After stagnating in 2023, the market is on the upswing again. The Balearic Islands are the only region in Spain to have even surpassed the 2007 level.
In 2023, the real estate market in Mallorca experienced a phase of stabilization after an extraordinary upswing in the post-pandemic period. According to the Engel & Völkers market report, this reflects a gradual return to a more sustainable level of sales, with prices remaining stable and demand remaining strong both locally and internationally. Despite a year-on-year decline, the number of real estate transactions is still in line with the ten-year average, underlining the continued attractiveness of the Balearic Islands. The recent tax changes, which include the abolition of property tax from 2024, could also attract new investment and further stimulate demand.
Engel & Völkers has expanded its annual market analysis through a collaboration with Spanish Property Insight. The figures in the market report show that real estate sales have returned to a stable level without a significant drop in prices. There was talk of a soft landing in 2023, suggesting that the fundamentals of the market remain solid, underpinned by continued international interest and local demand. According to data from the notary's offices, there was a slight fall in property prices in the Balearics in 2023 for the first time after 10 years of increases, by 0.4 percent.
Price turnaround in 2024
A trend reversal was already apparent in the first quarter of 2024. According to the appraisal company Tinsa, property prices on Mallorca and the neighboring islands rose by a whopping 8.3 percent. This is the highest increase in the whole of Spain and an even higher rate than in the real estate boom around 2007. What is unique in the country is that absolute prices are now also slightly higher than in 2007 - albeit without adjusting for inflation. This could mean that there is still room for improvement, especially as US buyers are also increasingly making purchases thanks to good flight connections.
Porta Mallorquina is also optimistic: According to a market study in collaboration with the STI Center for Real Estate Studies, there is continued momentum in Mallorca, particularly in the vacation property sector. Here, prices are still on an upward trajectory, with the center of the island recording the largest price increase of 13.6% in 2023. By contrast, the southwest of the island, traditionally the most expensive region, saw a slight fall of 0.5%.
The average price per square meter for vacation properties on the entire island is around 5,800 euros, whereby luxury properties can cost an average of 10,900 euros per square meter, in the southwest even up to 13,400 euros. Features such as pools, which can significantly increase the value of houses and villas, are a significant price driver.
There are indications that the marketing time for properties is increasing somewhat. According to Porta Mallorquina, there are currently over 2500 properties listed that were already recorded last year, which indicates that around half of all properties have a marketing time of over a year.
These developments suggest that the real estate market in Mallorca remains robust, with prices rising and demand remaining high, particularly in the premium segments. However, investors should remain vigilant as the decline in supply and longer marketing times could pose challenges. Timo Weibel from real estate agency Porta Mallorquina sees the market on an upward trend and considers a significant price reduction, as is currently being observed in Germany, to be unlikely.After the market grew by a whopping 55 percent between 2015 and 2024 (and by as much as 74 percent in the ten-year period since 2013), the STI Center is forecasting more moderate real price growth of a further 3.7 percent in Mallorca over the next three years.According to the study, the supply of luxury properties on the island is declining, which is particularly noticeable in the southwest, where the supply of properties has reportedly fallen by 41 percent. At the same time, demand is rising in Palma, where a 19% increase in ready-to-move-in properties was recorded. This reflects competition between the regions, with Palma increasingly establishing itself as a serious rival to the popular south-west.
Trend towards the center of the island?
According to Porta Mallorquina, vacation property prices in Mallorca recorded a differentiated development in 2023. The center of the island experienced the strongest price increase with a rise of 13.6 percent, starting from a relatively low level. There were obviously opportunities and pent-up demand here. Similarly robust increases took place in the north and south of the island, with price rises of 8.4 percent and 8.1 percent respectively. The north-east and north-west also recorded significant increases of 7.8 percent and 7.9 percent respectively, while the area around Palma rose by just 0.2 percent. The southeast saw a moderate price increase of 4.9 percent.
It will be interesting to see whether the surprising trend towards the center of the island continues or is simply due to an extreme shortage in other places. Or is it ultimately the case that certain properties are currently being deliberately held back by their owners in order to wait for higher prices or to avoid building up too much liquidity in one fell swoop in times of inflation? Whereby the clientele for the finca near Sencelles, the village house in Binissalem and the sea view villa in the south-west may not necessarily be the same anyway.
Michael U. Maier
