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A dose of optimism for the real estate market

The real estate market is recovering

It's time to leave the past behind and start looking towards the future!

2016 has been a year of great improvements for the Spanish economy. The country is recovering, growing at a faster rate than any other country in the European union, reducing unemployment and consecutively the financing conditions are getting better and better, giving the real estate sector big push forward. Today and now we can confirm that the real estate market is recovering and that it is an especially attractive investment sector.

This improvement in the economy has generated an increase in the demand of immovable property, that is growing in 2016 and that is estimated to maintain this tendency along 2017 reaching 50.000 annual houses. In simpler terms, if the economy is getting restored and the conditions of financing are favorable it is more likely that I will take the step to buy or rent. This increase in demand has also been promoted by investment. Nowadays, the real estate market can be considered one of the few opportunities for cost-effective investment. A clear example is the gross return on rentals that has grown to each a 5,48%.

This is great news for the real estate business as an increase in demand, with a relatively limited supply, will increase prices between 3% and 5% annually. At national level the prices increase but focusing on Majorca this increase in the price of housing is eight times faster than in the rest of Spain. The increase in the demand of flats without an increase in supply boosts Majorca towards the top in terms of real estate recovery.

Majorca has been the first community to obtain positive rates in terms of flat sales and increases in prices and has already accumulated four years of revaluation of immovable property and increase in sales. In the worst situation, when the national real estate market was descending at 40,7% the majorquin market was decreasing at 27%. The downfall was painful for all, but for Majorca maybe a little bit less. But why?

Once again we can find the answer in tourism. On one side vacation rentals which in comparison with the long run ones turn out to be more profitable and on the other side the foreign investors that, since many years ago, land on the island in search of immovable assets for secondary residence. Many make good use of their savings and buy a property for future retirement and others refurbish properties that are deteriorated and return them into the market as, in many cases, luxury assets.

Although we are talking about augments and an increase in the Balearics over the average, we have to be realistic and it must be considered a moderate growth. Moderate is positive as it is not the madness of seven years ago when the economy was in the bubble period, but we can consider it a more steady and constant increase. The truth is that the situation looks good and that we can therefore be optimistic for the future.
Published: 14 Oct 2016

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