Authored by the expert who managed and guided the team behind the Spain Property Pack
Yes, the analysis of the Balearic Islands' property market is included in our pack
What will happen in the Balearic Islands’ real estate market? Will prices go up or down? Are these islands still a hotspot for foreign investors? How is the local government impacting real estate policies and taxes in 2025?
We’re constantly asked these questions because we’re deeply involved in this market. Through our work with notaries, real estate agents, and clients who buy properties in the Balearic Islands, we’ve gained firsthand insights.
That’s why we created this article: to provide clear answers, insightful analysis, and a well-rounded perspective on market predictions and forecasts.
Our goal is simple: to ensure you feel informed and confident about the market without needing to look elsewhere. If you think we missed the mark or could do better, we’d love to hear your thoughts. Feel free to message us with your feedback or comments, and we’ll work hard to improve this content for you.
1) Rental yields in Formentera will stay steady due to consistent tourist demand
Formentera's rental yields are expected to remain stable thanks to a steady stream of tourists.
In 2023, the Balearic Islands, including Formentera, experienced a surge in visitors, with 3,313,373 tourists flocking to Ibiza and Formentera. This was a 7.86% increase from the previous year, highlighting the growing appeal of these islands. Such a rise in tourist numbers naturally boosts the demand for rental properties.
Formentera's short-term rental market is thriving, with the average daily rate hitting $438 in 2023. This figure suggests that tourists are more than willing to pay top dollar for a stay on the island, which is a promising sign for those considering property investments.
One of the unique aspects of Formentera's property market is its limited supply. Strict building regulations keep new developments in check, ensuring that the demand for existing rental properties remains high. This scarcity is a key factor in maintaining robust occupancy rates and rental yields.
With demand consistently outpacing supply, property owners can expect high occupancy rates throughout the year. This dynamic is particularly beneficial for investors looking to capitalize on the island's popularity.
Sources: Maninsanan, AirDNA, HomeRun Mallorca
2) Short-term rental markets will decline as stricter regulations shift focus to long-term leasing
Stricter rental regulations are reshaping the short-term rental landscape in the Balearic Islands.
In Mallorca, the government has put a hold on new holiday rental licenses until at least 2026, requiring current license holders to meet tough standards like obtaining a certificate of habitability and an energy certificate. This move has caused a noticeable drop in short-term rental bookings and listings, with an 8% decrease in bookings and a 12% decline in listings by July 2024.
Property owners are feeling the pinch from hefty fines on buildings with multiple short-term rental units, which has discouraged many from continuing with short-term rentals. The introduction of a national registration system in Spain, demanding property codes and local approvals, has added another layer of complexity, making it harder for owners to operate in the short-term market.
With these challenges, many property owners are now eyeing long-term leasing as a more stable and financially rewarding option. The shift is not just about avoiding fines; it's about adapting to a new reality where long-term leasing offers more security and less regulatory hassle.
For those considering buying property in the country, it's crucial to understand these dynamics. The focus is shifting, and long-term leasing is becoming the new norm in areas like the Balearic Islands, where short-term rentals once thrived.
As the market evolves, potential buyers should weigh the benefits of long-term leasing, which might offer a more predictable income stream and fewer regulatory headaches. Understanding these changes can help make informed decisions about property investments in Spain.
Sources: Skift, The Telegraph, Enso Connect
We have made this infographic to give you a quick and clear snapshot of the property market in Spain. It highlights key facts like rental prices, yields, and property costs both in city centers and outside, so you can easily compare opportunities. We’ve done some research and also included useful insights about the country’s economy, like GDP, population, and interest rates, to help you understand the bigger picture.
3) German investors will increasingly seek vacation homes in Mallorca's rural areas
German investors are showing a growing interest in Mallorca's rural properties for vacation homes due to several compelling reasons. In 2023, German nationals made up 41.4% of foreign property buyers in the Balearic Islands, the highest among all nationalities. This indicates a strong existing interest in the region from German investors.
Additionally, Germany was the top source of international visitors to Mallorca in 2023, with 4.23 million visits, accounting for over 39% of the market share. This high number of visitors suggests that Germans are already familiar with and fond of Mallorca, making it a natural choice for purchasing vacation homes.
The demand for rural properties, such as sea-view villas and historic fincas, is particularly strong in Mallorca. This demand is driving up prices, indicating a competitive market that German investors are keen to be part of. Furthermore, the inclusion of Mallorca in travel and lifestyle publications targeting German audiences supports the growing interest in the island as a vacation home destination.
