Balearic Islands warning as Majorca told 'no one will want to come here'

Property prices in the Balearic Islands will rise by eight percent by the end of the year, according to estimates by Ricard Garriga, CEO of mortgage brokers Trioteca.

He said: “The latest data from the National Statistics Institute show a year-on-year increase of 7.8 percent in housing prices [national figure]. With the recent fall in the Euribor [Euro Interbank Offered Rate] below 3 percent, together with attractive fixed-rate mortgages, demand will accelerate rapidly.

“With a limited supply of homes, this will drive up prices even further. Although the increase has moderated in the Balearics to 6.2 percent year-on-year, we expect that the rate cut will mean that prices will rise by up to 8 percent by the end of the year. The pressure of demand, added to the shortage of supply, makes the increase inevitable."

Several other estate agency associations and property websites have agreed with Garriga’s analysis and have shared what are now very familiar reasons as to why there is a housing crisis in the Balearics, and Majorca specifically, according to the Majorca Daily Bulletin.

"The Balearic Islands have the highest demand for housing in the whole of Spain. The Mediterranean climate and its extraordinary natural environment make the islands a highly desirable place, both for local citizens and for foreigners with high purchasing power,” said María Martos from Fotocasa.

“However, the island territory is limited. Expansion of housing supply is therefore more difficult than in other regions. The imbalance between supply and demand is great. In addition there is a totally insufficient amount of social housing, and this pushes prices up."

Hanz Lenz of the ABINI association added that the shortage of homes at affordable prices is one factor that is influencing high prices - around 20,000. He added that administrations have failed to take an ever-increasing population into account, while arguing that Spanish Government measures are leading to owners withdrawing their properties from the rental market, which “is driving up prices even more”.

Economist Pau A. Montserrat, a professor at the University of the Balearics Islands and a member of the Economics and Social Council (a Spanish Government consultative body) also said that there is a “decreasing supply [of housing] because not enough is being built” which is pushing prices up.

He said: “Growing demand [both from thosing coming to work and wanting to retire or buy a second home], stagnant supply and falling interest rates lead to higher prices. And the rental market is even worse.

“Until we have a serious debate, without absurd ideologies but with appropriate economic knowledge, we will find ourselves with a very serious problem. If we do nothing, it will only be solved when no one wants to come as a tourist or come and live here.”

He warned that the price of real estate will subsequently fall because the island will no longer be attractive. He added that measures to solve the real-estate problem have to be implemented, which requires “long-term policies and consensus”.

It should be noted that in contrast to the estimated eight percent rise, the College of Notaries reported last month that house prices in the Balearics fell by 6.2 and 5.9 percent in May and June respectively and that sales were also down.