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What will happen in Palma de Mallorca’s real estate market? Will prices go up or down? Is Palma still a hotspot for foreign investors? How is Spain’s 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 local agents, property developers, and clients who buy homes in Palma, 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) Rents in Palma will increase as it attracts more international workers and retirees
Rents in Palma are likely to rise as the city becomes more attractive to international workers and retirees. One key reason is the rising demand for rental properties. In the past, specifically in 2023, rental prices in the Balearic Islands, including Palma, increased by 30% in just one year, reaching a record high of 17.17 euros per square meter per month. This significant increase indicates a growing demand for rental properties.
Another factor is the growth in the expatriate community. Over the past five years, there has been a 293% growth rate in digital nomad check-ins in Mallorca, which includes Palma. This substantial increase in the expatriate community is likely to translate into higher rental prices as more people seek housing in the area. Additionally, Palma's rising popularity as a digital nomad hub further supports this trend, as it ranks among the top destinations for remote workers.
Moreover, the expansion of international schools and healthcare facilities in Palma indicates that the city is becoming more attractive to families and individuals seeking quality educational and healthcare services. This demographic shift can contribute to increased rental demand. Furthermore, the city's improved infrastructure and amenities, such as the new tramway and transformed beach promenade, enhance the quality of life for residents and visitors alike, making Palma a more desirable living destination.
Sources: Immobilien Portal Mallorca, Think Remote, Social Newsroom Spain
2) Investor demand for short-term rentals will grow in Palma's old town
Palma's old town is becoming a hot spot for investors interested in short-term rental opportunities. In 2023, Palma de Mallorca saw a significant rise in tourist arrivals, with over 13 million visitors, making it a major destination. This influx of tourists has naturally increased the demand for accommodations, particularly short-term rentals.
The number of active Airbnb listings in Palma de Mallorca has been on the rise, reaching 1,627 by September 2024. These listings are not just increasing in number; they are also proving to be quite profitable, with a typical host earning around €30,000 annually. This profitability is further supported by a high median occupancy rate of 77% for short-term rentals, indicating strong demand.
Palma's old town, with its historic architecture and cultural richness, is particularly attractive to tourists. Areas like La Seu, Palma Old Town, and Bellver Castle are in high demand for short-term rentals. This demand is bolstered by surveys showing that tourists prefer staying in historic areas, making properties in these locations even more appealing to investors.
Sources: Tourism Review, Airbtics, Homerunmallorca
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3) More Northern European buyers will invest in Palma for its warm climate and investment potential
The influx of foreign buyers in Palma is expected to continue growing, especially from Northern Europe, due to several compelling reasons.
Firstly, the property market in Palma has shown resilience and growth, even in the face of economic challenges. In 2023, foreigners accounted for nearly 32% of property purchases in Mallorca, with a notable presence of Northern European buyers, particularly Germans and British. This trend indicates a strong and sustained interest in the region's real estate market.
Moreover, the climate in Palma is a significant draw for Northern Europeans seeking warmer weather. With its pleasant climate and clear, dry summers, Palma offers an attractive alternative to the colder climates of Northern Europe. This appeal is further enhanced by the Mediterranean lifestyle, which combines cultural richness and a high quality of life.
Additionally, the luxury real estate segment in Mallorca is thriving, with a 7% increase in sales of properties priced above €1 million in 2023. This growth is driven by demand for sea-view villas and modern penthouses, which are particularly popular among Northern European buyers.
Sources: Yes Mallorca Property, Mallorca Solicitors, Weather Spark, Home Run Mallorca
4) Asian investors will grow more interested in Palma’s real estate for its capital appreciation potential
Asian investors are increasingly interested in Palma's real estate market due to several compelling reasons. First, there has been a notable rise in Asian investments in European real estate markets, with a 26% increase in cross-border capital investment from Asia and the Pacific into Europe in 2023. This trend indicates a growing interest in diversifying portfolios with European properties.
