No one has to remind you of the difficult times effecting the Spanish property market, and the local regional markets including Mallorca. Press reports, economic studies, reports from the EU and even none too impartial reports from the Spanish Government itself, all point to “double trouble” in Spain – economic recession as a consequence of the international financial crisis plus the “home grown” property market crash resulting from an economy far too heavily dependent on bricks and mortar and which has not gone into “slow down” but “melt down” following a 7 year speculative development boom of almost unimaginable proportions.
During this time the Spanish construction sector delivered upwards of 700,000 new units per year when underlying long demand is less than half of that (and likely to find a new level of 200,000 per year for the near term). Now the construction companies, from the largest household names down to the local builder, are going out of business by the day leaving an alarming number of unfinished properties on the market, apart from the ever growing stock of unsold completed new properties and, perhaps more worryingly, a banking sector that, to hide its exposure to the construction sector, has in effect become a dumping ground for unsold properties (over 110,000 properties are sitting on the balance sheets of the banks with estimates that this will grow to 150,000 by the end of the year). Add to that the other 800,000 plus new build homes still in the hands of the developers and unsold, and you get a feel of the problem and the difficulty that the property market will have finding a stable base while this supply overhang persists.
I will comment in more detail about the implications for the housing market and Spanish economy of this weight of unsold properties in a separate report as here I want to emphasise the point that buying off plan is now very risky and even buying completed new build should be approached with some caution to ensure all necessary Guarantees are in place and backed up by the appropriate Insurance Company policies (a legal requirement but one ignored by some of the many developers going out of business, leaving purchasers with no recourse in the event of problems with the build quality in the future).
A recent study of new build properties started 2 years ago suggests 25% are not finished, and are unlikely to complete in the near future, due to cash flow problems and the bank credit squeeze, a none too happy picture if one of those thousands of properties is yours and you have tied up your life savings in the deposit! And don’t think that this problem has reached a peak. Most experts agree that not until mid 2010 will the number of new build properties in the pipeline, and reaching completion, stop exceeding the take up in the market i.e. the stock of unsold properties is going to carry on growing!
My advice - ”be very wary of buying off plan” and where buying a completed new build property make sure you do thorough checks with your lawyer to ensure the appropriate insurance guarantees are in place.
In relation to prices and underlying values, only buy if you are in this for the long haul. I have long maintained that the Spanish and Mallorca property markets would probably not see any return to positive territory until 2012. No one accused me of being too optimistic (quite the opposite!) but I now think it could be some time later. How does 2016 sound for the Spanish market as a whole?
Will Mallorca fare better? Probably. The estimates of unsold stock in the Baleraic Islands are around 16,500 units while the much larger Communities of Andalucia and Valencia are facing an overhang of 176,000 and 155,000 respectively! Even after taking account of the population differences, the situation in these areas, and others like Murcia, are significantly worse. As regular readers will recall I have long maintained that the Mallorca property market has some defensive qualities, which include this “better than Spanish average” supply side picture and a demand side predominated by life style purchasers rather than investors. The strength of the Mallorca “brand” adds further support to the market.
That said it is not reasonable to assume that the Mallorca market can be de-coupled from the wider Spanish property market entirely. Problems of affordability, unemployment and wider general economic weakness effecting the tourism sector are all realities in Mallorca and can not be ignored. Property asking prices in many cases remain high where owners and agents have failed to readjust to the new market conditions and this alone is acting as a heavy weight on the local market. Other asking prices are now more in line with underlying value and thus have a much more limited down side risk. Others should carry a bold “health warning”!.
The conclusion? It is all about “stock selection” ie if you are looking to buy in Mallorca do so with caution and look for the well priced properties hidden amongst the ridiculously over priced. If you are in for the long haul, are a lifestyle purchaser and want to enjoy a home in Mallorca now, rather than sometimes in the distant future, then with care, particularly regarding issues of price and value, then now may still be a good time to buy.
Novi Property Mallorca and Properties International Mallorca
Charming and good value 
One of Mallorca’s top property developers has taken the bull by the horn and slashed property prices on their CalaDor development. Having earlier this year reduced prices by up to 25%, the most recent adjustment of a further 10% sees the scheme offering real value for purchasers at a time when many other owners and developers are still shying away from the deep cuts in prices that will stimulate demand.
It looks increasingly that value for money is easier to find in the Mallorca new property market than in the market in general. Along with the recent properties I have highlighted In 
I like the look of these two and they are getting close to a price which reflects underlying value.
Regular readers will know I am not exactly a “bull” when it comes to the Mallorca property market, the problem of finding good value in a market where many asking prices defy logic, and where I think we will be going in the future. Despite my view that the light at the end of the tunnel is just a spek in the minds eye and never has the saying “buyer beware” been so apt, I do feel that it is possible to buy and even on occasions it could be a good time to buy!