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Mallorca On A Budget – It May Never Be Possible Again!

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May 1, 2011


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The good news this summer is that there’s no need any more to feel embarrassed about living, holidaying or even property-shopping in Mallorca on a budget. The most well-off were some of the hardest hit in the financial crisis, so everyone’s looking for value – it just depends on how big your budget is!

Of course size does matter. But there’s value to be had in every price bracket, whether you have €200,000 to €300,000 to spend on a pied-à-terre not too far from the sparkling Med – or a multi-million-euro stash that could see you rubbing shoulders with Michael Douglas at the annual neighbourhood barbecue.

We shouldn’t be surprised. After all, when 10 percent reductions in high-end sale prices failed to lure buyers over the past two or three years, many agencies recommended hefty cuts of 20 percent – and some of those sellers most anxious to liquefy their property assets apparently went to 30 percent and even further.

Even so, this island ain’t cheap. So if you’re looking for a nice little summer hideaway, a totally unscientific abcMallorca straw poll of local estate agents reveals that the average purchase price for anything ready to move into in a decent seafront location currently has a starting price tag of around €1 million.

Not alone that, but Christian Czarnetzki, Managing Director of Engel & Völkers North, gives this fascinating insight into how the property market segments showing the most activity have been changing, even within the past 12 months …

“During the last quarter of 2010, activity focused in the main on smaller apartments. But so far this year, there has been a marked increase in both interest and in offers received for properties costing from €1 million to €3 million,” Czarnetzki told abcMallorca.

Michael Cunnington of MJC Associates, who work with Savills, agrees that there’s plenty of interest in high-value properties – but says hard-nosed buyers still expect good value. Nowadays everyone, it seems, is on a budget.

“Closing sales in Mallorca is still not easy, with long negotiations, more complex conditions and longer completion periods – and buyers still in the strong position of being able to haggle on price”, he stresses.

Real punter interest is good news, and the economic context for this summer’s property market looks slightly improved as well – although volatility on the oil market remains an imponderable given the uncertain political state of the Middle East.

The Spanish government predicts that the economy will grow by 1.3 percent this year – although the International Monetary Fund (IMF) is considerably more cautious, capping its forecast at just 0.6 percent.

“All the indicators so far suggest that the Spanish economy continued to grow in early 2011 – albeit at a painfully slow pace,” says Raj Badiani, Senior Economist at consultancy firm, HIS Global Insight, in London.

“However, the fact is that Spain still faces a profound challenge to pull itself clear of the severe recession which has resulted in continuous job losses since mid-2008.”

Specifically in real estate terms, recent figures from TINSA – the real estate appraisal and consultancy firm owned by the main Spanish banks – also give rise to some slight optimism.

The figures show that rather than falling again, average house prices barely changed between January and February, reducing the year-on-year decline to 4.5 percent – though the total fall since the peak of the market is still 19.5 percent.

Despite the fact that the rate of decline is slowing, it’s still clear that much of the mainland property market remains in suspended animation – particularly in areas where chronic oversupply is still a problem.

A quick survey at the lower to middle end of the market shows: a three-bedroom villa in Sucina, ten minutes from Mar Menor on the east coast, down from €175,000 to €85,000; a three-bed with pool in Fortuna, in Murcia, down from €220,000 to €150,000; and a five-bed villa with a pool in Moraira, near Alicante, down from €500,000 to an asking price of €340,000.

However, the Bank of Spain also believes that green economic shoots may indeed be in sight – though not surprisingly given the upheavals the global financial system has been through, its monthly bulletin was well couched in caveats and qualifications.

“The indicators for the first few months of 2011, while still scant, point in general to a continuation of the path of slow recovery,” the bulletin said, adding that consumer sentiment was “clearly improving”.

Within the TINSA figures there’s a smidgen of moderately good news too for Mallorca and the Balearics specifically:
• Prices for January showed a decline of only 0.8 percent
• The decline since the peak is less than the average at 17.5 percent

At Engel & Völkers North, Christian Czarnetzki, reviewing the year so far, is also cautiously optimistic: “We had a bright start to the year, with a surprising number of old clients returning and new clients coming into the market …

“There’s an interesting mix of German, Scandinavian and Brutish clients showing an interest, which is why we had a busy spring and are looking forward to an active summer. And interestingly, there’s also been an encouraging number of new inquiries from rental clients.”

Czarnetzki’s assessment is very much in line with another review of the Spanish market recently, this time by a major developer, Taylor Wimpey, which named Mallorca as one of the country’s prime real estate locations – its unique brand untarnished by the economic collapse.

“Sadly”, said the Taylor Wimpey statement, “there are areas in Spain which are, and will continue to be, negatively affected by a mass oversupply of homes. However, in prime locations such as Marbella on the Costa del Sol or Mallorca, their popularity with Northern Europeans who wish to own holiday homes or even live overseas will maintain a steady flow of interest and sales.”

There you have it: buying in Mallorca on a budget this summer is not alone good sense – you may never have the same fantastic range of opportunities again!

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Peter Cluskey

Peter Cluskey

An Irish journalist who worked for some years as a war correspondent for the national television station in Ireland – RTE. In recent years, he has specialised in writing about the real estate market worldwide – focusing particularly on the luxury second home destinations. He is a sought-after contributor to a number of international property publications, based on his reputation for well-researched and excellently written articles.