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Signs of Recovery at the Mallorca Property Market

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June 1, 2009

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At least that’s how it is most years. But 2009 is different. The entire world is on tenterhooks waiting for the first signs of economic recovery. So although things this Summer may look much as they normally do, there’s a lot riding on what’s real and what’s wishful thinking.

The main cheerleader for an early recovery in the Spanish property market in general is Gonzalo Bernardos, Professor of Economics at Barcelona University, an expert in property economics and a man known for his pithy no-nonsense analysis.

He issued a new report recently which concludes that we’re now at the beginning of the end of the worst period for property sales since the crisis began, not exactly a prediction of a booming year but enough to prompt El Mundo to pen one of its first optimistic editorials on the outlook for the economy in almost two years.

Bernardos believes that the market will come back to life this year, with more sales than in 2008, for five key reasons:

  • Interest rates are lower
  • House prices, on average, have fallen back to 2003 levels
  • Banks have started to lend more
  • Many people planning to rent are deciding to buy because prices have fallen
  • And investors are coming back ? because they see there?s value to be had

It’s that last observation in particular that will gladden the hearts of estate agents who if they?re being candid rather than desperately trying to avoid talking down the market will admit that they’ve seen buyers disappear and sales fall substantially, even here on Mallorca.

One of the Balearics’ most experienced market-watchers is Andrew Spence of real estate developers, Bendinat Group, who predicts, for instance, that sales across the island this year could be down by as much as 25 or 30 percent, depending on the property and its location.

Reviewing the market since it got off to its traditional start at Easter, Spence has already identified one major shift: Germans have replaced the British as the biggest buyers ? not because the Germans are buying more, but rather because the British have virtually stopped buying.

Eighteen months ago, 60 percent of our buyers were British, whereas now that’s only around 10 percent, Spence told abcMallorca. German buyers used to represent about 30 percent of purchasers, but that?s now up around 70 percent. And in addition, we’re also seeing some Scandinavian buyers, a few Russians and the occasional buyer from the Emirates.

Interestingly, he too says investors are back on the scene, watching for bargains.

The real bargain-hunters are looking for value as a result of distressed sales, and they can be found. I came across a property recently worth 500,000 but on the market for 350,000 and it was sold in two days. But that’s certainly not the norm; it’s a rarity?

Eric Lacabarats of developers, Espacio, agrees that German buyers are now the most important market segment. In general, the Germans are buying and their sales are remaining more or less constant whereas the British aren’t buying at all, or very little.

He’s also cautiously optimistic for 2009 because he too sees investors coming back with money to spend. We’re seeing interest from countries where we haven’t had clients before, such as Switzerland, Lichtenstein and Luxembourg, so clearly people are looking outside the usual tax havens for investment opportunities. Investors are saying, I have 20 million to spend, what can I do with it and thinking of Mallorca.

In terms of thinking innovatively about how to boost the market, Espacio recently started a new incentive scheme which offers customers 10 percent interest a year on any deposit they put on an apartment in GreenPort, their luxurious new development planned for Santa Ponsa.

The scheme, which is covered by a bank guarantee, means that if a buyer puts a 100,000 deposit on a unit to reserve it now, 12 months from now that 100,000 will have become 110,000, giving the customer a bigger deposit or a 10 percent discount on the purchase price.

But how long will it take for the market to recover fully?


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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.