delay your search waiting for the market to fall further you could well miss out on such prime opportunities. Equally, if you rush into it simply grabbing the biggest price discount you can find you could end up with a very bad investment.

With this in mind we have seen some fantastic purchases made this year. Purchases that should hold out as good investments pretty much whatever happens next in the global economy. For example:

• A 3-bed apartment in a prime community in Puerto Andratx with super harbour views and walkable to the town. Comparable properties in this prime location are usually over 1.1 million Euros and generally stick close to this level in negotiations. This purchase was made in the low 800's
• A second-line sea view villa refurbishment project in a prime residential location in Porto Cristo. The purchase plus works will be circa Euro 1.5 million all-in for a property that should comfortably be worth Euro 1.8 million when it is finished in the current market environment.
• A 2-bed apartment in Puerto Andratx, in a smaller and less prestigious community but also with harbour views and walkable to the town. The property was purchased for less than Euro 270,000. There is currently nothing comparable at this price level and few, if any, will come up in the future.
• A 4-bed country villa in the Pollensa area. Purchased for less than Euro 500,000 the property should comfortably be worth Euro 600.000 in today's market once a few finishing touches have been completed.

In all of these purchases the buyers had the sense to understand the locations and be patient in finding the right opportunity. The properties are all in well-established prime areas that provide a solid foundation to their future value. Hopefully these examples add some weight to our advice that broad market statistics and analyses are not what you should be focusing on if you want to take advantage of the downturn in property prices. A more insightful on-the-ground approach is required and likely to produce a far better result.