’Recent surveys have shown that during the forthcoming economic downturn in Europe and the US, many people regard their summer holiday as an essential, not a luxury, and come hell or high water people are still going to take a holiday.’

’But when it comes to a ski holiday, it’s not essential. It’s not part of society’s fabric. It isn’t an annual ritual observed by generations. A ski holiday is a luxury’ they say, ‘And ski holidays can be expensive – so we anticipate the ski industry to take a big hit for their 2008/9 season.’

Compounding the drop in visitors because of the gloomy economic outlook and many families looking to make savings, the travel company makes a further observation that will have ski resort owners from Andorra to Colorado feeling a cold wind blow across their predicted ski holiday visitor numbers.

’In the 1980’s recession it was the working classes who got hit hardest, tens of thousands of miners, car workers and others involved in industry were thrown out of work – this time the economic downturn is hitting the bankers and stockbrokers – and it’s the City of London and Wall Street bunch who take a week’s ski holiday in France, the US or Canada that are going to be cutting back their spending in the coming months.’

And while Europeans and North Americans worry about their jobs and rein in their spending this winter, tour operators and ski holiday businesses who have invested in new skiing facilities will be hoping they won’t be making redundancies of their own just to be able to keep operating until the end of the season.

Andorra Hotels

But what ski resorts will be hoping for more than anything else this winter is snow. ‘Two years ago European skiing areas were devestated at the lack of snow’, say Tribune, ‘And they will be hoping against hope that there’s good snowfall from mid November to mid March. If not the double whammy of no snow and the credit crunch could leave the ski fields very empty places this year.’

Typical of ski areas that stand to lose a lot in the coming year should both the credit crunch and lack of snow combine is Andorra. Andorra is a small country in the Pyrenees, and skiing is a major part of the country’s revenue. Andorra ski holidays started in the eighties as cheap alternative to ski holidays in France, but in recent years Andorra has spent millions on improving her infrastructure.

Included in the upgrade of facilities for Andorra has not only been public spending on roads and improved access to the skiing areas, but private capital investment in some very good quality hotels, with many hotels in Andorra now recognised as of a good international standard and achieving 4 or 5 star status.

And the country is spending more on her 2008/9 ski season by advertising directly in the UK for the first time to attract British skiers, money that was spent before the scale of the economic crisis and Britain’s part in it became apparent. Free skiing for children under 14 and helicopter rides over the Pyrenees are just two promotions Andorra was hoping would ensure a good year for her ski holidays industry. And private money will see an ice hotel in Andorra for the first time this year.

US and Canadian ski resorts have been investing equally heavily in their facilities, with top ski resorts such as Whistler and Colorado’s Breckenridge potentially being hit hardest as, like their European counterparts, Wall Street bankers and brokers stay at home instead of having a week of skiing with the family. If the snow is late though both US and Canadian ski resorts will have enough snow cannons to ensure skiing and snowboarding for all those who do turn up.

Ski resorts will be hoping that the real weather is as cold as the financial storms this winter.

Although most of the people here in the UK looking to purchase a property in France seem to be “waiting to see what will happen”, especially with the current state of the Sterling, others are actively looking and negotiating very good deals. In fact, some have realised that given the combination of price reductions and lower offers being accepted, prices of most properties on the French market have remained stable in sterling terms – the 25% fall in the pound’s value that occurred over the past year has put many potential purchasers off; which is easily understandable.

Indeed, the current situation favours purchasers rather than vendors, and most are accepting offers that would have seemed comical just a few months ago. Everybody is in agreement that the first six months of 2009 should remain a buyer’s market and as such be an excellent time to buy a property in France. Then it would not be surprising to see prices go up again, and then, as a consequence, the return of mass purchasers; the best deals will be gone by then as vendors won’t be in a position where they have to agree to low offers.

In the Cotes d’Armor department of Brittany, which has always been the most popular market with British expatriates, not only for its historical connection with the British isles, but also because of its long-established transport links with the UK, the average cost for a house is now 161 540 €; even though Brits purchased less properties in this corner of France over the last year than previously due to the economic downturn, they still represented 25% of buyers in the first part of 2008. Areas further afield like Loudeac or Carhaix Plouguer remain favourites as prices are considerably cheaper than resorts closer to the sea like Saint Malo for example; it is not unusual to see habitable properties go under 50,000€ in traditional little villages such as these.

In the Dordogne, also a popular destination for property hunters from the UK, the average cost for a house is now 150 100 €; the credit crisis is now having a dramatic impact on the prices of properties that have, in the past, been popular with British buyers, especially the higher value and stone houses properties that are at reduced prices as owners are conveying a willingness to accept much lower offers. In the North of the department, in hamlets like Nontron or small villages such as La Coquille, prices remain really cheaper than the area surrounding Bergerac (where one would find the international airport) and guaranteed bargains are to be made by people with a good knowledge of the market.

