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What is happening in the Balearic Islands’ real estate market? Are prices soaring or stabilizing? Is Mallorca still the go-to destination for international buyers? How are local regulations shaping property investments in 2025?
These are the questions we hear daily from industry experts, potential buyers, and sellers, from Palma to Ibiza and beyond. Maybe you’re curious about these trends too.
We understand this because we maintain close connections with local experts and individuals like you, exploring the Balearic real estate landscape every day. That’s why we crafted this article: to deliver clear insights, thorough analysis, and a comprehensive view of market trends and dynamics.
Our aim is straightforward: to make sure you feel informed and confident about the market without needing to search elsewhere. If you think we missed something or could improve, we’d love to hear your feedback. Feel free to message us with your thoughts, and we’ll strive to enhance this content for you.
1) Rents in Menorca will rise slightly as tourism grows
Menorca is experiencing a record-breaking surge in tourism, with over 200,000 visitors daily for 43 days in 2024.
This influx of tourists has led to a skyrocketing demand for short-term rentals, as many private homes are being transformed into tourist accommodations. The island has added 30,000 official tourist beds, which naturally pushes rental prices higher.
Menorca's charm is catching the eye of the media, painting it as a hot new tourist destination. This increased attention is drawing even more visitors, further driving up the demand for rental properties.
With more tourists flocking to the island, rental prices are on the rise as property owners capitalize on the booming market. The trend is clear: more tourists mean higher rents.
Locals are noticing the shift, as tourism reshapes the rental landscape on the island. The transformation of private homes into tourist accommodations is a testament to this change.
As Menorca continues to grow in popularity, expect rental prices to keep climbing, reflecting the island's newfound status as a tourist hotspot.
Sources: Euro Weekly News, Gob Menorca
2) Formentera's rents will stay high due to its exclusivity and limited housing availability
Formentera's rental prices are consistently high due to its unique charm and limited housing options.
In 2023 and 2024, the island was buzzing with tourists, leading to a 63% occupancy rate and a daily rental rate of $438. This high demand keeps prices elevated. The island's natural beauty and serene environment make it a magnet for vacationers, ensuring that rental properties are always in demand.
Formentera's insular nature means there's little room for urban sprawl, which keeps the housing supply tight. The government has imposed restrictions on new developments, but these measures haven't been enough to bring prices down. The scarcity of land and homes is a key reason why rental prices remain high.
Wealthy individuals often choose Formentera for their second homes, adding to the allure and exclusivity of the island. This trend has led to a shortage of long-term rentals, making it tough for locals to find affordable housing. The competition for available rentals is fierce, often resulting in bidding wars that push prices even higher.
Formentera's appeal to the affluent means that the rental market is competitive, with many willing to pay a premium for a slice of paradise. The island's limited housing stock and high demand ensure that rental prices stay elevated, making it a challenging market for those seeking affordable options.
Sources: AirDNA, La Voz de Ibiza, Your Formentera
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) Ibiza's rental yields will dip slightly as more properties become available
In 2023 and 2024, Ibiza saw a notable rise in construction and development permits, signaling a boom in new property developments.
With more properties popping up, the rental market is getting crowded. Platforms like Airbnb have seen a significant increase in listings, with 919 active listings by September 2024. This means more choices for renters, but also a more saturated market.
Local agencies, like Prestige Properties Ibiza, have noticed a drop in the average price per square meter. This suggests that property owners are adjusting prices due to the increased supply, a trend backed by government data on new housing projects.
Even though Ibiza's population is growing, the supply of housing is outpacing this growth. This mismatch can lead to a dip in rental yields as more properties become available.
For potential buyers, this means that while there are more options, the competition among property owners is heating up. This could be a good time to negotiate better deals.
As the market evolves, it's crucial to keep an eye on these trends. The influx of new properties is reshaping the rental landscape, offering both opportunities and challenges for investors.