Sources: Yes Mallorca Property, Road Genius, Home Run Mallorca
4) Demand for modern apartments and co-living spaces in Palma will grow as young professionals move in
Young professionals are flocking to Palma thanks to booming job opportunities.
In 2024, the Balearic Islands, especially Mallorca, saw a job growth rate of 3.3%, outpacing the national average. This surge is largely fueled by the tech, service, and hospitality sectors, making Palma a hotspot for those looking to advance their careers.
Palma's coworking scene is thriving, with spaces like IWG's new flexible workspace becoming a hub for startups and companies. These spaces cater to the demand for hybrid work models, offering flexibility and collaboration that young professionals crave.
The real estate market in Mallorca is buzzing, with a strong demand for modern apartments. Even with rising prices, properties are still accessible, with some options at €1,497 per square meter. This affordability, coupled with Millennials and Gen Z's love for urban living, is driving the need for new apartments in lively areas like Palma.
Young professionals are drawn to Palma not just for jobs but for the lifestyle. The city's vibrant culture, combined with its growing infrastructure, makes it an ideal place for those seeking a dynamic urban experience.
As more young professionals move in, the demand for modern apartments and co-living spaces is set to rise, reshaping Palma's real estate landscape.
Sources: Iberian Property, Euro Weekly News, Yes Mallorca Property
5) Property prices in the Balearic Islands will keep rising due to limited land and high demand
In recent years, the Balearic Islands have seen a significant rise in property prices, with a notable increase of 19.08% in second-hand property prices in 2024. This trend is expected to continue, albeit at a more moderate pace, with property sales projected to rise by 12.1% and rental prices by 10.3% in 2025.
The limited availability of land is a major factor contributing to this trend. The geographical constraints of the islands mean there is not much space for new developments. Additionally, strict environmental regulations further restrict the development of new properties, making land even scarcer.
High demand from foreign buyers also plays a crucial role. The Balearic Islands, particularly Mallorca, are highly sought after by international buyers from countries like Germany, the UK, and Nordic nations. This demand is especially strong for luxury properties, which drives up prices.
Another factor is the high demand for vacation homes. The islands have a large number of tourist flats, with over 154,000 beds available for tourists. Many of these rentals are illegal, with a significant portion of residential properties being converted for tourist use, exacerbating the housing shortage and driving up property prices.
Sources: Kleber Group, Private Property Mallorca, Sandberg Estates
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6) Property prices in the Balearic Islands will adjust moderately due to global economic uncertainties affecting foreign investment
In recent years, the Balearic Islands have been a hotspot for real estate investment, particularly from foreign buyers. However, the global economic landscape has shifted, leading to some changes in this trend. One of the key factors is the rising interest rates, which have made mortgages less affordable in Spain. This has put pressure on the property market, as potential buyers find it harder to finance their purchases.
Foreign investment, which has been a significant driver of the Balearic real estate market, has also been affected. Global economic uncertainties, such as the situation in Ukraine and the European energy crisis, have made foreign investors more cautious. This caution is evident in the reduced number of property transactions and slower growth in property prices. In fact, foreign buyers accounted for just over 30% of all sales, but their interest seems to be waning.
Historical data shows that the Balearic Islands have experienced price corrections during previous economic downturns. For instance, after the 2007 peak, there was a notable decline in property prices. With the current global economic conditions, similar trends could be expected. Additionally, the Balearic Islands have seen a significant drop in housing sales, with a 20% decrease in 2023 and a 17% year-on-year decline in the first half of 2024, indicating a potential market correction.
Sources: CaixaBank Research, Yes Mallorca Property, Homerun Mallorca
7) Eco-friendly property construction will increase due to tax incentives for sustainable building practices
Tax incentives for sustainable building practices can significantly boost the construction of eco-friendly properties. In the past, specifically in 2023 and 2024, the Balearic Islands saw increased government funding for sustainable construction projects. This funding was sourced from the Sustainable Tourism Tax, which collected over 133 million euros in 2023, and an additional 27 million euros was announced in 2024 to aid energy rehabilitation of homes and buildings.
These financial incentives have already benefited hundreds of homes, particularly in Ibiza and Formentera, by promoting energy sustainability and reducing environmental impact. The growing trend towards eco-friendly property developments is evident, with Mallorca aiming for 35% renewable energy sources by 2030 and 100% by 2050. This commitment is supported by the installation of numerous solar energy parks, indicating a clear shift towards sustainable living.
