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Property prices in Mallorca. Mallorca property market update July 2013

July 21, 2013

Mallorca property market update - July 2013

Buyers who are holding out in the expectation of seeing lower prices for the best properties risk having to pay more rather than less in the future.

It has been a while since I posted a market update, a key observation in the last report being that we were seeing increasing activity in the mid to premium sectors.

We commented at the time that this could mean we had seen the bottoming out in prices of sensibly valued properties of this type (see Mallorca property market update, September 2012.

What is now becoming apparent is that this demand is coming from an increasingly broad range of countries. While British, Germans and Scandinavians are still predominant, buyers from other parts of the world including Switzerland, France, America, Russia and elsewhere are more in evidence.

This trend applies almost exclusively to the mid to high end “international sector” properties, particularly good quality apartments within day-to-day reach of Palma, sea view properties and good quality country houses in the most scenic locations around Mallorca’s historic Old Towns.

So, while we still expect prices across Spain to continue falling for some time, the indications are that prime international locations such as the most desirable spots in Mallorca will not.

This is clearly illustrated in this article on Spanish Property Insight: Spanish house price equilibrium?

The reference made to Ibiza, another international property hot spot, could equally well be applied to prime locations in Mallorca.

There are undoubtedly still properties that are overpriced and it continues to be important to sift out the genuinely good opportunities.

But the effect of this increase in breadth of demand should not be under estimated. We are talking about a relatively small number of properties and it only takes a small number of active buyers to affect perceptions of the market and, therefore, price expectations.

You need only look at central London, where prices have risen consistently throughout the financial crisis and recession, to see what effect an increasing international demand can have.

So while the more intransigent owners might previously have been viewed as unrealistic, some of them will be rewarded over the coming years as their price aspirations are met.

The distinction between the different sectors of the market is fundamental. Properties in less sought after locations are likely to see further declines before prices even out. Because they account for the bulk of the available property stock, it is likely that average reported prices across the whole of Mallorca will also fall further.

However, buyers who are holding out in the expectation of seeing lower prices for the best properties risk having to pay more rather than less in the future.

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