Latest from Mallorca

Its a “buyers” market and, as one of my colleagues once put it when trying to list a property, but its a “sellers” market too!!! We all had a chuckle at that one, however, it must be said that there is some truth (if that’s the right word) in it when considering Mallorca.

Mallorca always has (and hopefully always will be) cushioned from the rest of Spain and its economy. We are always saved by tourism and its influence always tends to be more felt here than the rest of Spain. We are isolated both by water but also by market, we are more exclusive and we are certainly more expensive.

For these reasons the crisis hit Mallorca later than the rest of Spain and it does not run as deep. We have yet to be seen whether we come out of it earlier, but there is a feeling that this will be the case.

Why does this matter in terms of a bull or bust real estate market? Well, in simple terms, as our market is more exclusive there is much less “necessity” to sell which is what ultimately forces prices down. Across the board, asking prices have not dropped nearly as much as the 30% that was expected and indeed seen on the mainland.

Yes, prices have dropped but not as a general rule of thumb but rather on specific properties (and often they can be accused of having over inflated asking prices to begin with). What is being seen is much better negotiated prices and negotiations themselves are taking much longer than they used to albeit with double the effort to reach agreements. But again, do not get the wrong idea, not every owner is willing to negotiate to the same degree and some simply will not move any more than a mere token.

Why? Many of the owners of the properties that you are in the market for can afford them and therefore do not need to sell. Most are second home, a luxury, a perk and not a burden and so most will simply keep the property until such time as it sells for the price they are after.

To add to this, many properties are mortgaged very near 100% of their asking price. Why? Well, in the good old days, banks were lending 80% of value and since valuations were coming in at well in excess of asking prices, very often nearly 100% + costs of the purchase price was mortgaged. Since the banks won’t allow you to partially cancel a mortgage and people in general are not prepared to lose money with a property deal it means that very often there is very little room for price negotiation.

I am not trying to hype up property prices to suggest that they have remained as they were, this is not the case. I am the first to proclaim that, if there was a generic price decrease of nearly 30% across the board, the real estate market would pick up again and we would see an increase in volume of sales because, as everyone suggests, the market is extremely slow. What I am saying is that in many cases prices cannot be dropped and in others, they simply won’t be.

So, in summary, the market is tough and slow but don’t let asking prices put you off. There are deals to be had, but, you need to scratch the surface to find them. However, be realistic, if you are really after a “deal”, you can find it, but it is most likely not be the exact property you want … and yet, you may find the exact property you want but not get it for a steal. Even in this market, in Mallorca, it is still difficult to have you cake and eat it!!!