Mallorca property market review

Country:  Spain

4 January 2009

Q4 2008 represented one of the most challenging financial quarters yet for Mallorca’s economy, according to a fresh report compiled by estate agents, Engel & Völkers (E&V).

The company, which specialises in the luxury second home market, says that most areas reported a fall in sales levels of between 30 and 35% in Q4 2008, compared to the same period in 2007.

Furthermore, 2009 is set to remain difficult with anticipated sales down around 20% over 2008. The only area, which has proved to be the exception, is the southeast, which has had its best year yet.

This year started with more market movement than at the end of 2008 and now owners are more willing to negotiate to close deals.

British owners, in particular, are in a strong position to negotiate if they are taking euros home and some will discount up to 20% and still make a profit on their sale.

According to the Financial Times (27/12/2008), Mallorca property was highlighted as one Spanish area to safely invest in 2009 because of the island’s balanced supply and demand situation, which is driven by strict controls on new development, easy access and a sophisticated infrastructure.

Regional breakdown:
In the southwest, which includes some of the island’s most popular areas to own a second home, there is little interest in apartments and most recent sales (over 50%) are for villas, which is why the average purchase in this area is around the €1m (£900,000) mark.

British buyers have dropped by 50% and the main buyers at present are German, Scandinavian, Swiss and Spanish.

In Palma, the market slowed right down at the end of last year and prices started to readjust to the market conditions by approximately 10-20% below the original asking price. As a result the market is moving again.

Terence Panton, managing partner of E&V Palma, says: “January has started to look more positive with some recent sales to Swiss, German, Russian and Scandinavian clients. The main vendors tend to be local or foreigners that need to sell, British vendors can be very competitive at present when converting euros back into pounds sterling.”

Nils Haase, managing partner in the south east says: “2008 was our best year yet with
sales up by approximately 20% selling mainly fincas and villas. To date, our area has not been affected by the global financial crisis. We’ve had a busy period between Christmas and New Year with lots of viewings and our last sale of 2008 went through on December 30th.

In the north they are currently receiving many inquiries. In this area those vendors who want to sell are now more realistic and are willing to negotiate at anything between 10-30% below the asking price.

Christian Czarnetzki, managing partner for E&V North comments: “I suspect we are nearing the bottom of this crisis and I feel confident that the market will start to move again by mid 2009.”
 

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