In the Limousin, which remains the cheapest place in France for someone looking to purchase a property, the average cost for a house is now 92 200 €; the Creuse department remains the cheapest of all with a 2-bedroom house costing an average 68 600 €. Prices are expected to drop a further 5% to 10% in the course of 2009, but nobody really expects it to go below this as prices are already very low. On top of that, the opening of the new airport in Brive la Gaillarde (expected soon) should see prices in the Correze department increase, especially in the villages that could be reached in less than 1 hour from the international airport.

In the Languedoc region, the favourite place for brits looking for the sun, alongside the French food, wine and way of living, the average cost of a house is now 209 500 €; the Aude department, popular with people looking around Carcassonne and Perpignan, or generally close to the sea, remains the cheapest with a 2-bedroom house costing an average 157 900 € – the Gard and Herault departments, most popular with people looking for a Provence-style move, are very close in prices, with the average cost for a house being respectively 231,500 € and 232 000 € – prices in this region are expected to drop a further 5% to 10% over the next year but most properties are having their prices reduced and owners seem content to accept much lower offers in this corner of France also.

Finally, in the Normandy region, also a traditional destination for property hunters from the UK due to the proximity to England, the average cost for a house is now 156 800 €; prices have decreased during 2008 and are expected to stabilize next year.

As a conclusion, the uncertainty in Britain in particular and in the world in general may encourage people to buy in France. Indeed, compared with the other overseas markets, France offers a very protective purchasing system and low capital gain tax, and is a long standing tried and tested market without the various risks that some of the emerging markets offer. And, in today’s current climate, safety is priceless.

The last market review published by the Fédération Nationale de l’Immobilier (FNAIM), which is the French National Federation of Real Estate Agents, confirmed the general trend with price reductions during the 1st quarter of 2009 but emphasise on the fact there is no risk of a property crash.

According to an internal survey carried out by the FNAIM (260 estate agents participated to it), their turnover for the 1st quarter of 2009 is down by an average 30% compared to the 1st quarter of 2008. An article published in the French newspaper “Le Monde” (mentioning the FNAIM market report and a report from the French notaires) indicates that the notaires activity in 2008 decreased by 20% compared to the previous year. The whole resale market decreased by 17%, from 802,000 in 2007 to 667,000 in 2008. New build sales dropped by 37.6% (79,400 in 2008 against 127,300 in 2007).

As a consequence, the major French property developers decided price reductions on most of their developments during the 4th quarter of 2008 and the 1st quarter of 2009 by 10 to 20%.

The FNAIM mentions that the French government took several actions to revitalize the
French New Build market but haven’t put in place significant actions for the resale market. This can be easily explained by the Notaire figures previously mentioned. Thus, the recent tax incentives dedicated to French taxpayers such as “Loi Scellier” have boosted the
French investor market. It can be noticed by looking at the property developer quotations on the Paris stock exchange such as Nexity which has increased by 76.22% since 01st January 2009. It also explains why it is proving more and more difficult to get further discounts on New build and Off plan properties in France.

The resale market:
The financial earthquake and the brutal degradation of the global economy had an impact on the resale market, but not comparable to the one seen in the UK or the US. The number of transactions carried out by estate agents dropped on average by about 25% whereas the end of the price rise was favourable to the solvency support of the demand (+1.5% on average each year between 2005 and 2007) and compatible with the support of high level of activity, close to 700.000 transactions per year.

The property market, a slow price decrease, but no risk of a crash
Without surprise, decrease in price of resale properties was confirmed during the 1st quarter of 2009, on the apartments (- 0.4%) and houses (- 1.7%). However the decrease has been less sharp as a whole (- 1.0%) that those recorded within the 3rd quarter 2008 (- 2.9%) and the 4th quarter 2008 (- 6.5%). The transactions carried out during the 1st quarter 2009 were concluded at prices 9.8% lower compared to the sales realised during the 1st quarter 2008.

In the countryside, declines that occurred in 2008 are reflected in the prices: -7.7% and -6.1% respectively to the East and West part of France, -6.4% in the South-West, -8.8% in Centre and the Alps, -11.2% in Paris Ile-de-France and -13.3% in the South-East. With the image of the price evolution recorded on the Parisian market (- 4.9% over one year), there is no doubt that much of sellers have now agreed to moderate their asking price.

According to the FNAIM survey, 1 out of 2 sellers in France is now ready to negotiate his asking price with an average reduction of 14%. One of the reasons comes from the fact that the properties stay longer on the market: 5 months on average in 2009 compared to 3 months at the beginning of 2008. But more and more professionals now believe that prices have reached a low on the
French Property Market and hope to see the end of the tunnel pretty soon, especially with the improvement of the solvency of French buyers.

