Balearics Defence: en route to Britain?

A seasoned international property journalist at a reception recently coined a neat phrase to summarise the spin that still encircles a minority of the housing market. She referred to “The Balearics Defence” - the claim that while almost every aspect of a particular national housing market is in decline, some mysterious force keeps one particular area riding high.

In the case of the Balearics, the main proponents of this argument are a few estate agents whose position goes like this: The Spanish mainland housing market is in deep decline, still, after several years of price falls but the Balearics somehow buck this trend. The evidence? “Well” say those in denial, “look at asking prices: they are much the same now as five years ago”.

That, to use a Spanish colloquialism, is a load of cojones.

Speak to the more established and responsible agents on the Balearics and they explain that similarities between asking prices now, and asking prices pre-crash, occur only when sellers insist on trying to get 2007 prices even in 2012. The market does not support that view and these sellers typically do not have to sell - they hold tight until they get the asking price, even though estate agents know this may not happen for years...or perhaps at all.

The homes that actually sell have slipped from their highs (but not even all of these succeed, because demand from buyers has fallen significantly): the homes with asking prices that were found five years ago tend to stick.

Now is that attitude coming to Britain?

As often is the case, buying agents have the inside track on what is going on. I have asked several in recent days and the view is that the trend is creeping over here to the UK. While the markets of Central London and parts of the Home Counties are genuinely storming away some locations and some price sectors are sticking - except the asking prices are not reflecting that.

One westcountry buying agent says “50 per cent of the homes on sale at £700,000 or above are priced not-to-sell, unless someone foolishly pays well over the market value”.

Buying agents’ market intelligence says this is down to vendors’ intransigence rather than estate agents trying it on - the latter, after all, would do better earning commission from a sale at 80 per cent of the asking price than no commission on no sale at 100 per cent.

A Cotswolds buying agent says the same thing: “It’s happening more and more. It’s an unreported story that the top end of the market, outside the south east, is quite weak but asking prices do not reflect that. Vendors believe they can get much more”.

Part of it may be sloppy reporting - instead of explaining how the market is hugely fragmented, it is easy for journalists to suggest there is just ‘one’ market across a region or country. Or it may be sloppy reading - people selling homes may interpret stories wrongly, especially if there is wishful thinking and a financial incentive to do so.

Either way, it’s cojones again. Or, as we say in English, a load of Balearics.

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