Mallorca Property Market Update Executive Summary:
– Top end market (over €1million plus) now slowing down
– Fewer sales but higher value
– Lower end market slow/depressed and little demand for apartments
– Correct pricing is now essential to sell
– Market shift – now German buyers dominate over British (3 to 1)
Mallorca Property Market update
Report prepared by local real estate agents
On Mallorca as a result of the worldwide global recession, the strong
Euro, the Spanish banks’ strict demands on non resident buyers and a
downturn in the British home market, the last six months has registered
a slow down in the lower end of the second home residential market in
throughout the island. Those areas that have been traditionally popular
with the British market and have a high concentration of apartments
such as, for example, Santa Ponsa (southwest) are now seeing price
reductions from the original selling price of 10% to 20% at the lower
end of the market (under € 1 million) offering new opportunities for investors.
In Palma the market is slower for apartment sales under € 500,000 where
buyers traditionally bought with a mortgage. However, recently, as
vendors have adjusted prices to a more realistic level with current market
conditions, a new “breed” of cash buyer has entered the market and
is taking advantage of some good opportunities particularly for buy to
let investors as the rental market is strong and growing.
In the southwest region (from Palma to Puerto Andratx) the situation
has now started to change and even the top end market is now slowing
down as wealthy owners decide to hold onto their investment and wait.
The average sale value in this region is currently just under a million
euros with the highest average of € 2 million in the exclusive Son Vida
residential area on the outskirts of Palma to the lower average sale of €
300,000 in Santa Ponsa. The construction of new apartments has now
stopped in this region of the island and it is anticipated that demand will
revive within the next few years.
In the north of the island around Pollensa, where traditionally the most
expensive properties on the island tend to be located, the average sale
is currently just over € 1 million. However, this area also has a high
supply of holiday home apartments, which have traditionally been popular
with British buyers.
Although this end of the market is slower than in previous years there
are still some canny cash buyers around that are in a strong position to
get a good buy.
In the northeast, sales turnover has increased this year. The completion
of the new faster highway from Palma to Manacor has opened up this
region and brought new higher spending clients, who are mainly looking
for villas and larger properties but there is hardly any interest in apartments.
Along the east and southeast coast the situation
remains positive. Although the number of sales is around the
same as this time last year each sale is of a higher value. There is more
demand for property of over €1.5 million – € 4 million. This year there are
less British clients but they have been replaced by more German speaking
clients.
The Spanish banking sector continues to impose strict regulations on its
customers, particularly foreign customers and will now only lend a maximum
of 50% to non resident buyers. Furthermore, they will not grant
mortgages on plots of land or new build promotions. The picture was
very different two years ago when foreign buyers could obtain mortgages
of up to 100%.
To date, German buyers account for 50% of the market and British buyers
now account for around 20%. However, those British buyers who
are still coming tend to be the biggest spenders.
Says local agent Daniel Chavarria Waschke, “One of the great strengths of the islands is their international
appeal which means that when one market decreases, another
takes its place.
However, the last couple of weeks has seen unprecedented crisis in the
financial markets and we are now beginning to see the affects of this
even on high value property. Most price adjustments of around 20%
have been made mainly at lower end but this is more an indication of
vendors’ over inflated expectations. Even though demand for high quality,
well located property remains, there is no doubt that it’s a buyers
market and owners are much more willing to negotiate than ever before”.
