Mallorca still cool – despite overheated Spanish market
Building a business is all about branding. It’s about identifying your USP or unique selling point, distinguishing yourself from the competition, and concentrating your marketing on your target audience. Whether your product is widgets or million-euro seafront villas, if your brand is desirable and the price is right, your products will sell. You’ve got to be not alone cool – but the coolest.
So far the Mallorca property market has managed to do what it needs to do to survive, that’s distinguish itself from the rest of Spain’s troubled construction industry and sell itself as a sought-after, family-friendly, easily accessible, island destination – no mean feat in a global market in which the US is leading a lemming-style charge over the sub-prime cliff.
The really big plus for Mallorca is that there’s never been over-construction here. And prices, while they can of course run into the tens of millions for exceptional properties, have never been irrational across the market, as they became on the Costa del Sol. At the same time, the island has managed to remain untainted by the appalling stories of "land grabs" that have come out of Valencia – and the equally appalling stories of corrupt developers and unauthorised developments which have plagued Malaga.
Mallorca’s image as a good-value location remains intact, and, as we tip into the second half of 2008, there aren’t many Mediterranean locations which can legitimately make that claim. To paraphrase Rudyard Kipling, this is a market which is so far managing to hold its head while all about it are losing theirs. And that’s why – against the odds – it’s still desirable … and cool.
You only have to look across at tycoon, Francisco Hernando’s dream development – dubbed his "Manhattan in La Mancha" – in Seseña, half an hour’s drive from Madrid, to see how bad things can become. Hernando received planning permission to build 13,500 new homes, mainly apartments on the sun-baked plains of Castile. Billed as perhaps the largest complex in Spain, there were to be 280 blocks of flats surrounded by lush gardens, swimming pools and a lake.
But by the start of April only 2,500 apartments had been sold, with the same number again due for completion. "Property prices are falling and some of the owners are trapped in negative equity", says Manuel Fuentes, Mayor of Seseña, which had hoped to benefit hugely from the development. "It seems likely now that many prospective buyers who haven’t yet completed their purchases will prefer to lose their deposits rather than take up mortgages larger than the value of their properties."
So there are many reasons why Mallorca, which has so far adroitly managed to sidestep the worst of what’s flying around, should breathe a sigh of relief. While prices in the lower to middle brackets have eased slightly, the fact is that it’s still managing to attract its core target buyers, British and Germans.
Interestingly, Germans now dominate, a reflection, in all probability, of a pick-up in their domestic economy, which grew 1.5 percent in the first three months of this year, compared with a sluggish 0.4 percent in the UK. However, it should also be said that the German stock market is down 5 percent since the start of the credit crunch last August, compared with a fall of 4 percent in the FTSE 100, according to figures from independent investment researchers, Morningstar.
Daniel Waschke, Joint Managing Director of Engel & Völkers South-West agrees. "Yes, Germans are definitely dominating the market and account for approximately 50 percent of purchasers, while I’d say that 35 percent are from the United Kingdom", he told ABC Mallorca.
In the first quarter of this year, he says, Engel & Völkers achieved almost the same volume of sales as in January to March 2007. However, there is one anomaly he’s willing to share: "At the high end of the market, we have noticed that requests to view apartments under a value of €1 million to €2 million went down considerably. However, more buyers were interested in properties well above that value, and so this compensated our figures."
Things are going swimmingly in the €2 million-plus bracket – how cool is that!
So BCK Luxury Properties – www.bck-properties.com – shouldn’t have too much problem finding a home for a magnificent three-bedroom three-bathroom modern villa in Pollensa, on the market for €2.35 million. It has 383 square metres of living space, an infinity pool, and panoramic sea views over both the Bay of Alcudia and the Bay of Vincenz – a perfect summer hideaway.
Similarly, Property Independence – www.property-independence.com – should have plenty of interest in a chic, ultra-modern 455-square-metre family villa in Bendinat, with five bedrooms, three bathrooms, a swimming pool and fantastic views. It’s on the market for €2.9 million.
Most worrying perhaps in terms of the big Spanish picture is the impact the housing slump could have on the overall economy. For example, Spain ended 2007 – not that long ago – with a budget surplus of two percent of GDP, about €20 billion, which Finance Minister, Pedro Solbes, promised would be spent on reactivating the economy.
In the first two months of 2008, however, that surplus had dwindled to 0.8 percent of GDP, as a result of a fall in value added tax (IVA) receipts due in part to fewer property sales and a steep rise in benefit payments, due largely to pay-offs in the construction sector.
"This is not a crisis of demand", says Gaspar Lino, GM of Marbella-based property developer, Peninsula. "There are always people interested in buying a quality product at the right price.
"This is a crisis of oversupply, made worse by the credit crunch. Banks have gone from one extreme to another, from lending to virtually anyone to dramatically tightening their lending criteria, virtually overnight."
The question half-way through the year is this: how long will it take the mainland property slump to make itself felt in the real Spanish economy?
German buyers are dominating Mallorca’s property market – snapping up half the properties sold this year, and pushing the Brits into second place, finds Peter Cluskey.
