Mallorca Property Market Report October 2016

It has been six months since I wrote my last Mallorca Property Market Report. 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, while the other is a market where values have bottomed out. Still, the expectations are less about change 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 essential 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 varies depending on whether they have been set realistically / adjusted sufficiently to account for the significant falls in property values.
3. Future growth in values will be nonexistent in the short term and very limited and restricted to underlying inflation in the medium term, i.e., no real change in the next few 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; excellent sea views; restrictive planning conditions – rural fincas; high-quality developments, etc., to perform better / outperform the market in the medium / long term.
5. Land values 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 shortage of supply, 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, look at the emerging buying opportunities.
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 more significant 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 excellent sea views, etc

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