Additionally, the Mediterranean lifestyle and culture have become highly attractive to Asian buyers. The unique natural appeal and high quality of life in Mallorca, where Palma is located, align well with this interest. This cultural allure is a significant factor driving demand for properties in the region.
Moreover, the real estate market in Palma has shown promising capital appreciation trends. In the first eight months of 2024, the average price per square meter increased by 11%, highlighting an imbalance between supply and demand. This growth potential makes Palma an appealing destination for investors seeking capital appreciation.
Finally, the economic growth and rising wealth in many Asian countries have led to more overseas investments. This trend is expected to continue, with more Asian investors looking to diversify their portfolios by investing in international real estate markets like Palma de Mallorca.
Sources: Statista, Yes Mallorca Property, Asia Real Estate Summit
5) Luxury property yields in Palma will dip slightly as purchase prices rise faster than rental income
In recent years, we've seen a notable increase in property prices in Palma de Mallorca, especially in the luxury segment. For instance, in 2023, the average property price in Mallorca rose by about 5%, with prime locations experiencing even higher growth rates, up to 10%. This trend continued into 2024, with luxury properties seeing a 13% price increase due to high demand and limited supply.
While rental prices have also increased, they haven't kept pace with the rapid rise in property prices. In the Balearic Islands, rental prices saw a significant increase of 30% in one year, reaching a record high. However, historical data suggests that rental yields in luxury markets have been trending downward, as the high demand and limited supply drive property prices up faster than rental income.
Experts predict that property prices will continue to rise in 2025, with property sales expected to increase by 12.1% and rental prices by 10.3%. This indicates that purchase prices are outpacing rental income growth, leading to potential yield compression. The ongoing international demand for luxury properties in Mallorca, particularly from countries like Germany and the UK, further drives up purchase prices, contributing to this trend.
Sources: Homerun Mallorca, Immobilien Portal Mallorca, Portamallorquina, Private Property Mallorca, Lifestyle Properties Mallorca
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6) Property prices in Palma’s coastal areas will rise steadily as demand for sea views and beach access grows
The coastal areas of Palma are experiencing a steady rise in property prices as more people seek homes with sea views and beach access.
In 2024, second-hand properties in Palma saw a 19.08% increase in prices, averaging 4,931 euros per square meter. This trend is expected to continue into 2025, with both property sales and rental prices projected to rise. The allure of Palma's coastal charm is drawing in buyers who are eager to invest in this thriving market.
Tourism is another driving force behind this trend. In 2023, Mallorca welcomed a record 12 million visitors, many of whom were international tourists. This influx has positioned Mallorca as a top destination for international buyers, especially from Germany, the UK, and Nordic countries. The island's appealing climate, robust infrastructure, and high quality of life make it an irresistible choice for those looking to purchase property.
Adding to the price surge is the limited availability of coastal properties. This scarcity creates a supply and demand imbalance, further pushing up prices. With favorable financing conditions, international buyers are particularly keen on properties offering sea views and beach access, making these some of the most coveted investments in Palma.
Insider knowledge suggests that the demand for these properties is not just about the view. Buyers are also attracted to the lifestyle that comes with living by the sea, including access to water sports, beachside dining, and a vibrant community atmosphere. This lifestyle appeal is a significant factor in the ongoing price increases.
As more people discover the unique benefits of owning a coastal property in Palma, the market is expected to remain competitive. The combination of high demand, limited supply, and the island's growing popularity ensures that property prices will continue to climb, making it a prime time for potential buyers to consider investing.
Sources: Tourism Review, Private Property Mallorca, Mallorca Property
7) Property prices in less developed areas of Palma will grow slowly as buyers prefer established neighborhoods
In 2023 and 2024, property prices in Mallorca rose, but the increase was more significant in prime locations like Palma, Port d'Andratx, and Deià. These areas saw growth rates of up to 10%, while the overall island experienced a 5% rise. This trend shows that established neighborhoods are more attractive to buyers.
Real estate market reports from those years highlighted that buyers preferred established neighborhoods such as Santa Catalina and Old Town. These areas are known for their charm, modern conveniences, and vibrant social scenes, making them more desirable. Additionally, the luxury real estate segment, particularly properties priced above €1 million, saw significant appreciation in these prime locations.
