More conflicting news from the Spanish property sector, this time from Palma de Mallorca, the capital of The Balearics. Developers are reported to be both pleased with new home sales levels this year, yet more pessimistic than ever.
According to Spanish press reports, Gabriel Oliver, President of Proinba, a Balearic developer’s association, recently claimed that developers are “very pleased” with sales this year. He said they expect to close the year with 4,000 new homes sold, reducing the inventory of new homes by 2,000, or 34pc, to 3,900 homes. As a result there may be demand to start building new homes again in the second half of next year.
Speaking at a press conference to mark the recent Firastock property exhibition in Mallorca, where developers offered 500 properties priced between 120,000 and 400,000 Euros, he also declared that house prices on the islands have “hit bottom” after declining 15pc since the peak in 2008. Developers all over Spain have been saying the same thing for a while now, to no avail.
Oliver warned that developers will go under if they reduce their prices any further. Doing so would mean selling “well below cost price,” as property prices have now reached their lower limit, so nobody should expect further price reductions.
He explained that property prices have fallen further on mainland Spain were housing inventories are higher, and banks selling repos play a bigger role in the market. Developers have fared better in The Balearics, keeping house prices higher as a result.
Doom and Gloom
But according to a recent survey of the building sector in Mallorca (by the Gadeso Foundation), the sector is in a deep funk, and the only thing that has “hit bottom” is the morale of its businessmen.
According to this survey:
- 95pc of businessmen in the construction sector say that business is worse than 4 months ago
- 81pc think the economy is still in recession
- 87pc think that company situation will be worse next year
- 88pc say sector will still be in crisis next year
- 70pc say the local economy will still be in recession next year
Perhaps both reports are true, and developers in The Balearics are suffering wild mood swings brought on by the pressure of trying to stay afloat.