The solvency of French buyers is improving
The recent interest cut realised by the European Central Bank (down to 1.5% in April 2009) has contributed to ease the lending market. In France, people can now easily get a monthly repayment mortgage at 4.25% when it was about 5.15% in November 2008. And most importantly, the recent price reductions contributed to improve the solvency of French buyers. The solvency indicator has been increasing by +5.2% on the 1st quarter 2009 compared to last year.

The impact of price decrease by 10% and of a fall by more than 60 points of base interest rates deserve to be appreciated, because these two combined falls make it possible to reduce the rate of effort of the households of about 5 points. Thus, one mortgage refused in the 1st quarter 2008 because of a rate of effort too high, is 35% more likely to be accepted today, taking into account conditions prevailing on the market!

In other words, it’s becoming easier for French people to get a mortgage and this has already brought some dynamism to the market.

2009 Forecast
These last price reductions can only be welcomed by the property market. The combination of prices reaching a low on the French Property Market, sellers ready to negotiate the asking price with an average reduction of 14% and the imminent return of French buyers on the market thanks to the improvement of their solvency, it would not be surprising to see the market picking up sooner than expected by anyone.

There are also signs that housing market activity in the UK is picking up slightly, with mortgage approvals up slightly and surveyors reporting increased interest in house purchases. World stock markets too have recovered significantly from their low points in March.

All of this is good news, but our view remains largely unchanged as regards the overall state of the world economy and also the property market in Mallorca. That is, that there is indeed a slowdown in the rate of fall of the key economic indicators in some countries. And this could be a sign that the recession is gradually finding a its lowest point. We do not feel however that there will be a quick or significant rebound except for perhaps in the stock markets driven by traders who appear in the main to be flying in the face of what continues to be pretty dire economic and company performance data.

Furthermore some of the key actual economic indicators, and things the UK and other counties still have to contend with, look far from cheery. Unemployment could reach 9% in the UK, 10% in the US and 20% in Spain by the end of the year. This will undoubtedly have a negative effect on consumption and the housing market in these countries.

Added to this, these signals of recovery are not yet apparent in a small number of the biggest economies in the world such as the US, Germany and Japan. In many developing countries too conditions are still getting worse.

With all this in mind, we think it far too early to be heralding the end of the recession, or even that it has reached its ultimate low. It may be that we will see a modest return to growth in some countries in 2010, but it will take longer, possibly much longer, to return to the levels of activity seen prior to 2007.

On top of this there are still great concerns over the financial health of some of the worlds biggest economies. And the overall effects of the massive amounts of money pumped in to stimulate these economies is not yet clear. The IMF has warned that there could still be another $3 trillion in losses for the financial sector as a whole before the crisis is over.

Our prognosis for the Mallorca property market

As above, there are plenty of solid reasons to believe there will be no significant uplift in property markets in any country, even the strongest such as mallorca, during the course of this year and most likely the first half of 2010 too.

On top of the global macro economic considerations there are factors specific to the Spanish property market that also put pressure on prices across the region. These are highlighted in the article mentioned above.

However, it is also very clear that activity has picked up for and that sales are being made, albeit at a relatively low level. There are a number of more positive factors that are contributing to this.

Euro interest rates are lower now than they have even been

The latest European Central Bank’s interest rate cut to 1.00% is the lowest level since the single currency’s creation. It is possible that the rate will be cut still further later in the year. Whilst it is likely that not all of this will be passed on to lenders, any lowering of consumer rates is positive and will help stimulate the markets to some extent.

In Mallorca we are seeing buyers are taking 50% loans so they have a hedge against any further significant currency fluctuations. Braver investors are seeking higher percentage Euro loans on the basis that Sterling will improve against the Euro and therefore, paying off the loan and converting the bulk of their Sterling at a later date will be to their advantage.

Reflecting this there was a small increase in the number of new mortgages granted in March although the number is still significantly down on last year.

Continue opportunities for property purchases at very low asking prices for Mallorca

This is the most important factor. Buyers in the Mallorca property market at present tend to be either professional investors, or private individuals who realise a) that there are some very good deals to be had in the current market and, b) that to delay looking for a property in the hope that conditions will move even more in their favour might mean missing out on a great opportunity that is available in the market right now.

We have written several times on this subject and you can read previous articles ono the subject via the links listed on this page of the Mallorca Property Partners website.

Overall our prediction remains that average property prices in Mallorca will drop further through to the end of this year, possibly continuing into the first half of 2010. We do not however think this drop will be as high as in other parts of Spain (predicted to be 10% overall this year and 12% next year by analysts at BBVA – one of Spain’s leading banks). The fact that there are active buyers in the market in Mallorca sets the region apart from most. And there are plenty of other solid reasons to set Mallorca apart from other parts of mainland Spain, the other Spanish islands, and most other international property markets too (see the “Green shoots” article referenced above).

