| Are Mallorca property prices set to plummet? This | | | | profile of the person we are talking about. And that's |
| author thinks not. | | | | without even considering the 450.000 euro minimum |
| I can't remember the number of times that I have | | | | it will cost you to buy a 2 bedroom Luxury |
| heard the "I will wait for prices to drop" line and | | | | Apartment on a golf side development. And I won't |
| wanted to shout "wake up and smell the coffee". | | | | even go into the villas. Who can afford to have a |
| Unless the current financial crisis effecting the major | | | | 2.000.000 euro villa sitting empty for 10 months of |
| world economies proves to be indefinite then don't | | | | the year? Well not anybody. |
| expect prices to reflect this in Mallorca. In fact, | | | | And that is the reality of the property owner / |
| whereas there is a real estate crisis in the rest of | | | | vendor of a large chunk of the properties here in |
| Spain, the Balearic Islands and Barcelona were the | | | | Mallorca. Almost regardless (and I stress almost as, of |
| only two areas in Spain to have price increases in | | | | course, there will be individual cases where this is not |
| 2007. We simply don't have a 500.000 property | | | | true) of the crisis's around the world economies, |
| surplus here on the island as is being reported on the | | | | there is no underlying necessity to sell. There is no |
| mainland. | | | | new job taking you 400 miles away from your |
| Yes, prices do seem to have stabilized over the last | | | | current home. There is no "top performing school" in |
| two months and the local Spanish and Resident | | | | the next county, there are no property chains from |
| market is all but still. Certainly, the credit crunch, to | | | | first time buyers to 'upgraders' to 'downsizers' to |
| coin a phrase coming out the UK at the moment is | | | | retirees. People own a place in Mallorca because it is a |
| also being felt here. Interest rates of 3.0% on | | | | jewel in the Mediterranean, it has charisma, it is |
| mortgage just over two years ago are no longer and | | | | desirable - even famous people have property here! |
| the current starting rates of around 5.5% give or | | | | They have property here because it is a luxury and |
| take are being felt in the pocket. But the monthly | | | | they can afford it. |
| cost of borrowing here in Mallorca is still cheaper than | | | | On top of that, it cost them 10% on top of the |
| in the UK, where a large proportion of the investors | | | | sales price to buy it in the first place and its going to |
| come from. | | | | cost them 18% of the profit when they sell it. |
| So the British Pound has dropped against the Euro. | | | | Nobody wants to sell at a loss, especially not real |
| Yes, and this will effect the top end budget of the | | | | estate and certainly not luxury real estate. Take our |
| buyers that are looking but even then, most buyers | | | | 100.000 euro example, if you want to turn that |
| have a certain margin in their budget so they can | | | | around and sell it without loss and you are not a fiscal |
| either absorb this extra cost or look at slightly | | | | resident in Spain then you need to add 21% to your |
| cheaper properties, it does not stop them from | | | | purchase price to break even at point of sale. |
| buying. Add to that the fact that many investors | | | | That is the essence of price stability here in Mallorca: |
| now have euro accounts anyway and the increasing | | | | the fact the real estate market is largely based on |
| use of commercial exchange companies the knock on | | | | luxury second homes, there is no underlying need to |
| effect of this is greatly reduced. | | | | sell, the cost of buying and selling factored into the |
| So why aren't prices dropping? Well, it is the nature | | | | bottom line and simple supply and demand - I have it, |
| of the property in Mallorca and the owners that | | | | you want it and I'm in no rush to sell. |
| defies the logic of other real estate markets. A large | | | | So if you're thinking about buying something in |
| percentage of the property in Mallorca are second | | | | Mallorca do so now, not in two years time "when the |
| and holiday homes. They are luxuries of the rich and | | | | prices have dropped", because they haven't dropped |
| even the not so rich but certainly well off few. Lets | | | | in the last 20 years so why should they start now. In |
| face it, not anybody can afford to spend even the | | | | fact, wait two years and it will probably cost you |
| 100.000 euro minimum to buy a Studio apartment in | | | | more. At least 21% more from they guy that bought |
| the Santa Ponsa for example. Add to this that it is | | | | it two years ago! |
| money spent on a holiday home and you see the | | | | |