New property market scenario in the Balearics

Home sales recorded during last March in the islands show an increase of 71% over the same period of 2013, a percentage no other Spanish region comes even remotely close to, since Catalonia, in second place, increased by 42.8%, and the national average is 22.8 %, according to data provided by the National Statistics Institute (INE).
The presidents of the associations of promoters and real estate agents, Mr José Luis Guillén and Mr José Mir respectively, interviewed today in the Diario de Mallorca, agree that this reactivation is based on two main factors: the good performance of the economy and labour market in the archipelago (thanks to an excellent tourist season), and the fact that it is becoming easier for buyers to access a mortgage.
This is reflected in the mortgage plans currently offered by some banks, with interest rates of Euribor plus 1.99 points. However, the conditions under which a mortgage is now offered are not as flexible as ten years ago. At present, banks’ valuations are much more adjusted to real market value and banks will finance up to 80% of this value, so that the buyer will have to come up with the remaining 20 % and about 10% on top to cover the operation costs.
On the other hand, Mr José Luis Guillen expressed his regret that finance is much harder to access for developers, although the stock of new homes is nearly exhausted in the islands, especially in some municipalities, such as Palma.
This revival of purchases and the shortage of new housing is having an effect on property prices, which are again recording increases of around 3%.
One year ago, Solvia, created by Banco Sabadell to sell its huge property stock, was selling with an average discount of 52% on the original prices. Now, at Sabadell-Solvia they have reduced their discounts. “We had a 52% discount and now only do 40%. The funny thing is that we are now selling more than last year. We think it’s the end of falling prices, except for the worst properties.”
Their analysis agrees with studies such as the last from the Instituto de Prácticas Empresariales (IPE), which showed that Balearics is among the three Spanish regions with a lower number of unsold homes, with a total of 7,965. It is also the first region in which prices have started to rise consistently. A new market scenario appears to be clearly opening.