Does the “Credit Crunch” mean bargain Mallorca Property deals? - 1st November 2008
Inevitably it has been a relatively flat year for the Mallorca property market, but compared to other locations the market is proving resilient to the prevailing economic slowdown. There are certainly some good deals to be had and this could be a good time to get into the market, but buyers should not expect the kind of dramatic price cuts seen in other markets, and wise investors will not necessarily look to the most heavily discounted properties.
Mallorca has, for many years, been one of the most solid and positive property markets in Europe. But even this strong market is not escaping the effects of the economic instability we are seeing across the world. Overall however, the slow down in Mallorca is less severe than that being experienced in the UK, mainland Spain or most other locations. Also the effect of the slow-down varies widely between areas and types of property.
Underlying this, Mallorca still remains one of the most sought-after property markets in the world and the supply of good properties continues to be limited. It is important to understand this, and the reasons behind it, if you are to get the best value during this period when there will be some good buying opportunities:
- Mallorca is an international market. Whilst the British have been the predominant buying force in recent years, demand for Mallorca comes from all parts of the world and continues to increase. Mallorca is already established as one of the most desirable places to own property and this is not changing.
- At the same time, planning restrictions have been rigorously enforced and made even more stringent in recent years. This has protected the environment and limits the supply of properties on the market.
- This has a knock-on effect across all properties on the island, particularly those in the most well-established and sought-after locations. The old properties are worth renovating to a high standard and, where there are opportunities for new-builds, they are built to the high standards buyers expect.
- While the world is in a slow-down, many of those vendors who have been in the Mallorca property market for a while prefer to stick close to their asking prices rather than drop it significantly for a quick sale. They have seen prices escalate consistently over the years and there is confidence that this will continue to be the case when the economic environment improves.
- The rental market continues to get stronger, something that is most apparent in prime areas such as Pollensa. This allows many vendors to be somewhat ambivalent as to whether their property sells now or in the future. If they do not get the price they want now they simply continue to rent out until a buyer appears or the market rises.
- In additional to this there are more and more people wanting to move to Mallorca on a permanent basis.
These factors all mitigate against the effects of the international slow down and show Mallorca to be a good investment. But even the strongest markets are not escaping the current slow down and there are good opportunities to buy that would not have existed last year. This all points to this being a good time to get into the Mallorca property market if you are in a position to do so.
So, where do the best opportunities lie?
There are already some "bargains" to be had, and likely to be more. But the best investments will not necessarily be the properties where the greatest price reductions have occurred. Just as there are far more significant cut-price deals on the mainland at present ... would you rather own one of those or a good property in Mallorca in a few years time?
The same applies to different areas and properties within Mallorca. The best properties will go down by the least amount, and go up by the most when things turn around.
Our advice is to focus on the well-established prime areas. They are the prime areas for good reason, i.e. they are the most attractive when you take all factors such as amenities, scenery and accessibility into account. The price reductions in these areas might be less, but this is where the demand has remained most solid and where it will escalate most when things get back to normal.
Areas at the top of the recommended list are, therefore, probably ones you have already heard of: Pollensa Old Town and Puerto de Pollensa in the north, Palma Old Town and Santa Catalina, Puerto de Andratx, Port Adriano and El Toro / Santa Ponsa on the SW coast, Puerto de Soller and Soller Old Town in the NW, and the good resort towns on the east coast such as Cala d'Or and Portocolom.
Within these areas, focus on properties that are in a good location (views, nice countryside, good part of town, premium developments, good accessibility etc), and those which are high quality properties or can be renovated to a good standard.
Don't expect such properties to come at the sort of bargain knock-down price reductions we are seeing on mainland. But you can expect some negotiation and there will be some good deals to be had on properties that should be excellent investments for the future.
What you need to consider is how much these properties will start escalating when the economic environment improves, and how advantageous it will be to get into the market now rather than leave it until then. Our tip as to the best time to buy is early next year through to mid-March (i.e. before the holiday season and main buying period gets under-way).
If you are interested and want to discuss any aspect of the Mallorca property market in more detail please do not hesitate to email or call us via our website Mallorca Property Partners.