Moreover, consumer interest in environmentally friendly technology and energy-efficient homes has been rising. Properties like Villa Castanyetes in Port Andratx, which utilize geothermal energy, reflect this demand. The government's initiatives and the market's response suggest that tax incentives can effectively drive the construction of eco-friendly properties by making sustainable building practices more financially attractive.
Sources: TTG Media, Spanish Property Insight, La Voz de Ibiza
8) Property values in Menorca's rural areas will rise as investors seek tranquility and authenticity
Menorca's rural property prices have seen a 22.97% increase in Ciutadella de Menorca from October 2023 to October 2024.
International buyers are snapping up properties, making up about 40% of transactions in 2023. They're drawn to Menorca's peaceful vibe and authentic lifestyle, which is pushing property values higher.
Menorca's status as a UNESCO Biosphere Reserve and a Top 100 sustainable destination is a big draw. The island's commitment to eco-friendly tourism is pulling in investors who crave tranquility and authenticity.
Getting to Menorca is easier now, thanks to improvements at Palma airport and better roads. These upgrades are making the island more accessible and attractive to investors looking for a sustainable lifestyle.
With its focus on eco-friendly living and improved infrastructure, Menorca's rural areas are becoming hotspots for those seeking a serene and genuine experience.
Sources: Indomio, Menorca Private Owners, Homerun Mallorca
We made this infographic to show you how property prices in Spain compare to other big cities across the region. It breaks down the average price per square meter in city centers, so you can see how cities stack up. It’s an easy way to spot where you might get the best value for your money. We hope you like it.
9) More Asian buyers will invest in the Balearic Islands, diversifying the international buyer profile
In recent years, we've seen a noticeable increase in Asian investment in European real estate, including the Balearic Islands. This trend is partly due to the initial interest rate cuts by the European Central Bank and the Bank of England, which have encouraged Asian investors to explore new opportunities in Europe.
Another factor contributing to this trend is the improved connectivity between Asia and the Balearic Islands. For instance, United Airlines announced new direct flights from Newark to Palma de Mallorca starting in May 2025. This enhanced travel convenience is likely to attract more Asian tourists and investors to the region.
Moreover, there's a growing interest among Asian buyers in the Mediterranean lifestyle and culture. The Balearic Islands, known for their beautiful beaches and vibrant culture, are becoming increasingly popular among those looking for luxury and vacation properties. This interest is further fueled by media coverage of Asian celebrities purchasing property in the area, which serves as a powerful marketing tool.
Sources: Asia Real Estate Summit, Simple Flying
10) British buyers will keep leading the foreign market despite Brexit challenges
British buyers are still flocking to the Balearic Islands, even after Brexit.
In 2022 and 2023, around 15,000 Britons made Mallorca their home, showing a steady increase in British residents. Despite rising property prices, British buyers continue to snap up homes, proving their strong interest in the region.
One big draw is the well-established British expat communities that make settling in easier. Social clubs and local events help newcomers feel at home, while British schools and cultural institutions offer familiar comforts.
The Balearic lifestyle is another major attraction. With its mild climate and rich cultural heritage, the region promises a high quality of life. This allure is often highlighted in media, drawing Brits looking for a better life abroad.
Real estate agencies have noticed this trend, reporting stable or increasing inquiries from British clients. This suggests a lasting interest in Mediterranean properties, despite any Brexit-related hurdles.
Sources: Yes Mallorca Property, In Mallorca Magazine, Balearic Properties
11) Property values in Mallorca's interior will rise steadily as remote work trends persist
Remote working trends are driving up demand for rural properties in Mallorca's interior.
With more people working from home, there's a growing desire for larger homes with dedicated office spaces, often found in the peaceful countryside. This shift is all about finding a better work-life balance, and Mallorca's interior regions are perfect for that. Real estate agents are seeing a noticeable uptick in sales as buyers flock to these tranquil areas.
One of the key reasons for this trend is the improved digital infrastructure in these regions. Enhanced internet connectivity means remote workers can stay productive without being tied to a city office. This makes the interior of Mallorca not just a beautiful place to live, but also a practical one for modern work needs.
These areas offer more than just space; they provide a sense of tranquility that's hard to find in busier locales. The combination of peaceful surroundings and modern amenities is a big draw for those looking to escape the hustle and bustle while still staying connected.
