A short report on the current state of the property market in Mallorca in the Spring of 2010, looking back the last six months of data and where Majorca’s housing market is heading in the year ahead.
New builds in Mallorca
Figures just released from the Housing Ministry reveal that Spain had a total of 688,044 newly built and unsold homes at the end of 2009. Half of these homes are in three main regions – Valencia accounts for 17.4% (119,798 ), Andalucia 16.6% (114,147) and Catalonia 15.6% (107,240).
This oversupply represents 12% more than the previous year. At the height of the property boom in 2005, new builds increased by a staggering 89% and year-on-year continued to increase by an average of 46% until 2008.
The Balearics’ total unsold stock stands at 16,961 homes, spread throughout the islands of Mallorca, Menorca, Ibiza and Formentera. As the Ministry doesn’t provide a breakdown of the statistics, we have to use their estimate of 1,548 homes per 100,000 population to arrive at a figure of 10,836 unsold homes in Mallorca, a little over 1.5% of Spain’s total.
There has been much speculation as to how quickly this over-supply will be absorbed. To put this into perspective, we need to look at the type of new build properties for sale in Mallorca and where they are.
The majority are small to mid size apartment blocks in areas where over zealous developers targeting the local market built relatively quickly with cheap finishes. Many of these units only have pre installation for AC/heating and the Spanish don’t expect to find a fitted kitchen or appliances. They are generally of little appeal to the overseas buyer, mainly due to their locations eg. Palma city suburbs or the uninspiring outskirts of working towns inland, such as Inca, Llucmajor, Manacor or Felanitx. They are often directly overlooking the road, with small balconies and have no community gardens or facilities. The annual number of completions on new builds in Palma peaked in 2006 and then gradually reduced by 50% over the next three years. The total figure for 2009 is a level equivalent to the pre boom years, and completions climbed quarter on quarter by an average 25%.
Compared with mainland Spain, there are relatively few areas of high density holiday homes on the coast in Mallorca. As land available for development of apartments on the south west peninsula dried up in the mid 2000s, developers moved to the east coast. New building began around Porto Colom (north of Cala D’Or) and south of Porto Cristo at Porto Cristo Novo. Both these locations benefit from reasonable proximity to an existing tourist infrastructure. However, the new complexes which sprang up between these locations at Calas Mallorca (comprising Cala Murada, Cala Antena, Cala Domingos and Cala Malgrana) are dominated by 70s style, high rise hotels and low budget, all inclusive, family holiday clubs.
Although the Housing Ministry figures don’t take account of regional differences, they are useful trend indicators and show that prices for new builds dropped only 0.1% in the last quarter of 2009 as well as the first quarter of 2010. Prices have now reduced to the same level as the last quarter of 2006 and appear to have bottomed out.
Time to buy?
The attractions of the east coast are undoubtedly its white sand beaches and azure waters reminiscent of the Caribbean, but buyers should be aware of the lack of facilities, especially around Calas Mallorca. As the Ministry of the Environment has clamped down on any further expansion of coastal urbanisations, this is not set to improve, especially whilst local government is pouring money into projects elsewhere such as the Playa de Palma ten year regeneration plan. Nevertheless, if all you desire is a quiet life, you can now buy a two bedroom apartment 200 metres from the beach from €139,000 and a two bedroom, detached villa from €213,700 – including a complete furniture package.
If you are set on a seasonal location, make sure the property has a special position or outstanding views. At the other end of the scale, a new, Ibizencan style, waterfront villa at Cala D’Or in the south east is currently on the market at €1.2m, having been steadily reduced from its original asking price of €1.9m.
Don’t forget there are also pockets of new builds in established areas with all year round life, good local infrastructure and transport links eg. Calvia village, less than ten minutes from the coast in the heart of the rural southwest, has some attractive town houses in small communities. As promoters have pared down prices, properties may not be readily available through the agent network. Bear in mind that new builds attract IVA, which is set to rise by 1% in July. House hunters check out property for sale in Spain including Majorca
Resale property prices started to fall mid 2007 and have been gradually falling for the past three years. They are now at a level equivalent to early 2006 and this spring, those realistically priced villas have started to shift in the most popular areas of the south west. The number of resale property completions also increased quarter on quarter by an average of 13.5% throughout 2009.
There are some excellent, quality resales – a three bedroom villa in an immaculate community of stone houses with large pool and landscaped gardens is on the private market asking €400,000, 25% less than equivalent properties still being advertised by agents.
In summary, encouraging news and as the banks are lending again, all indicators point to confidence returning to the market. It will be interesting to see if transaction figures for January-March 2010 continue to rise – we have to wait until June when they are released. If you are thinking of buying in Mallorca, remember that as the market picks up, vendors may also be less willing to drop their prices and that a discounted bargain may not always prove a wise investment in the long term. Buying any property comes down to first targeting the right location for your intended lifestyle and then sourcing the best possible property within your budget. So it pays to do your homework.