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A war of words has broken out between developers on the Island of Mallorca and the College of Technical Architects (Aparejadores) over what is happening to property prices in Mallorca, and the outlook for the future.
Unsurprisingly the developers, many of whom have large stocks of unsold properties (although not as large as those on the Mainland), argue that prices won’t drop further fearing, no doubt, that buyers will sit on their hands waiting for further falls before committing to any purchase. Official figures from the Instituto Nacional de Estadistica (INE) suggest prices across Spain fell by 9.2% between April 2009 and the same month last year. Tinsa, one of Spain’s largest valuers, published a similar figure of 10.1%, although referred to a figure of 17.1% for the Mediterranean coastal areas and 10.4% for the Balearic Islands.
Although these figures do not take into account falls prior to April 2008, official figures of price movements since the top of the market passed are not more than circa 15% and therefore along way short of what is happening in other countries (UK, USA, Ireland etc) where similar property price bubbles have been experienced. As we have mentioned on a number of occasions it seems much more likely that the statistics in Spain are inaccurate rather than that Spain is suffering less, and price reductions are subsequently lower.
Anecdotal evidence, where sales are being achieved are of price reductions much nearer 30 – 40% with the largest falls in areas with greatest over supply problems and poorer quality properties. While Mallorca has very significant defensive qualities – more limited over supply of unsold new build properties; a history of “lifestyle” purchasers rather than speculative investors; a top quality international brand; and a large stock of top quality luxury properties, we have long maintained that property values in Mallorca have fallen although in many cases this has not been reflected in asking prices, many of which have remained stubbornly high.
It is thus refreshing to hear that our fellow professionals, the Aparejadores, believe that where sites are being purchased for future development these are being done so at values which will allow subsequent sales to be done at up to 30% below the “boom time” levels.
They quote land prices of between 42,000 and 48,000 per dwelling, on small unit schemes, compared to 102,000 and 108,000 at the height of the boom and the start of the credit crisis.
Clearly this will have a direct impact on second hand property values and those of the unsold stock of new build properties. Even if asking prices don’t drop the reality is that actual sales prices, particularly where mortgage finance is required and where the bank valuers are coming in with much lower figures, need to fall if buyers are to commit. The key for buyers is to thoroughly review the market, if necessary seeking independent valuation advice, and to negotiate hard. This is a buyers market (and yes there are some good buying opportunities) so don’t be the one that over pays because someone says Mallorca property prices “don’t really fall”! (each individual case needs to be assessed on it’s own merits and some properties will see lower price reductions than others but no property, however special, can be total immune to what is happening, so as the saying goes “buyer beware”!
David Novi is founding Partner of Mallorca property agents, Novi Property Mallorca (http://www.novipropertymallorca.com), Mallorca Chartered Surveyors (http://www.mallorcacharteredsurveyors.com), Mallorca Real Estate Search, The Mallorca Mortgage Business and Properties International Mallorca
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