House prices to rise by 15 percent this year

Staff Reporter THE Association of Balearic Estate Agents (API) is predicting an increase in the price of homes of between 10 and 15 percent this year. This forecast, they claim, will apply as much to newly built property as it will to dwellings that have already had a previous owner. The Association also believes that the lifting of the building freeze on urban development will lead to the building of 30 percent more housing. The rise of house prices in the Balearics has been attributed to the population growth registered in the Balearics over the last few years. Foreign buyers have been a major factor in causing the cost of homes to shoot up and unbalance the market. According to calculations by the API, the price of newly built homes in 2003 went up by 14 percent whereas property that had already had one owner rose by 24 percent. It is estimated, however, that this growth rate will slow down in 2004 to settle at around 15 percent. A typical profile of a purchaser, paying up to 35 million pesetas for a newly built property, is that of a young couple, native to the Islands, enjoying a stable work environment. Investors in dwellings already having had one owner, however, are likely to be couples without children. Due to earning lower salaries or to lack of a secure job contract, they will typically only be able to afford homes that cost not more than, say, 20 million pesetas. The head of the Balearic Association of Real Estate Agents is of the opinion that the present regional government's housing development plans will help to keep prices stable. If there had been no further home building, it is likely that prices would have shot up yet again and would have remained completely out of the reach of many people. In spite of the property price rises in 2003, 19.9 percent in the Balearics, no coastal district within the Islands lays claim to the country's most expensive new housing development, a dubious accolade awarded to San Sebastian in the Basque country (charging 2'788 euros per square metre) and Barcelona (2'917 euros per squre metre). Although Ciutadella was the most expensive coastal area of the Balearics, undergoing a home price rise of 24.4 per cent to stand at 1'291 per square metre, it was only the fourth highest in Spain in its category. A property valuation society purports that the rise in demand for a second home on the coast and the consequential price increase of such property, is as much attributable to Spanish nationals as it is to British and German buyers.