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| Mallorca Property Market October 2010 - To Buy or Not to Buy That is The Question!A review of the Mallorca Property Market and the outlook for real estate prices. The report get's behind the lack of market transparency to give readers a real insight to both the past and present and the future outlook for Mallorca property.
By: David Novi BA MPhil MRICS The key finding / conclusion reached is that although various different reports reach different conclusions regarding prices, some say they are falling, others that they are stable and even some that they are rising, David Novi concludes with his opinion that for Mallorca specifically (his report looks also in part at the Spanish property market generally), that underlying values have bottomed out and that we are now in the low activity / no price change period prior to growth returning.(Please note the very important reference to underlying values, something very different to, for example, asking prices!). More specifically his report highlights the following conclusions regarding the state of the market and the prospects for the short and medium terms: 1.Underlying values should continue to bottom out at current levels. There are downside risks but in Mallorca David sees these fairly much under control and unlikely to exceed 10%. Buyers should be aware of this at the time of negotiating the final purchase price and in that way can “manage out” some if not all this risk. 2.Whether asking prices continue falling will all depend upon whether they have been set realistically / adjusted sufficiently to account for the significant falls in underlying property values. In other words do research and know whether the property you want to buy is realistically priced or not. In that way you will know whether you are talking about negotiating a “bit” or are looking to take off a “wholesale chunk” to arrive at the final agreed purchase price. 3.Don’t expect a sharp rebound in property prices! Future growth in values is likely to be non existent in the short term and very limited and restricted to underlying inflation in the medium term ie no real growth through 2011 and 2012 at least and only modest growth over above general inflation levels in the economy to follow thereafter at levels of 1-3%. Interestingly rather than become more bullish since he reported with similar conclusions in March 2010 David feels that perhaps a return to real growth is some 12 months further off than Ie suggested earlier in the year. 4.Special properties with “unique” qualities – front line; very good sea views; restrictive planning conditions – rural fincas; high quality developments etc to perform better / out perform the market in the medium / long term. David strongly believes there is a floor under this market but equally he does not believe that is the same as saying that the prices of these properties should not have been adjusted downwards, just that the extent of the adjustment may have been less and the downside risk of further falls much less likely . That said all depends on whether they were correctly priced at the outset. Some of these properties were ridiculously priced at the height of the boom so need severe price reductions to account for the initial over pricing and now the falling market. He concludes that it is all property specific and be aware of over generalising and then over paying for a property however “prime” and unique it is! 5.Land prices have come down significantly and will stay low in line with the wider market. Land values will hold down prices in the medium term as developers take advantage of cheaper land to sell at these new lower levels. 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. It could well be a good time to get in now buy a well priced plot and build your dream home rather than search endlessly for the finished article which is never “quite right”! In terms of where David would be looking to buy, and what he would be doing he gives the following “tips” and recommendations: 1.If I were a buyer I would start to be actively in the market now, particularly if you are a lifestyle purchaser or investor with an income return bias . By “in the market” I mean starting to look, getting a feel of what is available, seeing what you like and starting to understand what is available and at what price. Make sure you either do your own research or use a Property Finder / Buyers Representative that can impartially help advise and guide you (don’t expect an estate agent to!) They want a sale of one of their properties while a Property Finder wants a sale but doesn’t mind which one so are impartial at the time of choosing and advising. 2.“BUYER BEWARE” it is all about value and ensuring that you buy at an appropriate level and don’t over pay on unrealistically priced properties. Understand who is selling, why and how motivated they are. Understand what the property is really worth and whether there can be a “meeting of minds” in this regards. If not walk away and find another property. If the owner is unrealistic all the best valuation advice in the world won’t get you the property at a realistic price! 3.Look at new build where good discounts are available (but beware of off plan unless your deposit(s) are backed with a bank guarantee) 4.Look at the properties with “defencive” 5.Land could well be a good buy now. Look at it either as a long term investment or to build a home. Particularly rural plots, front line or with very good sea views etc but most good plots are worthy of serious consideration, if of course the price is right! 6. In relation to areas of interest I would look, in particular at Pollensa, Santa Ponsa, Soller and surrounds, and the NE of Mallorca. That said it is all about being “property specific”. There are badly priced properties in these areas in the same way as there are some well priced properties in other areas! Happy hunting! For personalised help and advice regarding property finding and negotiating an acquisition in Mallorca please contact David at info@novipropertymallorca.com or info@mallorcacharteredsurveyors.com # # # David Novi BA MPhil MRICS is an experienced Chartered Surveyor and valuer specialising in the Mallorca property market. He offers bespoke services for purchasers and investors of residential and commercial real estate on the Island including property finding; area guides / tours for property buyers; relocation advice; independent market valuations and investment / development appraisals. For more information see his Blog http://mallorcapropertymarket.wordpress.com and the Novi Property Mallorca web portal http://www.novipropertymallorca.com where he showcases a selection of properties available on the Island End
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