Post image for Mallorca property market update, September 2012

Mallorca property market update, September 2012

September 20, 2012

Mallorca property market update, September 2012

The market for properties in Mallorca is still depressed, but activity appears to be gradually increasing as crisis becomes the norm.

Our latest Mallorca property market update gives our perspective on this along with practical advice to those interested in taking advantage of the buyer’s market.

In 2012 the Eurozone crisis has overshadowed the poor state of the rest of the global economy, with Spain taking center stage for much of that time. This has maintained pressure on a property market that was already severely depressed, the construction “bubble” in Spain having burst back in 2008.

The various statistics available for the Spanish property market show a continuing decline with no turnaround in sight in the near future.

  • The value of housing transactions in the first half of this year decreased by 17% compared to last year (Ministry of Development).
  • Spanish house prices fell 14.4% over the same period (National Institute of Statistics).
  • House prices along the Mediterranean Coast have continued to decline, averaging 40% since the market peak in 2007 (TINSA).

However, while the statistics provide a valuable overview, they are of little practical use to people who are actively looking for a property. Nor are they much use to anyone wondering whether they should buy now or wait for lower prices.

This is simply because price trends vary greatly according to type of property and by exact location, just as in the UK or any other country.

Ideally we would have statistics broken down into individual locations within Mallorca) and by type and value of properties within those locations.

Such detailed data is not available, so we have to rely on our own observations as to what is happening here at ground level. In our June update I commented that:

  • Lower priced properties in the international sector, most obviously those in package tour resorts, will have fallen more than average. Values in these locations were fuelled by easy credit. Easy credit is no longer available so the volume of potential buyers is limited compared with what it used to be. Prices are likely to remain under pressure for some time …
  • Prices of mid to high-end properties in the international sector will have fallen less. Owners are generally less reliant on high loan-to-value finance and the supply-demand equation is more supportive of prices. Consequently there are indications that sensibly priced properties have reached a floor. Many owners who are not under financial pressure are now happy to wait for the market to stabilise … rather than negotiate further substantial amounts off the price.

Since then the indications are that these observations were correct.

Fuelling this, desirable prime location properties are being seen as a “safe-haven” at a time when most currencies are under pressure and bank deposits earn next to nothing.

It also seems that people are getting used to, and thoroughly fed up with, the crisis. Whatever that outcome might be, people want to get on with their lives. For some this means buying a property in Mallorca. So people are slowly but surely returning to the market for lifestyle purchases too.

This also explains the apparent increase in activity over recent months. Whatever the motivation, buyers are realising they might be able to buy a good long-term investment at a preferential price.

With this in mind, our view is that the market will carry on in its current state for several years longer, showing a gradual strengthening of the mid and high-end sectors.

Further pressures will come and go as it seems likely there will be more drama within the Eurozone and other economies. But prices in the most desirable international locations will continue to show resilience comparative to the rest of the market.

Our advice if you are considering buying now, is to spend time on the ground researching locations and purchase prices in detail.

Bear in mind that many properties in all sectors of the market are still overpriced. Don’t be swayed by discount money-off offers when assessing a deal. Look to the underlying value of the property in relation to comparative properties in the same location.

Alternatively, use Mallorca Property Partners to do this on your behalf. We can apply more than 10 years of experience as the leading property finder service specialising solely in Mallorca.

You can read more about the benefits of using Mallorca Property Partners on our homepage – www.mallorcapropertypartners.com.

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