Sources: Airbtics, Ibiza Prestige, Airbtics
4) Property prices in the Balearic Islands will stabilize following a period of rapid growth
In recent years, the Balearic Islands have experienced a rapid increase in property prices, but signs now point towards stabilization. In 2023, the average price per square meter in Mallorca rose by 10.5%, which was already a slowdown from the 12% increase in 2022. This trend of decreasing growth rates continued into 2024, with forecasts predicting even more moderate price increases.
Additionally, the number of real estate transactions in the first half of 2024 dropped by 14.46% compared to the same period in 2023. This decline in transactions suggests a cooling market, influenced by factors such as rising mortgage interest rates, which have made property purchases less affordable for many buyers.
Real estate agencies have also predicted market stabilization, with some adjusting asking prices to better align with current market trends. This cautious approach to pricing reflects a shift towards a more balanced market. Furthermore, the inventory of available properties has remained stable, particularly in popular tourist areas like Mallorca and Ibiza, indicating a sufficient supply to meet demand.
Sources: Balearic Properties, Yes Mallorca Property, Ibiza Prestige
5) Mid-range property prices may slightly dip as supply catches up with demand
In recent years, we've seen a noticeable increase in the supply of mid-range properties in the Balearic Islands. For instance, the inventory levels in Palma city have risen by 19%, and the south region has experienced a 10% increase in supply. This growing inventory suggests that more properties are available for buyers, which can lead to a stabilization or even a slight decrease in prices.
Additionally, there has been a significant uptick in construction and development projects across the islands. This means more housing options are becoming available, which helps balance the market. When supply starts to meet demand, it often results in a cooling effect on prices, especially in the mid-range segment.
Moreover, real estate market analyses have shown signs of stabilization or slight decreases in mid-range property prices. In areas like the south-east and Palma city, the share of the mid-range segment is decreasing, indicating that prices might not be rising as quickly as before. This trend is further supported by the fact that properties are staying on the market longer, giving buyers more choices and less urgency to make quick decisions.
Sources: Porta Mallorquina, Private Property Mallorca
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6) Rental yields in Menorca will increase as tourism grows
Menorca has seen a significant rise in tourist arrivals, breaking historical records in 2023 with over 200,000 people visiting daily for 43 days. This surge in tourism is a key factor driving the demand for rental properties on the island.
The hotel sector in Menorca experienced high occupancy rates, with 67.5% of available rooms occupied in 2023, up from 65.8% in 2019. This indicates a growing demand for accommodations, which is likely to push rental yields higher as more tourists seek places to stay.
Additionally, the use of short-term rental platforms has expanded, adding 30,000 official tourist beds to Menorca’s capacity. This growth, facilitated by digital platforms, makes it easier for tourists to find and book private homes, further supporting the rental market.
The Balearic Islands, including Menorca, saw a 9.1% increase in foreign tourists and a 16.4% boost in tourism spending in 2023 compared to 2022. This growth is attributed to the islands' appeal and improved accessibility, which is expected to continue attracting more visitors.
Improved accessibility to Menorca from 70 national and international destinations beyond the summer season will contribute to the development of the local real estate market. This increased connectivity is expected to attract more tourists and support the rental market.
The expansion of flight routes and frequency to Menorca has contributed to its increasing popularity as a holiday and residential destination. This expansion is likely to continue, supporting the growth in rental yields.
Menorca’s unique landscapes, mild Mediterranean climate, and excellent gastronomy and cultural offerings make it a highly sought-after destination. Positive reviews and ratings from tourists indicate a high likelihood of return visits, which can drive up rental yields.
Sources: Euroweekly News, CaixaBank Research, Engel & Völkers, Gob Menorca
7) Ibiza's inland areas will draw more buyers seeking quieter, less touristy spots
In recent years, Ibiza's inland areas have become increasingly attractive to buyers seeking quieter, less touristy locations. One of the main reasons is the rising property prices in coastal areas. By 2024, the average price of homes in these areas had surged to €1,740/m², particularly in popular spots like Sant Josep de sa Talaia and Santa Eulalia des Riu. This significant increase in prices has driven many buyers to consider more affordable and less crowded inland locations.
