The housing market: A constantly evolving sector

International political uncertainty, as well as concerns about the imminent future of the decree allowing the construction of 20,000 homes on developable land in Palma, made their way into the room where numerous professionals had gathered. Paula Serra, editor of El Económico, kicked off the event by noting that "today is an important day."

Judit Montoriol, Chief Economist at CaixaBank Research, outlined the projected economic outlook for this year, which will shape the direction of the real estate sector globally, in Spain, and specifically in the Balearic Islands. "We are in a turbulent moment, with geopolitical and economic uncertainty since Donald Trump assumed the presidency of the United States," Montoriol stated. The first sixty days of his tenure have been marked by "continuous announcements that were later reversed. It is difficult to know what is in force, what has been suspended, and what reciprocal measures will be implemented in response." In addition to this, there is the conflict between Israel and Palestine, ongoing negotiations between Ukraine and Russia, and the new role of European defence. "We are in a very uncertain context, but in economic terms, we are coming from a very positive 2024, with robust growth and a decline in inflation," the expert explained.

If there is a moderation in US growth and the impact of tariffs on China, along with caution in Germany, Spain "is coping well with the impact and stands out on a global scale." In the coming months, Montoriol predicts that "although interest rates are higher than expected, there will be two or even three cuts this year, meaning that the European Central Bank would maintain them at 2 per cent."

Spain also benefits from being one of the countries least exposed to international trade tensions, and Montoriol noted that CaixaResearch forecasts "a GDP growth of 2.5 per cent." Alongside expanding employment and consumption, there is also "a high savings rate and a very low level of household debt, similar to that of the 2000s." Furthermore, tourism is expected to continue growing. "People ask me if we will reach 100 million tourists in Spain: our forecast is around 98.5 million," said Montoriol.

Regarding housing, uncertainty "does not help but should not significantly affect the real estate sector." In fact, price increases are expected as the supply "gains traction." In the Balearic Islands, following the post-COVID boom and the real estate declines of 2023 and 2024, "we are now at very high levels, with a 22 per cent increase in sales."

National trends indicate that Barcelona, Madrid, the Balearic Islands, and the Mediterranean arc are leading in sales, although "the greatest growth is occurring in 'Fresh Spain,' in the northwest of the peninsula." In Asturias, foreign investment has made a strong entry. "In areas less affected by heat waves, there is interest in purchasing second homes for both Spaniards and foreigners," the expert explained. On the mainland, there is still a very strong demand for housing with a very limited supply, a situation that is even more pronounced in the Islands.

"In 'Fresh Spain,' there is a buying boom, with rising prices," and this ripple effect is already impacting the outskirts. In 58 per cent of municipalities with more than 20,000 inhabitants across the country, housing prices have increased by more than 10 per cent.