There are very different data on market development in times of inflation, with a particularly wide gap between the international and national segments.
“Who offers more?” is currently the question on Mallorca's real estate market. While prices in Germany are falling again for the first time in over a decade, the island continues to see an increase, according to a wide variety of sources.
The real estate portal Fotocasa, for example, speaks of a 20.3 percent increase for existing properties in Mallorca on an annual basis, albeit on the basis of unrepresentative data. The more conservative appraisal company TINSA, on the other hand, sees only a 3.4 percent increase for the Balearic Islands as a whole within 12 months.
It is possible that the truth lies somewhere between these two extremes. The independent Steinbeis Transfer Institute (STI) Center for Real Estate Studies (CRES) has calculated realistic annual growth of 10.9 percent for Mallorca alone, which is roughly in line with general inflation.
How expensive is real estate in Mallorca?
According to the National Institute of Statistics, property prices in the Balearic Islands (including Ibiza, Menorca and Formentera) rose by 5.9% in 2022, making the islands the most expensive autonomous region in Spain. Despite a decrease of 1.1% at the end of 2022 compared to the previous quarter, the Balearic Islands remain the most expensive region in the country, according to INE, having only minimally moved away from the peak reached in the months of July to September 2022.
This applies to both new and second-hand homes, with prices for new-build homes rising by 6.5% within a year and an increase of 0.9% compared to the previous quarter. Although prices for used apartments fell slightly at the end of 2022 on a quarterly basis, they are 5.8% more expensive than a year earlier. In addition, according to INE data, prices in the Balearic Islands in the fourth quarter of 2022 were 12.2% higher than in the same period in 2007 - at the height of the last real estate boom before the subprime crisis - and 71.3% higher than the low at the beginning of 2013.
In contrast, the appraisal company TINSA only sees a 32.9% higher level than in 2013 and even a 9.8% lower average value than in the 2007/2008 boom. If the conservative appraisers are to be believed, there is still room for improvement. However, the data is difficult to interpret due to the fact that some of the statistics mentioned refer to the Balearic Islands as a whole, while others only refer to Mallorca. After a brief stagnation at the end of 2022, prices are expected to be on the rise again in 2023.
Average of up to 5700 euros / m2Prices for vacation properties in Mallorca have risen across the board for another year: In January, the average price per square meter was around 5,700 euros. This corresponds to an increase of 10.9 percent compared to the previous year.“ These are the latest findings of an independent market study conducted by the Steinbeis Transfer Institute (STI) Center for Real Estate Studies (CRES) in collaboration with the real estate company Porta Mallorquina Real Estate. For the ninth time, the offers of the largest real estate agents in Mallorca were recorded, manually validated and statistically evaluated.
Compared to last year's study, the price trend has accelerated. At that time, the increase was still 4.5 percent according to STI-CRES. The experts do not expect the price increases to stop. A total of over 5,500 residential properties were evaluated as part of the study. 10,000 euros in the southwest Price drivers in Mallorca are properties in the upmarket and luxury segments. According to STI-CRES, an average of 9,650 euros per square meter must be paid for a luxury property across the island at the beginning of 2023. This is 16 percent more than a year earlier. In the sought-after southwest, the average mark of €10,000 per square meter was broken for the first time. Here, the average is 12,860 euros, 30 percent higher than the previous year. But things can get even more expensive: According to estate agents, prices sometimes go up to 30,000 euros. In addition to an unobstructed sea view, state-of-the-art facilities are also required. Exclusive new builds offer underground parking, elevator, infinity pool and underfloor heating, among other things.
Study director Prof. Marco Wölfle: „The market for vacation properties in Mallorca is robust for the time being. Prices depend very much on the sea view and pool. This explains, among other things, the favorable price level in the center of the island. The island-wide price premium for a top sea view is around 60 percent. Properties with a pool are on average 30 percent more expensive.
According to STI, prices in the center of the island start at around 2,800 euros per square meter. But even in the coastal regions - with the exception of Palma and the southwest - properties can be found for less than 5,000 euros per square meter, according to the German institute. Since 2015, STI-CRES has been analyzing property prices in Mallorca with a particular focus on the international market segment. Here, a noticeable spread can be assumed compared to properties that are predominantly purchased by local normal earners, especially in simpler neighborhoods or in more distant communities. The condition of the building fabric also plays an important role in the final price.
No matter how you look at it: Mallorca and the neighboring islands may be cheaper than major German cities, but they are no longer cheap. The Balearic Islands are the region in Spain with the highest average price for properties sold in 2022, at 346,499 euros according to the National Statistics Institute INE. This is significantly higher than the national average, which is 188,036 euros. Madrid follows with 310,127 euros, the Basque Country with 242,782 euros and Catalonia with 221,162 euros. The other 16 autonomous regions are below the national median. Extremadura, for example, has the lowest average property purchase price at €86,677.Are you planning to buy a property in Mallorca?
One thing is clear: international investment in the Balearic Islands is on the rise. An estimated 34.38% of real estate purchases are made by foreigners, 1.7 percentage points more than in the previous year. This also emerges from the statistical yearbook. It is particularly noteworthy that more than a third of these transactions are in the range of at least half a million euros, with Germans accounting for 44.2% of foreign buyers.
The data shows that vacation homes and other high-end properties are sought after by buyers from Europe as well as other parts of the world, including Middle Eastern countries, China and increasingly the US.The real estate sector in the Balearic Islands is booming and has experienced astonishing growth over the last ten years: in 2022, sales amounted to 7.544 billion euros. This sum is higher than the Spanish national budget and has grown by 350 percent since 2013. Alongside tourism, the construction and real estate sectors therefore remain the economic drivers on Mallorca and the neighboring islands. A wide range of international service providers and real estate agents are helping to ensure that this remains the case in the future. Incidentally, the German Steinbeis Institute expects prices to continue to rise over the next few years.
Michael U. Maier
The full CRES study is available for download on the Internet:
https://www.porta-mallorquina.de/blog.
