Something is stirring in Mallorca’s property market. The overall market still looks depressed, but look a bit closer and you find that the quality segment is coming back to life. A window of opportunity has opened up for buyers who want the best at a reasonable price. That window won’t stay open for ever.
There’s no denying that the vital statistics of the overall market are still pretty gloomy. Prices, according to the valuation company Tinsa, are down by 8% in the Balearics over 12 months to October, whilst transactions– the heartbeat of any market – are down dramatically over the last 2 years. Cumulative sales in the year to October were 5,876, down 40% on the same period last year, and 64% compared to 2007.
But as I explained in a recent article ‘Segments are the key to understanding the Spanish property market’, overall figures can be misleading if you are interested in prime and A-grade property. That looks to be the case in Mallorca, and to a certain extent in other areas of Spain that attract prime property buyers. Prime and A-grade property is doing much better than the other segments that make up the bulk of the market. Buyers interested in prime and A-grade property need to take note.
“Prices are falling overall, especially in places like Magaluf, but they have stabilised in sought after prime spots like Portals and Andratx,” explains Martie Quick, a local agent. “When it comes to prime property, frontline and with great sea views, we are busy with viewings and sales. Buyers are focusing on the best we have and looking for value, as you would expect in a buyer’s market.”
Good value is driving sales
What is bringing the quality segment back to life? The explanation is simple. Prices have come down significantly since the peak, so you can now buy prime and A-grade property for a reasonable price. For example, flats in good areas with sea views have fallen from around 550,00 to 350,000 Euros, and villas are down to 1.5 million from above 2 million Euros. At these prices buyers are moving in.
There are other reasons why the quality segment in Mallorca has come back to life. Demand in Mallorca is well diversified, attracting upmarket buyers from all over Europe, where the recession looks like it’s over (and where upmarket buyers still have money, or can borrow money cheap as chips). It is not as dependent as other regions on English buyers, who are struggling with a recession and the weak pound.
But the English are helping the market in another way – as vendors. Thanks to the weak pound many British vendors can drop their prices and still do okay in Sterling, having bought when the Pound was above €1.40. Today the Pound stands around €1.10, a drop of more than 20%. “British vendors can sell at a loss in Euros but still make a tax-free Sterling gain,” explains Quick.
As a result of recent sales, the supply of prime and A-grade property shows signs of tightening. “We are now actively having to look for property, the first in 18 months,” says Quick. At some point this fact will start to show up in rising prices. As Quick points out, “It’s far easier to negotiate with owners just before prices start rising than just after.”
Will prime and A-grade property prices in Mallorca fall more? Perhaps, but probably not by much. There are simply too many affluent Europeans interested in buying at these prices, and the good stuff, always in short supply, is never given away (in the rare instance when it is, it is always snaffled up by insiders). If the Pound strengthens, as it might next year, British vendors will be under less financial stress and won’t be minded to accept such big discounts. So it looks like there is a window of opportunity for buyers in Mallorca, and anyone hoping to take advantage of it needs to get their skates on. At the very least, you should be looking around.