Investment in Mallorca. 2018 analysed

A second report by our secret surveyor

Mallorca and the Balearics have a property market renowned for long term strength and stable growth. In this article, we argue, much against the mainstream and how 2018 represents one of the worst years for Mallorca property investors and what that might mean for the future.Q

Market Share

Out of the 18 Spanish regions, 15 had a larger share of the property market (Nº of transactions ) in 2004 than in 2018. The property crash took its toll on most regions and what this suggests is that many have yet to recover. However, Mallorca, Basque Country and Navarra have a larger market than back in the pre-crash period. This has reinforced the conception that Mallorca is one of the strongest markets in Spain, but nevertheless, growth levels may be greater in other regions.

Less Transactions

Investment trends in the Balearics show there were 5% less property transactions in 2018 than in 2017. This is specifically significant due to the fact that only the Balearics and Canary Islands where the ones to decrease in Spain.

Historic Anomaly

Spain’s market in the 2017-2018 period grew by 11%. Balearics decreased by 5%. This is a historical anomaly. The property market in the Mediterranean islands has always been growing at a higher rate than in inland Spain. In fact, the last time that this wasn’t the case was 10 years ago during the 2008-09 period and 2007-2008 years. In all the other most recent years, Spain’s average growth has always been smaller than Mallorca’s.

Why Decrease is specifically important

Analysts might be quick to point out is that the 2007-2009 period (the last time this anomaly occurred), it was the turning point to what happened to be the worst property crash in decades. It would make sense for the Balearics to be one of the first regions to feel a property bubble exploding as it is a region where there are high levels of foreign investment and where there is a strong luxury market. Both of these markets will be more reluctant to invest if there is uncertainty regarding the future of the economy.

Will there be a recession?

Macroeconomic tensions are escalating: Brexit, yellow vests, Trump… Moreover, there are many economic indicators which suggest that the economy is not as strong as it were a few years ago: GDP growth in countries such as France, Germany, Italy and UK are the lowest they’ve been in recent years. Recession may occur. However, this does not mean it will be as brutal as the previous one.

It is important to note that when the previous crash occurred, the Balearics was one of the regions least affected in Spain, especially at the high end.

Looking back over the last 30 years, Long term capital values have shown exponential growth.

The Balearics has proportionally the biggest luxury market in Spain. Luxury markets have always remained more stable than less expensive markets.

Demand is diversified: the Balearics has a strong international market which helps diversify risk. Even if an international economy fails, another generally steps in to help dampen such a fall.

All data is taken from the official Ministerio de Fomento 2019 document. Find the methodology in: https://apps.fomento.gob.es/BoletinOnline2/?nivel=2&orden=35000000