Additionally, there has been a noticeable shift in buyer preferences towards rural and inland properties. In 2023, real estate reports showed that 75% of buyers opted for properties as their second or holiday homes, indicating a strong preference for quieter locations. This trend was further supported by a change from a low supply/high demand market in 2022 to a higher supply/lower demand scenario in 2023, encouraging buyers to explore less touristy areas.
Moreover, the overcrowding and tourism saturation in coastal regions have made inland areas more appealing. The Balearic Islands Economic Outlook 2024 highlighted that increasing prices in the tourism sector were impacting tourist flows, suggesting that coastal areas were experiencing saturation. This situation, coupled with a decrease in property sales and new construction permits in coastal municipalities, points to a market adjustment that favors inland regions.
Sources: Ibiza Prestige, Spanish Property Insight, BBVA Research
8) Formentera will draw more buyers seeking exclusive high-end properties
Formentera is the go-to spot for luxury property seekers.
Imagine owning a piece of paradise where the price per square meter is a whopping €9,383. This isn't just any island; it's Formentera, where exclusivity is the name of the game. According to Hiscox’s I Report on the Luxury Housing Market in Spain, this high price tag is a testament to the island's allure.
What makes Formentera even more special is its limited land availability. This scarcity means that only a select few can call it home, making it a magnet for high-net-worth individuals who crave privacy and uniqueness. In 2023, a remarkable 38% of property transactions were international, showing just how much the world is taking notice.
Formentera isn't just about buying a home; it's about making a smart investment. The island has seen property values rise faster than other Balearic Islands, offering a golden opportunity for investors. Plus, with rising rental yields on luxury properties, the returns are as enticing as the views.
Life on Formentera is about more than just stunning properties. The island is buzzing with upscale amenities, from chic beachside restaurants to trendy boutiques. These developments are drawing in those who want to live the high life, making Formentera a top choice for luxury living.
Formentera's charm is undeniable, and its appeal is only growing. With its unique blend of exclusivity, investment potential, and lifestyle offerings, it's no wonder more buyers are flocking to this island gem.
Sources: Your Formentera, Savills
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) Affordable housing prices will rise due to a property shortage
In recent years, the Balearic Islands have experienced a significant decrease in the number of new housing developments. This has led to a situation where one out of every three properties is inhabited by tenants who pay rent, highlighting the growing difficulties in obtaining a home of one's own.
Both locals and international buyers have been driving up demand for housing in the region. This increased demand, coupled with a limited supply of available properties, has caused rental prices to surge. For instance, rental prices in the Balearic Islands increased by 30 percent in just one year, reaching record highs.
The Spanish Ministry of Transport, Mobility, and Urban Agenda has reported a significant housing deficit, with a shortfall of approximately 3.5 million affordable homes across Spain. This shortage is particularly acute in the Balearic Islands, where the lack of new housing developments exacerbates the issue.
Sources: Majorca Daily Bulletin, Immobilien Portal Mallorca, Think Spain
10) Palma de Mallorca rents will rise as more people relocate for work
Palma de Mallorca is becoming a hotspot for job seekers, leading to a surge in rental demand.
With companies like Eurofins Optimed Clinical Research and METRO Markets GmbH expanding, job opportunities are booming in Palma. This business growth is drawing more people to the city, eager to find work and settle down.
The city's population is on the rise, with a 0.62% increase expected in 2025, bringing the total to 486,000 residents. This growth isn't just from locals; Palma's charm is pulling in international workers, especially from Germany, the UK, and Nordic countries.
There's a clear link between more jobs and higher rents. In 2023, rental prices jumped by 10.5% per square meter, and this upward trend is set to continue with a 10.3% increase expected in 2025. The Balearic Islands, including Palma, have seen a 30% spike in rental prices over the past year, highlighting the demand and limited supply.
Palma's appeal as a tourist destination also plays a role. The influx of tourists and new residents is making the city a prime spot for international buyers and renters, further driving up demand.
