Mallorca Property Partners: There are Signs of Life in the Mallorca Property Market - Are They "Green Shoots" of Recovery?

The Mallorca property market has picked up somewhat over the last month or two, and there is much talk of the global recession having reached a turning point. Is this the start of a return to a sellers market and increasing property prices in Mallorca?

(PRWEB) May 20, 2009 - This is clearly a question that people considering buying properties in Mallorca have uppermost in their minds. They are concerned they don't enter back into the market before prices have dropped to their fullest. But neither do they want to wait too long and miss out on the best deals.

There is, of course, no certain way of knowing when a market has reached its low point. A simple analysis of the factors influencing the market for properties in Mallorca shows some powerful influences that would push prices down further, but also some that work against this to support them.

* Whilst there is much talk of green shoots and the recession having bottomed-out, forecasts from the UK and other European countries that there would be a return to grown in 2009 seem optimistic. On April 22nd the International Monetary Fund forecast the U.K.'s economy is likely to contract 0.4 percent in 2010, while in Germany the economy is forecast to shrink 1 percent. With the British and Germans being the predominant buyers of property in Mallorca it seems likely the negative effects of the recession will continue through this period.

* Within the Spanish property market as a whole, prices have been most affected in the coastal areas with a high proportion of holiday properties. As non-essential items, when times are tough many owners look to sell their holiday homes and prospective buyers hold back, so the recessionary effects felt in other sectors of real estate are magnified. Average prices across the Balearics and the Canaries combined fell by 9% in 2008 which is a greater fall than in other regions (figures from Tinsa, a leading Spanish real estate appraisal company). The pace of decline accelerated into 2009 with Tinsa's index showing prices across Spain to have dropped by 10% year-on-year to January, and by 12.6% in coastal areas.

* Obtaining mortgages continues to be difficult with banks cautious of making new loans. Whilst lending restrictions might have relaxed slightly since last year, problems associated with the over-supply of property on mainland Spain place a huge burden on the banks and it is difficult to see how the situation can improve significantly until the property market stabilizes.

* Sterling is still low against the Euro making purchases for UK buyers more expensive.

These factors would indicate the market still has a way to go before that low point is reached. So why has the market picked up in recent months?

Aside from the usual seasonal factors, the answer lies in a more detailed study of Mallorca as a discrete market, distinct from the Spanish mainland and the other Spanish islands. A strict planning regime has ensured that Mallorca has not suffered from over-development. And demand for property in Mallorca is no longer reliant on beach-apartment holiday homes in package-tour resorts. Often stated to be one of the most desirable places in the world to own property, Mallorca is increasingly exclusive and sophisticated drawing buyers from all parts of the world.

According to Mallorca Property Partners, a leading Mallorca property finder and advice service, " … most of the activity at present is with properties in good areas and in the mid and high-range price brackets. Buyers in the market understand the solid investment potential these properties offer. This is at a time when holding money in the bank generates little return and stock market investments remain volatile and risky".

But why not wait for prices to fall further?

In answer to this, Mallorca Property Partners point out the significant variance between final selling prices and average price indicators. "The owners' circumstance is a far more powerful influence now than it would be in a normal market environment. Depending on their situation some owners are negotiating just a little, and some are accepting very significant discounts on the asking price. Average prices may have a bit further to fall, but some of the opportunities available right now are as good as you are likely ever to see in Mallorca."

To illustrate, Mallorca Property Partners have close to a hundred price reductions and Mallorca Property "bargains" on their website. These range from low cost apartments to multi-million Euro sea view villas and country houses.

Furthermore, UK buyers in a solid financial position can consider taking a Euro mortgage, even if they do not need one, as a hedge against further currency fluctuations. With the pound forecast to regain ground against the Euro this could work in their favour, particularly as interest rates are lower now than they have been for many years. Ironically the chances of someone obtaining a mortgage when the finance is not essential are considerably higher.

For these reasons waiting for average prices to reach their absolute floor could mean missing out on some great deals. And by taking a Euro mortgage against part of the purchase buyers from the UK can balance the effects of the weak pound and even make it work in their favour.

So, to return to the original question. It may be a bit early for talk of green shoots in Mallorca or elsewhere. But there is activity in the property market and the signs for Mallorca returning to solidly increasing prices when things do turn around are positive.

Astute buyers will recognise the potential disadvantages of waiting for signs of an economic revival before they start looking. Rather they will be searching for property opportunities ongoing until the right one arises. One option is to open a watching brief with Mallorca Property Partners to keep a lookout for you. With comprehensive coverage of all the key buying locations this could noticably increase your chances of success in finding the best deal. You can register with them via their website at www.mallorcapropertypartners.com.