Property repossessions in Mallorca have been receiving a lot of publicity of late. This is understandable as some represent exceptionally good deals that may well not be repeated.
This is not, however, always the case so buyers looking for strong investment properties are well advised to make a broad assessment of all the factors affecting the potential future value of a property, not just the "discount" off the previous purchase price or valuation.
A key point is that not all Mallorca property repossessions are necessarily at genuine "good deal" prices. Where properties had originally been bought at 90, 100 or 110% loan-to-value, the banks have to write down (lose) a considerable percentage of the outstanding loan in order to bring the property in line with current prices. They are understandably reluctant to do this.
Leading on from this, the previous valuation or market price, or indeed the price quoted by the agent as "the normal sales price of comparable properties", may well be in relation to price levels prior to the decreases bought on by the recession.
In Mallorca as elsewhere, property prices will level out in prime areas sooner than other locations. They will also rise more quickly when the recession does ease with any solidity. In our view it will take a many years longer for prices in "non-prime" locations to re-establish to their pre-recession level. The best and safest investment opportunities at present are with the good properties in prime locations and less of these become available as repossessions.
It is also worth noting that many opportunities to buy properties advantageously are established before they are repossessed. Generally owners who are under pressure will set keen prices and are flexibly in negotiations in order to sell quickly, possibly at a level that simply covers the outstanding mortgage.
When a good quality repossession is on offer, in a good area at a good price, it is likely to sell very quickly. Therefore, to stand a chance with these it is essential to be active on the ground and in Mallorca in your search. An alternative is to use a specialist property search service to give you the inside track on what is available and to assist in getting the best deal.
Mallorca Property Partners (http://www.mallorcapropertypartners.com) for example works with agents appointed by the banks to sell repossessed properties, so when searching for a property on your behalf they take these opportunities into account alongside other available properties. It has to be said however that quite often non-repossessed properties win out as being the most secure opportunities with the greatest potential for capital increase in the future.