As more people flock to Palma for work, the rental market is feeling the pressure. The combination of job growth, population increase, and tourist interest is creating a perfect storm for rising rents.
Sources: Immobilien Portal Mallorca, Macrotrends, English Jobs, Private Property Mallorca
11) Eco-conscious buyers will be drawn by tax incentives for sustainable building practices
Tax incentives for sustainable building practices are a powerful tool to attract eco-conscious buyers, especially in regions like the Balearic Islands. In recent years, the government has actively promoted sustainable tourism and building practices, collecting significant funds through initiatives like the Sustainable Tourism Tax. This tax alone gathered €133,342,900 in 2023, which was used to fund projects benefiting both locals and tourists.
Moreover, the demand for eco-friendly properties has been on the rise. In Mallorca, for instance, there has been a noticeable increase in developments that incorporate advanced sustainable technologies, such as geothermal energy. Properties like Villa Castanyetes and Villas Maricel are prime examples of this trend. These developments not only reduce energy consumption but also lower carbon emissions, making them highly attractive to environmentally conscious buyers.
Consumer interest in eco-friendly homes is further supported by real estate companies like Engel & Völkers Mallorca, which have observed a growing preference for properties with innovative architecture and energy-efficient features. This aligns with the Balearic Government’s commitment to sustainability, as they aim to increase renewable energy sources significantly by 2030 and 2050.
Additionally, media coverage has highlighted the tax benefits associated with sustainable practices, such as the regulatory developments affecting the 2023 tax period. These incentives include a reserve for investments in the Balearic Islands and tax reductions for income from the sale of locally produced tangible assets. Such benefits make sustainable properties more financially appealing to buyers.
Sources: TTG Media, Spanish Property Insight, Cuatrecasas, Mallorca Solicitors
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12) Stricter rental rules will affect short-term rental markets in tourist-heavy areas
Stricter rental regulations are shaking up the short-term rental market in popular tourist spots like the Balearic Islands.
In 2024, Mallorca experienced an 8% drop in short-term rental bookings and a 12% decline in listings due to these new rules. The local government has been cracking down, especially on property owners with multiple short-term rental units, by imposing hefty fines.
Back in 2023, the Balearic Islands' government decided to put a hold on new licenses for holiday rentals until 2026. This moratorium has led to a noticeable decrease in new short-term rental properties, causing a ripple effect in the market. Property owners are feeling the pinch, especially those with 12 or more short-term rental units, as they face significant penalties.
Many property owners are now pivoting towards long-term rentals to dodge these fines. This shift is making it tougher for tourists to find places to stay, as the availability of tourist accommodations has dwindled. Reports from 2024 highlight the struggles of property owners, who are finding it challenging to sell properties that can't be used for short-term rentals.
For those considering buying property in these areas, it's crucial to understand how these regulations might affect potential rental income. The landscape is changing, and adapting to these new rules is essential for anyone looking to invest in the local property market.
Sources: Skift, Airbnb Community, Porta Mallorquina
13) Menorca's coastal properties will attract more interest from Scandinavian buyers
Scandinavian buyers are showing increased interest in Menorca's coastal properties for several reasons.
Firstly, there has been a noticeable rise in Scandinavian property investments in Spain, particularly in the Balearic Islands, which include Menorca. This trend suggests a growing attraction to the region among Scandinavian buyers, who are part of the foreign investment driving up real estate transactions and prices.
Secondly, the improved flight connections between Scandinavian countries and Menorca make the island more accessible. With multiple direct flights available, traveling to Menorca has become more convenient for Scandinavian buyers, enhancing its appeal as a property investment destination.
Additionally, the growing number of real estate agencies in Menorca catering specifically to Scandinavian clients indicates a targeted effort to meet the demand from this demographic. This suggests that the interest from Scandinavian buyers is significant enough to warrant specialized services.
