Are real estate prices in Mallorca set to fall as across the rest of Spain? The evidence so far suggests not.

I can't remember the number of times that I have been told the "I will wait for prices to drop" line and wanted to shout "wake up and smell the coffee". Unless the current mortgage crisis reverberating around the globe proves to be indefinite then don't expect prices to to drop in Mallorca. In truth, whereas the rest of Spain is experiencing a Real Estate Crisis, the island of Majorca and Barcelona were the only two regions in Spain to experience price increases in 2007. The fact is, there is not a 500.000 unit property surplus here in Mallorca as there is on the mainland.
It is true, real estate valutations have become more stable over the last few months and, the local Spanish and Resident market is not moving. For sure, the credit crunch, to use the headlines we are seeing in the news at the moment can be felt here. Low interest rates from a few years ago have disappeared and the current starting rates of around 5.5% give or take are being felt in the pocket. That said monthly mortgage costs are here in Mallorca cheaper than in the UK, where much of the foreign investment in Mallorca comes from.
So the British Pound has dropped against the Euro. For sure, and this will put certain properties out of their range, even so, most buyers have a certain margin in their budget so they can either absorb this extra cost or realign the requirements to the current budget, they still have buying power, remember, nine times out of ten this is a holiday home. Many buyers have already bought in Spain or Mallorca and so have euro accounts and a large selection of forex companies offering their services helps take the sting out of the tail.
So why do prices not fall? Well, it is the nature of the real estate in Majorca and the profile of those who own them that runs againts the currentt of the standard market trend. A large percentage of the property in are second and holiday homes. They are luxuries of the affluent and even the not so rich but certainly well off. Lets face it, not anybody can afford to spend even the 100.000 euro minimum to buy a Studio apartment in El Toro. Add to this that it is money spent on a holiday home and you see the profile of the client we are talking about. And what about the 835.000 euro minimum you would need to buy a Semi-Detached house with pool near the expanding Puerto Adriano marina. And since we're on the subject what about the Villas. Have you got a cool 3.000.000 euros spare for a holiday home?

That is the reality of the real estate vendor of many of the properties Majorca. Almost regardless (and I stress almost as, of course, there will be individual cases where this is not true) of the crisis's around the world economies, they have no underlying urge to drop their price. There is no 50.000GBP pay rise if you relocate from where you live. There isn't a "best school in the country" 200 miles away, there are no property links from first time buyers to 'need to be closer to the station' to 'the kids have all moved out' to retirees. People buy a place in Mallorca because it is a jewel in the Mediterranean, it is charming, it is sought after - even Lloyd Webber has property here! They have property here because it is a luxury and they can afford it.
On top of that, it cost them 10% on top of the sales price to buy it initially and its going to cost them 18% of the profit when they sell it. Nobody wants to lose money when they sell, especially not with real estate and certainly not with luxury property.
Those are the factors that drive the stable prices here in Mallorca: the fact the real estate prices are largely based on luxury second homes, there is no underlying need to sell, the cost of buying and selling taken into account in the bottom line and simple supply and demand - I have it, your after it and I'm in no rush to sell.
So if you're buying something in Majorca do so now, not in a few years "when the prices have dropped", because they haven't dropped in the last two decades so why should they start now. In fact, wait a couple of years and it will probably cost you more. At least 21% more from the guy that bought it two years ago!

Article Source: http://myarticlezine.com

Sebastiaan Kemna has been in the Real Estate business in Mallorca for over 10 years and runs a very successful Estate Agency in Santa Ponsa as well as a successful property portal: www.mallorcahotproperty.com www.mallorcaproperty.com

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