Just like the rest of Spain, the housing overhang in the Balearics is growing as quickly as demand for new homes is falling. The glut of newly built homes languishing on the market in search of a buyer is set to reach 5,000 by the end of the year, according to the local Developers’ Association. That is the equivalent of half of all new homes built each year in the Balearics.
Developers have reacted by starting fewer homes this year, which explains why housing starts have fallen 65% compared to last year, from 10,000 to 3,500.
Developers in the Balearics are putting a brave face on it. “It’s not a big stock,” said Gabriel Oliver, President of the developer’s association, when comparing it to the inventory of unsold homes in other parts of Spain. Speaking to the Spanish press, he went on to say that the Balearic’s inventory of new homes will be absorbed in a few of months when mortgage financing starts flowing again and the market comes back to life.
Meanwhile, with sales down by around 50% in the Balearics, local developers are said to be offering all sorts of deals to tempt buyers. According to Oliver, deals range from deferring deposit payments to offering free furniture packages. That might help explain why the market in the Balearics is down more than most. Free furniture and white goods are all very well, but in a market like this big discounts are what count.
But when it comes to prices, Oliver argues that developers don’t have much room for manoeuvre, thanks to high land prices and low margins. “The margin for negotiation is less than what has always been the case for resale properties,” says Oliver, who does not point out that some developers, especially those who bought land years ago, will have plenty of margin to play with, if they are serious about selling.