As more people discover the benefits of living in Mallorca's interior, property values are expected to rise steadily. The demand for homes that offer both serenity and connectivity is only going to increase as remote work becomes a permanent fixture in many people's lives.
For anyone considering a move, now might be the perfect time to explore these hidden gems in Mallorca. The blend of natural beauty and modern convenience is a rare find, making these properties a smart investment for the future.
Sources: Private Property Mallorca, Ibiza Prestige
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12) Luxury villa demand on Mallorca's southwest coast will rise as more wealthy individuals seek exclusive homes
The demand for luxury villas on Mallorca's southwest coast is expected to surge due to several compelling reasons. First, property prices in this region have been on the rise, with prime locations experiencing significant growth. In 2023, the average property price on the island increased by about 5%, with some areas seeing up to a 10% rise. This trend is forecasted to continue, with a projected 3% increase in property prices for 2025.
Additionally, the number of high-net-worth individuals globally has been growing. In 2023, the ultra-wealthy population increased by 7.6%, reaching 426,000 individuals with a combined net worth of $49.2 trillion. This demographic is expected to grow further, with projections indicating a 38% increase by 2028. As more wealthy individuals seek exclusive properties, the demand for luxury villas in desirable locations like Mallorca is likely to rise.
Moreover, there is a growing interest in second homes among wealthy individuals, particularly in luxury destinations like Mallorca. The island's appeal as a luxury retreat, coupled with its robust tourism industry, makes it an attractive option for international buyers. This interest is further fueled by new flight connections, making the island more accessible to affluent buyers from the U.S. and the Middle East.
Sources: Lifestyle Properties Mallorca, PR Newswire, Homerun Mallorca
13) Beachfront property prices in Formentera will rise significantly as demand outstrips supply
The demand for beachfront properties in Formentera is set to outpace supply, leading to significant price increases. In recent years, Formentera has seen a notable rise in property transactions, especially among foreign buyers. This trend was particularly evident in 2023 and 2024, with the Balearic Islands, including Formentera, experiencing a surge in interest from international investors.
Formentera's geographical constraints play a crucial role in this dynamic. As a small island, it has limited land availability, which naturally restricts the supply of beachfront properties. This scarcity, combined with the island's unique appeal, makes the market highly competitive, driving up prices.
Moreover, the government has implemented restrictions on new developments to preserve the island's natural landscapes. While this limits the supply of new properties, it enhances Formentera's appeal, further increasing the value of existing beachfront properties.
In addition, improvements in accessibility, such as the introduction of accessible walkways and ramps at beaches, have made Formentera more attractive to a broader range of buyers. This, coupled with positive media coverage highlighting the island as a desirable location, has contributed to its growing popularity.
Sources: Housenix, Wanderlust Magazine, Assetfolio, Idealista, Consell de Formentera
14) Rental yields in Palma will rise as it attracts digital nomads year-round
As Palma becomes a year-round destination for digital nomads, rental yields are expected to increase due to several key factors. First, the city has seen a rise in coworking spaces, such as Palmapolitan and The Hub Mallorca, which cater specifically to remote workers and digital nomads. This development indicates a growing community of professionals who require flexible work environments, thereby increasing demand for rental properties.
The Mediterranean climate of Palma is another significant draw for digital nomads, as surveys have shown a strong preference for such climates among this group. This preference contributes to the city's appeal, attracting more long-term residents who are likely to rent properties for extended periods. Additionally, the increase in international residents, including digital nomads, further supports the notion that rental yields will rise as more properties are rented out to these individuals.
Moreover, the extension of the tourist season in Palma, with accommodations opening earlier than usual, suggests a year-round influx of visitors. This extended season supports the idea that rental yields will increase as more properties are rented out throughout the year. The media coverage highlighting Palma as a digital nomad hotspot also plays a role in attracting more remote workers to the city, further driving up demand for rental properties.
Sources: Career Gappers, Private Property Mallorca
We created this infographic to give you a simple idea of how much it costs to buy property in different parts of Spain. As you can see, it breaks down price ranges and property types for popular cities in the country. We hope this makes it easier to explore your options and understand the market.
15) Interest in Ibiza's party districts will drop as family-friendly areas become more popular
In recent years, particularly in 2023 and 2024, there has been a noticeable shift in the property market dynamics in Ibiza. Properties in the island's party districts have seen a decline in interest. This trend is largely due to a growing preference for quieter, family-friendly areas.