Sources: esalesinternational.com, flightconnections.com, yes-mallorca-property.com
14) New environmental rules will boost the development of energy-efficient homes
New environmental regulations are set to encourage the development of energy-efficient homes, especially in regions like the Balearic Islands. In the past, specifically in 2023, Ibiza experienced a notable increase in photovoltaic energy production, which was a 7.5-fold increase in clean energy generation compared to the previous year. This shift, although renewable energy still accounted for only 2.8% of the island's total energy production, marked a significant step towards energy efficiency.
The Menorca 2030 Strategy is another driving force, aiming to cover 85% of electricity demand with renewables by 2030. This strategy outlines a progressive increase from 18% in 2020 to 54% in 2025, showing a clear trajectory towards more sustainable energy use. Such ambitious goals are likely to push for the development of homes that align with these energy targets.
Moreover, the European Directive on Energy Performance in Buildings (EPBD) mandates that all buildings should be zero-emission by 2050. This directive is a strong regulatory push that will likely lead to stricter energy efficiency standards for new constructions, including those in the Balearic Islands. These regulations are expected to drive innovation and investment in energy-efficient building practices.
Sources: Ibiza Preservation, Clean Energy Islands, Idealista
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) Foreign buyers will increasingly target sustainable properties in the Balearic Islands
In recent years, foreign buyers have shown a growing interest in sustainable living, particularly in the Balearic Islands. This trend was evident in 2023 and 2024, as many prospective buyers in Mallorca specifically sought ecological living concepts that emphasized energy efficiency and environmental responsibility.
The real estate market in Ibiza also experienced a shift towards carbon-neutral properties, with builders and agents adopting carbon-offset initiatives to reduce emissions. This change in buyer preferences has led to an increase in real estate listings that highlight sustainable features.
Developers and architects in Mallorca have been designing and building energy-efficient homes that incorporate passive architecture, recycled materials, and eco-friendly technologies like solar panels and energy-efficient windows. Similarly, Prestige Properties Ibiza has supported sustainable practices and promoted eco-friendly construction through initiatives like the "Going Green Debris Campaign."
Sources: Ibiza Prestige, EV Mallorca Blog
16) Demand will rise on Mallorca's eastern coast with new luxury resort developments
The eastern coast of Mallorca is experiencing a surge in demand, largely due to new luxury resort developments. In recent years, there has been a significant increase in investment in luxury resorts, such as the Ikos Porto Petro, a 5-star all-inclusive hotel on the southeast coast. This development offers high-end amenities and activities, attracting affluent tourists and investors.
Additionally, the real estate market in Mallorca has shown a consistent rise in property prices, particularly in coastal and luxury areas like the eastern coast. In 2024, property values increased by approximately 11%, and this trend is expected to continue in 2025. This rise in property prices is a clear indicator of growing demand and interest in the region.
Moreover, Mallorca was the top destination for foreign tourists in 2023, with over 47 million nights spent on the island. The eastern coast, known for its beautiful beaches and secluded coves, is poised to benefit from this influx of tourists. The increased media coverage highlighting the natural beauty and luxury offerings of the eastern coast further enhances its appeal to potential visitors and investors.
Sources: Ikos Resorts, Euronews, Lifestyle Properties Mallorca
17) Palma de Mallorca will see higher rental yields as demand for city living rises
Rental yields in Palma de Mallorca are on the rise as city living becomes increasingly popular.
In recent years, property prices in Palma have surged, with second-hand properties in the Balearic Islands jumping by 19.08% in 2024. This boom is especially noticeable in Palma, where the demand for housing is intense.
Palma's population is growing, reaching 438,234 by January 2024, a 1.76% increase. This growth highlights a shift towards urban living, fueled by the island's thriving economy and better infrastructure.
Mallorca's strong tourism industry keeps holiday rentals busy, making short-term rentals a smart investment. The average gross rental yield in Palma stands at 5.14%, showing a healthy demand for rental properties.
With limited housing supply, rental yields in Palma are driven up as demand outstrips available properties. This scarcity makes investing in Palma's rental market even more appealing.
Sources: Homerun Mallorca, Euro Weekly News, Private Property Mallorca, Global Property Guide
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.