Mallorca Property Report 2009

The Mallorca Property Report 2009

Here are some important comments about the property market in Mallorca:

Interest rates

It is expected that the ECB follows in the steps of the United States Federal Reserve on interest rates and placed in the coming months, the official price of money around 0.5%, maintaining the minimum rates for a long time . But banks are continuing severe restrictions on the granting of mortgages, tightening the conditions for access to mortgage credit, making it difficult for individuals to currently obtain financing.

2. Financial system: With the Bank of Spain and its demanding cyclical allocations, the financial system has so far maintained a high level of solvency with excess supplies on late, which ever is higher. Major banks confirm that late payments are soaring, the boxes will bear the brunt with faulty payers above 4%. The financial sector has endured the first attack without cost to the taxpayer but is not immune to the deteriorating economic and financial climate.

3. Trust: The property sector is one of the most sensitive to economic expectations. Expectations about the Spanish economy have collapsed in recent months and have reduced the confidence of buyers. But the latest U.S. government, specifically the plan to rescue the Program of Public-


After eight years (1997 to 2004) of sharp rises in housing prices, from the year 2005 there was a moderation of prices.
In the second half of 2006, coinciding with a decline in the Bank of Spain lending, there is a decrease in the number of transactions and this started a trend of falling property prices.

From the second half of 2007 we saw a significant drop in price and number of transactions.

The year 2008 made for the biggest slowdown in the whole of Spain and a significant drop in prices is being held in the third quarter of 2009 now.

In 2006 the number of housing transactions that took place in Spain was 50,000 a month. This figure included inheritances, donations and exchanges, which can be calculated at about 4000 a month. Therefore the number of property-sales/purchases was at 46,000 homes a month.

The number of transactions now is less than 18,000 homes a month.

This figure also includes inheritances, gifts and exchanges (4,000 cases per month). On the other hand now the banks are allocating 5,000 houses per month from seizure for nonpayment of mortgages. Therefore, the number of property-sales/purchases is at 9,000 homes a month compared to the 46,000 homes that were sold in 2006.

There are no reliable data on the number of second-hand flats for sale in Spain. At the risk of error,  in our opinion, there are more than 1,300,000 households of this type for sale, in a fleet of more than 25 million homes in Spain.

Since the turn of the cycle, investors have disappeared from the market, potential buyers for mallorca apartments have dropped significantly, the number of flats for sale has increased, sales time is lengthening. The potential buyer is more selective, has much more to look at, where he had to choose, he feared making a mistake, and then postponed a purchase decision. Often the operation was abandoned at the end and the potential buyer did not buy.

The owner is very reluctant to take the loss. Three years ago the sale was finally made with a discount of 2-3% of the starting price or aspiration of the owner. Today those initial claims are down between 30 and 40%. If there is a significant downward floor not sold. The drop in price is largely related to the real need for the owner to sell.

Now if the owner leaves the price high, and thinks that „he can always come down in price“, you will find that your house will have very few visits, and you will not sell until the price drops to market value or below. Furthermore, any „first buyers“ are sitting it out and hope to be the first to take advantage of real opportunities.


After thoroughly analyzing the current market situation, the property being sold and those which are not sold, we have reached the following conclusions:

1. The number of purchase sales of second hand homes has plummeted, is at historic lows now. 9000 homes are currently sold every month in Spain.

2. Interest rates continue to fall and financial institutions keep tightening the conditions for granting mortgage credit.

3. The property sector is very wide. There is a tendency to link the sector with the residential market of Mallorca Villas but other segments are the same such as shopping centers, industrial, logistics, hotels, old people’s homes …. Neither the new build market nor the second hand housing market are buoyant.

8. In some cities there is a steady demand for houses with two bedrooms.

9. The big flats, of four or more bedrooms have few potential buyers. If the property is “good” will extend the time of sale and are sold with lower price. If these large buildings, are located on lower floors, first floor, is dark, with poor distribution … have no application, they just do not sell (not even at a reasonable price).

10. Local: There is no over-supply of those Mallorca properties in excellent shopping areas, the prices here are maintained. Others will fall in price.

11. The banks are accumulating a significant number of property from seizure for nonpayment of the mortgage loan and purchase of  builder’s promotions. In the coming months the authorities will draw the market at very low prices by increasing supply and leading to lower prices.

12. Already present there are great opportunities to buy property in mallorca at reduced prices.

13. Providing liquidity or credit, now is the best time to buy for three reasons:

a) First reason: There’s a lot of supply. Currently, there are many properties  for sale. Now you can choose, you can choose a high floor, sunny, with a penthouse view, widely distributed … and before the buyer had to make do with what I had (indoor, dark …) if purchased by area.

b) Second reason: the owners have their property on the market for a long time. Lately they have had few calls and visits. Faced with this situation they are often willing to lower their price up to 40%.

c) Third reason: Many families can not afford the mortgage if one of its members becomes unemployed. They are forced to sell at prices far below market price. This way there have appeared real opportunities.


The real estate cycle, unlike other sectors, is very long. An important feature of the current cycle is that the phase of decline was very rapid and intense with sharp falls in prices, their duration and a recovery will occur in less time.

The adjustment of prices in the property, which is fundamental, is now a reality. For this year the expected price decline is around 40%.

A glimmer of hope: The Public Private Investment Program, an increase of 5.1% in February on the sale of second hand homes in the U.S. and international monetary policy make it possible to believe that we got to the bottom of the crisis internationally. Within a few months we will know. If so and if we have sustained low interest rates, banks beginning to grant mortgages and the trust is beginning to recover … we will be able to start a long career in the sector standards, which any calculation is arbitrary, it is very likely to be four years until we see a consistent recovery of the sector.


In Spain three years ago  the prices went up almost every month in a constant. A good strategy in such markets, three years ago, was to set a price slightly higher than the market price … and you expected the market to go up soon. A high asking price, in a few months he was alone in price and sold. That is, putting “a price upfront” market. If the market is rising, putting a price slightly higher than the last price that was paid, hoping thereby to reach the demand.

However, if the market is falling, the advance sales price must be set a little below the last sale price of the last. Yes, lower. Something that was impossible to think of and what we are not accustomed to.

In the current situation in Spain, with falling prices and expectations of the market with a clear trend to lower prices, the owners, if they really want to sell their home, have to adjust the sales price below the last market value. If they resist, as many are doing, they will not sell. If you want in the coming months to try to sell your house you will have to put it up for a price well below the current achievable price.

The Mallorca Property Report


Balearic Properties Pollensa
Via Pollentia 3
Telephone: +34 971 53 22 21


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