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Article Directory :: Finance & Investment Articles
Credit crunch, poor exchange rate and the property slump! ... All of which, seem to be in every sentence read about the property market abroad.
As a consequence every European destination has been tarred with the same brush.
I write to defend the Majorca Property Market...
First I'll describe the downfall of some of the new resorts...
New build and buying off plan has been 'the craze' across Europe, as well as possibly property all over the world. Whilst the concept is excellent and the potential that your property increases in value over the short term; we must when investing in property consider the long term benefits too.
If these so called 'new resorts' don't sustain growth and have an increasingly efficient infrastructure then the resorts will die a death. The resorts will be a ghost town out of the main 3 month holiday season. You cannot have 20,000 apartments without an infrastructure to support them. By this I mean schools, supermarkets, buses, transport, restaurants, etc. If 10% of the owners move out to live, the resort must have sustainable infrastructure all year round.
If these apartments, cum duplex houses come onto the property market for resale after the first year, the property owners may have already seen this problem arise.
Why would I therefore defend 'buying property in Majorca?' ...
Since the 1950's Majorca has been a major holiday destination, and consequently because of its natural beauty people have continued to buy property. As we study the property sales in Majorca today we see a buoyant property market, when the rest of Europe is in a slump.
What does this mean? It means that Majorca is in demand. If you buy property in a new resort elsewhere in Europe there is a possibility that in ten years your property value will fall. Whereas the buoyancy in Majorca alone suggests that prices will either remain steady or show a steady increase.
If we compare an average villa price with mainland Spain over the last year we will see this demand and buoyancy principle in action...
Although I will accept the uncertain exchange rate has also affected the results, the underlying factor remains that property prices in Majorca has remained stable.
A villa on mainland Spain selling at 320,000 Euros a year ago is now selling at 260,000 Euros. Whereas the same priced villa in Majorca has actually increased by 5,000 Euros. So here is the crunch decision... Do you go chasing the possibility of earning 60,000 Euros once the property market returns and buy on mainland Spain; but also face the possibility of another slump and lose money. Or... invest in property in Majorca and see the value of your property steadily increase with time and reach the 60,000 threshold without panic within 5 to 10 years?
An astute investor of course would take the guarantee of a gradual increase and buy property in Majorca. If you are up for a gamble and include a risk of an unstable property market then study the European property market and stab your pin.
We love Majorca and live here. The best advice would be to buy a property where you know you can sell it.
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