One of the key indicators of this shift is the significant decrease in property sales and rental inquiries in Ibiza's party districts, as reported by Engel & Völkers in their 2024 Market Report. This decline is contrasted by the increasing popularity of areas like Figueretes, which are close to Ibiza Town and offer a more serene environment. These areas are becoming more attractive to second-home buyers and relocators who are looking for affordable and peaceful places to live.
Additionally, there is a consistent high demand for housing in regions characterized by a family-friendly environment. This is further supported by the rising demand for schools, parks, and family-oriented amenities in quieter areas such as Portinax, Cala Llonga, and Puerto San Miguel. These locations offer long sandy beaches, cafes, bars, and watersports, making them ideal for families seeking a more relaxed lifestyle.
Moreover, the property values in family-friendly areas like Figueretes and Santa Eulalia have been rising, indicating their growing desirability. This trend is also reflected in the increased investment in infrastructure and services in these quieter areas, which further enhances their appeal to families and those looking for a more laid-back lifestyle.
Sources: Icelolly, Let Us Ibiza, Engel & Völkers
16) Rental yields in Menorca will increase as long-term rentals gain popularity with families
Menorca is becoming a hotspot for families seeking long-term rentals.
Families are drawn to Menorca for its mild Mediterranean climate and stunning natural beauty. The island offers a family-friendly environment that makes it an ideal place for those looking to settle down. This has led to a noticeable increase in demand for rental properties.
Many families are relocating to Menorca, attracted by its relaxed lifestyle and rich cultural offerings. The island's excellent gastronomy and laid-back atmosphere provide a better quality of life, making it a top choice for families. This influx is driving up the demand for long-term rentals.
Property prices in Menorca, particularly in Mahon and Ciutadella, are on the rise, making home ownership less accessible. As a result, more families are choosing to rent instead of buying, which is further fueling the long-term rental market.
The limited supply of homes, combined with the growing preference for renting, has led to a significant increase in long-term rental properties. This trend is expected to continue as more families opt for the flexibility and affordability of renting.
With these factors in play, Menorca is poised to see a rise in rental yields, as long-term rentals become increasingly popular among families. This shift is reshaping the island's property market, making it an attractive investment opportunity.
Sources: Engel & Völkers Menorca Market Report, Spain Property Market Outlook 2025
17) Luxury home prices will rise as international buyers seek exclusive Mediterranean properties
Luxury property prices in the Balearic Islands are on the rise, driven by a surge in international buyers.
In 2024, foreign buyers made up 32.5% of all property transactions in the Balearics, with a strong presence from British, German, and other European nationals. This influx of international interest is a major factor pushing up demand for exclusive Mediterranean homes. The allure of the islands is undeniable, with their stunning landscapes and vibrant culture attracting those looking for a slice of paradise.
The scarcity of high-end properties is another reason for the price hike. In 2024, the Balearic Islands experienced a 19.08% increase in second-hand property prices, averaging 4,931 euros per square meter. This jump is largely due to the limited supply of luxury homes, as more buyers compete for these coveted properties. The market is tight, and those who want in are willing to pay a premium.
The Balearic Islands are consistently spotlighted as a prime destination for luxury real estate investment. The region's pleasant climate and rich cultural offerings make it a magnet for wealthy expatriates and retirees. This steady influx of affluent individuals continues to drive up demand for luxury homes, making the islands a hot spot for real estate.
Insider knowledge suggests that the Balearics' appeal isn't just about the weather and culture. The islands offer a high quality of life, with excellent amenities and a relaxed lifestyle that appeals to those seeking a change from the hustle and bustle of city life. This combination of factors makes the Balearics a top choice for those looking to invest in luxury real estate.
As international interest grows, the Balearic Islands are poised to remain a sought-after location for luxury property buyers. The unique blend of natural beauty, cultural richness, and high living standards ensures that demand will continue to outstrip supply, keeping prices on an upward trajectory.
Sources: Private Property Mallorca, Yes Mallorca Property, Euro Weekly News
While this article provides thoughtful analysis and insights based on credible and carefully selected sources, it is not, and should never be considered, financial advice. We put significant effort into researching, aggregating, and analyzing data to present you with an informed perspective. However, every analysis reflects subjective choices, such as the selection of sources and methodologies, and no single piece can encompass the full complexity of the market. Always conduct your own research, seek professional advice, and make decisions based on your own judgment. Any financial risks or losses remain your responsibility. Finally, please note that we are not affiliated to any of the sources provided. Our analysis remains then 100% impartial.