It was one of the most challenging times yet for the island's property markets and 2009 is set to remain difficult with sales predicted to be down around 20% over 2008, according to the report from Engel & Volkers, one of the largest network of international estate agents in the Balearics.
However, it is not all doom and gloom and the south east of the island has had its best year yet. 'Last year was our best yet with sales up by approximately 20%, mainly fincas and villas. To date, our area has not been affected by the global financial crisis. We've even had a busy period between Christmas and New Year,' said Nils Haase, Managing Partner in the south east.
Property owners are realising that the need to be willing to move on price to secure a deal and British owners, in particular, are in a strong position to negotiate if they are taking Euros home, the real estate agency said. Some will discount up to 20% and still make a profit on their sale.
The effect of the global economic downturn on the property market varies considerably on the island. In the south west, which includes some of the island's most popular areas to own a second home, there is little interest in apartments and over 50% of most recent sales have been villas.
There has been a noticeable absence of British buyers who have fallen 50% and the main buyers at present are German, Scandinavian, Swiss and Spanish.
In Palma, the market slowed right down at the end of last year and has only really started to re adjust to the market conditions by approximately 10 to 20% below the original asking price. As a result the market is moving again.
'January started to look more positive with some recent sales to Swiss, German, Russian and Scandinavian clients. The main vendors tend to be local or foreigners that need to sell,' said Terence Panton, Managing Partner of E&V Palma.
In the north vendors who want to sell are willing to negotiate at anything between 10 to 30% below the asking price, according to Christian Czarnetzki, Managing Partner for E&V North. 'I suspect we are nearing the bottom of this crisis and I feel confident that the market will start to move again by mid 2009,' he added.
But in the north east of the island owners seem reluctant to drop prices. 'In the latter half of 2008 the market died in this area. 'Although property prices have come down by approximately 10 to 25% since last year, owners here are reluctant to negotiate well below the asking price,' said Dieter Funk, Managing Partner.
