It is six months since I wrote my last Mallorca Property Market Report, and it is always a little bit worrying going back to reflect on what one has said and whether, with the benefit of hindsight, an alternative conclusion might have emerged! Back in March, the big question was whether we could call the “bottom of the market” and what that might mean in practice – one thing is a market that has touched bottom and is ready to move up the gears quickly, with real growth just around the corner.

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The other is a market where values have bottomed out, but the expectations are much less about growth and more about “stagnation”! My conclusion at the time was that we might indeed be able to call the bottom of the market if we were to define it in terms of reaching the “bottom of the cycle of underlying residential property values in Mallorca” (please note the very important reference to underlying values, something very different to, for example, asking prices!). More specifically:

March 2010 Market Report Conclusions

1. Underlying values to bottom out at current levels

2. The evolution of asking prices depends on whether they have been set realistically / adjusted sufficiently to account for the significant falls in property values Wide News.

3. Future growth in values to be nonexistent in the short term and very limited and restricted to underlying inflation in the medium term ie, no real growth in the next couple of years. Modest increase over above general inflation levels in the economy to follow after that at levels of 1-3%

4. Special properties with “unique” qualities – front line; very good sea views; restrictive planning conditions – rural fincas; high-quality developments, etc, to perform better / outserve the market in the medium / long term.

5. Land values to hold down prices in the medium term as developers take advantage of cheaper land to sell at these new lower levels for the medium term. Long-term supply shortage, save for those in urban areas and for “mid-range” apartments, like Palma, Inca, and Manacor, should see values rise. Alongside these conclusions, I set out a few “tips” or recommendations for both owners and potential investors of Mallorca residential property:

1. If you are a lifestyle purchaser or investor with an income return bias, start to look at the emerging buying opportunities BUT..
2. “BUYER BEWARE” is all about value and ensuring that you buy at an appropriate level and don’t overpay on unrealistically priced properties.
3. Look at new builds where good discounts are available (but beware of off-plan unless your deposit(s) are backed with a bank guarantee)
4. Look at properties with “defensive” qualities, as set out in (4) above, for greater short-term security
5. Look at land to hold as a long-term investment / to build a home. Particularly rural plots, front line or with very good sea views, etc

Market Update March 2010 – October 2010

So, what has been the reality of the last six months? Have my conclusions been largely borne out, or has hindsight led us to see that we should have reached alternative conclusions? Let’s start by reviewing the statistics and data that have emerged since the March 2010 report and what the so-called specialists have been saying. But before that, let’s enjoy the headline that greeted me this week none other than the Spanish.

The bottom of the property market in Spain! While I am immediately cynical when it comes to anything said by a politician, particularly when it is a Foreign PM talking to US investors in a desperate attempt to convince them to buy bundles of government bonds at the lowest possible yield, he did seem to be confirming what I said, namely that we are at the bottom and although it is true that I said it six months ago, if prices have largely remained unchanged over that period, then it could be said that it was the bottom then as well as now!

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