Balearic property prices go through the roof

Property prices in the Balearics have risen the most in Spain since 1997 and households are spending more in the Balearics on housing each month than anywhere else in the country. Between 1997 and 2001, the price per square metre of housing in the Balearics rose by 112 per cent and during that time, the Balearics topped the urban development table with an average of 19.6 per cent more land developed on each year, according to a study carried out by the Socio-Economic Council. Last year alone, the price of new housing in Majorca rose by 18.1 per cent and the average cost of a square metre in Palma was 1.142 euros. The report concludes that the main reason for such a sharp rise in house prices in regions such as the Balearics and the Canaries has been massive demand which, at times has been far greater than supply. The study however, has been published at an interesting time for the property market in the Balearics. Demand has dropped over the past eight months and some estate agents are not taking any more properties on their books because supply is far greater than demand. The Confederation of Balearic Business Associations confirmed yesterday that the outlook for 2002 is that the market is slowing down. “Obviously such high prices can not be maintained and activity in the construction industry is on the decline,” sources for CAEB said. The last big property boom started in 1998 when house prices rose by as much as 20 to 30 per cent in the Balearics and the Basque Country - this winter however, some estate agents claim, will be a buyers' market. But, despite the down turn in some sections of the property market, Balearics' families are still paying around 40 per cent of their monthly income on housing, more than in any other region in Spain. The Balearics is just one of five regions where households are having to pay over 30 per cent of their monthly income on housing. In Murcia, for example, just 19 per cent of the monthly wage goes on housing. On average, families in the Balearics are paying 527'94 euros per month on housing. In Madrid they pay the most, 646'90 euros per month, but average wages are higher because of the cost of living in the capital, which is still, nonetheless, lower than in the Balearics where the current rate of inflation is just over three per cent.