Lutz Minkner - Mallorca 2025: A real estate market between boom, regulation and challenges
Expert Lutz Minkner üon price trends, the housing crisis and the future of the Mallorcan real estate market.
The real estate market in Mallorca has been a hotly debated topic for years. While the demand for luxury properties continues to rise, many locals are struggling with unaffordable rental and purchase prices. New legal regulations and political measures are intended to counteract this, but not all experts see them as a sensible solution.How has the market developed in 2024 and what are the forecasts for 2025? Is the planned social housing construction sufficient to alleviate the housing crisis? Which buyer groups are currently shaping the business and how do tax conditions influence the Mallorca location?Renowned real estate expert Lutz Minkner answers these and other questions in an exclusive interview. With decades of experience as a lawyer and estate agent in Mallorca, he analyzes the current developments, challenges and future prospects of the market - in a well-founded, critical manner and with a clear view of reality.
Rückblick auf 2024 & Marktprognose 2025: How did the real estate market develop in 2024? Which trends will continue, and what should buyers and investors pay particular attention to in 2025?
Unfortunately, in discussions about the real estate market in Mallorca, little or no attention is paid to the fact that we don t have a single market, but several, namely the domestic market and the market of international demand. Both markets are fundamentally different and play by different rules.
The domestic market in Mallorca is characterized by a low supply at constantly rising prices. Even families with two earners find it almost impossible to find affordable housing. The international market, on the other hand, is mainly in the luxury real estate segment. Here, too, prices are rising steadily. However, there is very good demand from international investors who are willing and able to purchase these properties at the prices on offer.
Housing crisis – luxury market vs. affordable housing: The real estate market is booming, but many locals are struggling with rising rental prices. Are there solutions that do not deter investors and still provide more affordable housing? The Spanish constitution grants every Spaniard the right to decent housing. The creation of this housing is undoubtedly the responsibility of the government, not the banks, not the private developers, because both do not work out of altruism, but must generate a reasonable return on their actions. In the last 20 years, only a small number of social housing projects have been built. After the left-wing government was voted out in 2023 following eight years of mismanagement, the new conservative government launched a program to convert and build an initial 4,000 apartments. This ranges from densification of cities through additional storeys, conversion of commercial premises into residential space, provision of building and building land for the construction of price-linked housing, rent guarantees for owners in the event of rent losses or home ownership;for situations of rent default or squatting, the fight against illegal vacation rentals in order to return these apartments to the normal rental market, through to tax concessions for owners and interested parties from young families and the disabled. Many of these solutions can be implemented quickly, others - such as the new build - will of course take at least three years from planning to moving in.Regulation & Politics – Where is Mallorca heading? The government has and wants to regulate the market more strongly with new rules and requirements for investors and buyers. Do these measures make sense or will they damage Mallorca's attractiveness in the long term?
We do not need regulation; on the contrary, we need to streamline administrative channels and reduce bureaucracy. Regulations such as the housing law enacted by the central government with rent brakes and a protective umbrella for squatters to the detriment of owners are counterproductive. There will still be some disputes here between the left-wing central government and the conservative Balearic government. Pedro Sánchez's latest idea to make it more difficult or impossible for EU foreigners to buy property by doubling property transfer taxes not only contravenes various legal provisions. This plan will also not create a single new home. This proposal is also not worth the paper it is drafted on, as Sánchez does not currently have a majority in the legislative process. In the long term, such announcements are damaging, because investors want legal certainty.
International buyers – Who is investing in Mallorca today? Has the profile of international buyers changed? Are there new trends –
such as sustainable construction or increased interest in certain regions and property types?
Mallorca continues to attract foreign real estate buyers. Many are looking for a second home with sun and sea, others are even looking for a retirement home. Buyers come from Germany, the UK (slightly less since Brexit), Scandinavia, Switzerland and Austria, and more recently also from the USA. Whereas 20 years ago, buyers came from the 60+ age group, they have become significantly younger in recent years, namely 35 to 60 years old.
Taxation & Financial framework conditions: How do current tax regulations, affect the real estate market?
What developments or changes would make sense from your point of view?
In the Balearic Islands, property tax has been suspended up to an amount of 3 million euros. This tax-free amount applies to every buyer. For example, if a family buys with the parents and two children at 25% each, the tax-free amount is 12 million euros. Marga Prohens, the Prime Minister of the Balearic Islands, wanted to abolish the wealth tax altogether, but was unable to get her way with the central government, which wanted to tax the excess amount with the so-called „wealth tax“ (to which the central government is entitled) in the event of a complete exemption from the wealth tax from 3 million euros. The wealth tax, which now amounts to over 3 million euros, is after all due to the Balearic Islands. There has also been massive tax relief in the area of inheritance and gift tax: inheritance tax has been abolished or halved for close family members (parents, children, spouses, uncles, aunts, nieces and nephews). All of this makes Mallorca's real estate market attractive for investment.
Your personal outlook: Are you optimistic that Mallorca can continue to develop its real estate market in a sustainable and stable way – or do you see specific challenges here?
Yes, Marga Prohens has set up a „round table“ at which all relevant social groups sit (although a few have left again) and, under the moderation of the renowned economist Antoni Riera, analyze the problems and develop and present proposals for solutions. But this will be a hard piece of work for all those who love Mallorca.
The Association of International Real Estate Agents ABINI, of which my partner Marvin Bonitz is a board member, will do its part to set a new pace for the rhythm of growth.
Lutz Minkner, www.minkner.com
