Company Affair

Of the Balearic Islands off the coast of Spain, Majorca has remained for many years the most popular destinations, for travelers as well as those from around the world, buying real estate and setting up permanent residence on the island. In 2008, the number of new homes purchased was at a steady incline. Many were satisfied with the safety of their investments as the balance between supply and demand was extremely stable. However, the current economic climate is reaching the island with a noticeable drop in the housing market. The British have always loved the island, as tourists and as residents, however current sales numbers indicate a fifty percent drop in the purchasing of new homes by the British.

All of the islands have been popular with the jet set, the rich and famous, with Majorca consistently being the most visited. It’s no wonder as the island has a temperate and mellow climate throughout the months of summer sunshine, and the stunning, pristine beaches and landscapes. In the past, many have considered this island to be the hub for those with yachts, of all the locations in the Mediterranean. And the capital, Palma, is much more than a tourist town, much more cultural and cosmopolitan than other tourist destinations. According to reports from Spain’s National Institute for Statistics, the amount of people moving to and setting up residency on the islands climbed by more than 17 % in the past year. Most coming from Germany, making up the most populous single nationality to immigrate to the islands. The British, of course are a close second with many from Italy and Morroco as well. Palma has the largest population, with Calvia coming in second. Almost twenty-five percent of the people living on the islands now are foreign immigrants. However, it has been a financial quarter not without challenges. Overall sales dropped by almost 40 percent by the end of 2008, when compared against the same quarter of 2007. One exception to the drop has been the Southeastern region of Majorca, an area with the most profitable year to date. The island, the businesses, the 5 star hotel Majorca are attempting to balance the situation, introducing new developments, in the hopes of leveling out new home purchases on all of the islands.

A new Merill Lynch report estimates that there will be a 15% drop in housing prices in 2008, followed by more drops in ‘09 and ‘10. This is bad news to any type of investor whether it is big investment brokerages or novice investors using online systems. The National Association of Realtors, however, think the Merrill report is over the top.

The worst housing financial crisis in decades is only going to get worse, a Merrill Lynch report said Wednesday.

The investment bank forecasted a 15 percent drop in housing prices in 2008 and a further 10 percent drop in 2009, with even more depreciation likely in 2010.

By contrast, the National Association of Realtors (NAR) expects housing prices to remain flat in 2008. NAR did cut its home price estimate for the current quarter, however, to a 5.3 percent year-over-year decline, which represents the steepest drop in that price measure on record. But NAR sees an uptick in home prices in the last two quarters of 2008.

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