Mallorca Property Values vs Asking Prices - Mallorca Property Market Update March 2009
Novi Property Mallorca
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Never has there been such a disparity between property prices and values in Mallorca and, associated with this, such disparity in the asking prices of individual yet similar properties.
While we prepare our latest update on the Mallorca property market, and our forecast of where values will be going in the months ahead, we felt it important to highlight this general disparity in prices and values and the importance of market research and independent valuation advice.
Unfortunately good quality statistical evidence of the Spanish property market is difficult to obtain, but it is clear to see the anomaly between various official statistics that suggest that values have fallen by only 3% during the year to the third quarter of 2008, when compared with figures from the US and UK, two other nations that suffered from recognised "property price bubbles", that show annual falls of 20%.
To put it another way it is very difficult to see how the official statistics can reflect the reality of what is happening in the Spanish economy (the Madrid stock exchange has fallen to levels last seen in 1983!) and that values are falling rapidly even if asking prices are not!
David Novi comments, "my view is that in Mallorca properties for sale seem to fall into 3 quite distinct groupings - the first where asking prices have remained unchanged, and have even in some cases increased, and where owners seem reluctant to reduce their expectations even where serious buyers show interest. These properties are to all intents and purposes unsaleable. A second tier of properties where asking prices also remain largely unchanged but where owners are at least prepared to recognise the economic realities of today's market and where significant discounts can be negotiated by buyers able to demonstrate their willingness and ability to purchase; and a third tier where asking prices and values are more in line, with owners (in most cases either developers or hard pressed private individuals) reducing prices to attract buyers".
The effect of this 3 tier market is firstly disguise the reality of falling values; secondly create a disparity between different property asking prices (realistic and unrealistic); and lastly to decouple in many instances the fundamental relationship between prices (asking) and values. The only solution for buyers is to undertake a three stage analysis - the first is market research; the second independent valuation; and the third an assessment of "worth" ie what any particular property is worth to the buyer. In order for a transaction to take place we need to see a convergence between the asking price / expectations of the owner; underlying value (generally assessed by an independent Valuer / Chartered Surveyor etc); and the "worth" that the buyer has put on the property (worth will include various aspects, many subjective, including importantly the perceived risk of the purchase in the eyes of the buyer).
In the current market that is not at all easy but neither is it impossible!
For more information about the Mallorca property market and how to identify buying opportunities please contact David Novi BA MPhil MRICS at [email protected] or for a bespoke property finding service at Mallorca Real Estate Search
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