But once again the over-riding observation is to not rely too much on market data and statistical analyses. This is because of the considerable variance in actual selling prices above and below the average prices in this unusual market environment. The reason for this is that the seller’s circumstance is a more powerful factor than in a “normal” market environment and this is not directly related to the usual determinants of the value of a property.

There are, therefore, some exceptional deals being done at price levels that are unlikely to be improved upon regardless of where average prices go to. To illustrate, see this selection of properties in Mallorca that have  either been reduced in price or listed at very low asking prices.

If you are reading this because you might be interested in buying a property in Mallorca, our advice is to monitor opportunities on an ongoing basis. You might see the ideal property right now and be able to get it at an unbeatable price. It is not easy though to identify the best opportunities, as not all owners are dropping the asking price but still may negotiate significantly when it comes to an offer.

Your best approach would be to brief us at MPP to use our experience and unrivalled contact base to look out for the best Mallorca property opportunities for you. Read more about what Mallorca Property Partners offer.

Festival de Beaulieu-sur-Mer & Saint-Jean-Cap-Ferrat 18th â?? 25th September 2009
The “Legendary Violins” Festival first took place in 2008 and it recounts tales about violins and cellos. For 2009 the festival features the talents of the Stradivarius of Eugène â??Ysaÿe violin. The Vienna Philharmonic solo violin is also celebrated. There will be performances throughout the region.

American Film Festival â?? Normandy 4th â?? 13th September 2009
Not only is it a scenic and beautiful seaside resort, every September the Normandy town of Deauville holds a festival that rivals Cannes. The very best American films of the year are previewed here. Now in its 35th year, the festival sees many Hollywood stars descending on Deauville to premiere their latest movies.

Besancon Music Festival 11th â?? 26th September 2009
Attend various concerts and live performances in the area of the Besancon Festival and be fascinated by the wonderful music! You will hear the music of composers of the Romantic Era who were inspired by Rome, Florence and Venice. The Festival also features the 51st International Competition for Young Orchestral Conductors with the BBC Symphony Orchestra.

The Ambronay Festival 11th September â?? 11th October 2009
Check out this wonderful celebration of classical music â?? this Festical celebrates 30 years in 2009! The festival is a celebration of the great musicians who left their legacy on the history of Ambronay and baroque music.

Festival d’Ile de France 4th September â?? 11th October 2009
The 2009 Festival d’Ile de France celebrates all things feminine â?? and is dedicated to all women who have fought for emancipation throughout generations. Musical repertoires will range from the Middle Ages to Baroque, to Classical Romanticism and music from all around the world.  Now in its 31st year, the Festival takes place in 23 historical sites in the Paris area and in total features 33 concerts in total.

Grande Braderie de Lille
Known as one of the best flea markets on the continent, why not head to the annual Lille Market Festival and grab some bargains! The 2009 Market takes place on Saturday the 5th September. It is a celebration of the market trade that has been in existence in the city since medieval times.

The Bird King Festival
Every September in the Old Town of Le Puy-en-Velay, visitors can take in the Bird King Renaissance Festival (Fêtes Renaissance du Roi de l’Oiseau). Attending this Festival is like thrown back in a time warp to the 16th century â?? you will see the aristocracy in their fur lined velvet cloaks walking alongside peasants in plain clothes leading donkeys, and there are goods for sale on the streets! You will see musicians playing the tunes of the time through recorders and drums. Why not take part or watch the archery competition which pays tribute to the idea behind the festival, when the Bird King was decided by how many birds he shot with the bow and arrow. Then everyone will attend mass at the local cathedral. The Festival is a reminder of Le Puy-en-Velayâ??s medieval and Renaissance heritage.  The city lies 325 miles southwest of Paris in the Upper Loire region of south-central France.

Feria du Riz & Course de Satin Horse Race – Bouches-du-Rhone 11th â?? 13th September 2009
Visitors to this festival will see the cowboys of Camargue known as “Guardians” compete in this event. This annual event dates back to 1529. The “Guardians” are renowned for looking after the bulls and horses of the region. You will be astounded by the bull running, and their guarding by the Camargue horses, and enjoy all the music and festivities that go along with it!

‘Tapis Rouge’ Red Carpet Antiques Festival â?? Rhone Valley Lyon 1st October  2009
This annual event takes place on the first Thursday of October. Visitors to Lyon will be astounded by the red carpet that envelops Rue Auguste Compte, which is located in the heart of Lyonâ??s Antique Quarter. All festival attendees have the opportunity to browse through the jewellery, fabrics, antique furniture and china that is on display in the Quarter.

Whatever French festival you wish to attend, make sure you enjoy it  â?? take plenty of photographs and the memories will remain forever! If you are travelling around any of the regions, the best way to see the sights and sounds of the local festivals is to travel independently by hiring a car. For the best options available to you visit our Car Hire France page.