Palma, Mallorca

Very familiar reasons as to why there is a housing crisis. | Archive

Andrew EdePalma17/09/2024 07:20
TW
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Ricard Garriga, CEO of mortgage brokers Trioteca, estimates that property prices will rise by 8% in the Balearics by the end of the year. "The latest data from the National Statistics Institute show a year-on-year increase of 7.8% in housing prices (national figure). With the recent fall in the Euribor below 3%, together with attractive fixed-rate mortgages, demand will accelerate rapidly. With a limited supply of homes, this will drive up prices even further. Although the increase has moderated in the Balearics to 6.2% year-on-year, we expect that the rate cut will mean that prices will rise by up to 8% by the end of the year. The pressure of demand, added to the shortage of supply, makes the increase inevitable."

Spokespeople for estate agency associations and property websites agree with Garriga's analysis, and they give what are now very familiar reasons why there is a housing crisis in Mallorca and the Balearics.

María Martos of the Fotocasa website, for instance: "The Balearic Islands have the highest demand for housing in the whole of Spain. The Mediterranean climate and its extraordinary natural environment make the islands a highly desirable place, both for local citizens and for foreigners with high purchasing power. However, the island territory is limited. Expansion of housing supply is therefore more difficult than in other regions. The imbalance between supply and demand is great. In addition there is a totally insufficient amount of social housing, and this pushes prices up."

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Hans Lenz of the ABINI association says that one of the factors that most influences the high price is the shortage of homes at affordable prices - around 20,000. He adds that administrations have failed to take an ever-increasing population into account, while arguing that Spanish Government measures are leading to owners withdrawing their properties from the rental market, which "is driving up prices even more".

Economist Pau A. Monserrat, a professor at the University of the Balearic Islands and a member of the Economics and Social Council, a Spanish Government consultative body, says: "The Balearic property market has a growing demand, both from people who come to work here and from retirees who want a second home or to settle on the island. There is also a decreasing supply because not enough is being built. This makes prices go up. Growing demand, stagnant supply and falling interest rates lead to higher prices. And the rental market is even worse.

"Until we have a serious debate, without absurd ideologies but with appropriate economic knowledge, we will find ourselves with a very serious problem. If we do nothing, it will only be solved when no one wants to come as a tourist or come and live here. The price of real estate will then fall because we will no longer be attractive. I don't think that this is what we want to happen. We have to implement measures to solve a real-estate problem and these require long-term policies and consensus."

* In contrast to the estimated eight per cent rise, it might be noted that the College of Notaries last month reported that house prices in the Balearics fell by 6.2% in May and by 5.9% in June (monthly decreases) and that sales were also down.