Surveys of homebuyers indicated a preference for areas with better amenities and infrastructure. Established neighborhoods like Santa Catalina offer a mix of historic charm and modern amenities, which makes them more appealing. Investment trends also showed higher investment in these areas due to their appeal to international buyers and expatriates.
Sources: Homerun Mallorca, Private Property Mallorca
8) Property prices in Palma de Mallorca will keep rising steadily because demand is high and supply is limited
In recent years, property prices in Palma de Mallorca have been on a steady rise, and this trend is expected to continue. In 2024, the Balearic Islands saw a significant increase of 19.08% in second-hand property prices, reaching an average of 4,931 euros per square meter. This upward trend is projected to persist into 2025, with Mallorca experiencing an approximate 11% rise in prices in 2024 alone.
One of the key factors driving this price increase is the high demand from international buyers. In 2024, foreign investment played a major role in the market, with international buyers making up about 40% of property transactions on the island. Buyers from countries like Germany, the UK, and Scandinavia have shown a strong interest in Mallorca, further fueling demand.
On the supply side, the limited availability of new land for development is a significant constraint. The island's geography and existing infrastructure restrict the amount of new land that can be developed, which contributes to the high demand and rising prices. Additionally, government regulations may also be influencing the market by limiting new construction projects.
Sources: Private Property Mallorca, Homerun Mallorca, Lifestyle Properties Mallorca
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9) Property values in Son Vida will rise significantly as it attracts high-net-worth individuals seeking exclusivity
Son Vida is quickly becoming a magnet for wealthy individuals, driving up property values.
One reason for this is the overall rise in property prices in Palma de Mallorca, especially in the luxury segment. In 2024, luxury property prices in the south-west region, including Son Vida, hit €13,400 per square meter, showing strong demand. This trend is fueled by the island's appeal to high-net-worth individuals.
In 2023, Mallorca saw a record number of visitors, many eyeing luxury properties. This influx is pushing property values higher in exclusive areas like Son Vida. The island's charm and exclusivity are major draws for these affluent buyers.
Son Vida's infrastructure is another key factor. The area boasts 24-hour security and a single access road, perfect for those craving privacy. The presence of two 5-star hotels and top-notch golfing facilities adds to its allure, making it a prime choice for the wealthy.
These amenities create a luxurious environment that attracts high-net-worth individuals. Son Vida's exclusivity and high-end offerings make it a standout location for those seeking a prestigious lifestyle.
As more affluent individuals flock to Son Vida, property values are expected to continue rising, solidifying its status as a sought-after destination.
Sources: Mallorca Real Estate Market Study 2024, Son Vida - Beverly Hills of Palma? - Predator SL
10) Rental prices in Palma’s tourist areas will rise as demand for short-term rentals grows
The demand for short-term rentals in Palma is on the rise, driven by a surge in tourism and changing traveler preferences.
In 2023, Palma de Mallorca saw a remarkable influx of visitors, with 12.48 million tourists flocking to the island. This wave of international guests naturally fuels the need for accommodations, making short-term rentals a hot commodity.
Platforms like Airbnb are thriving in Palma, despite concerns about overtourism. The demand for short-term rentals in areas with the highest supply jumped by 21% in 2023, according to Skift Research. Travelers are increasingly seeking flexible and personalized lodging options, which these platforms provide.
Tourism is a major economic driver in Palma. In 2023, tourists spent nearly €17.62 billion in the Balearic Islands, highlighting the region's allure and the financial perks of catering to visitors. This economic boost is a magnet for investors eyeing rental properties.
Investors are particularly drawn to Palma's high summer demand, seeing potential for strong returns. The bustling tourist season offers lucrative opportunities for those investing in short-term rentals.
With the growing popularity of vacation rentals and the steady stream of tourists, rental prices in tourist-heavy areas are expected to climb. This trend is reshaping the real estate landscape in Palma, making it a prime spot for property investment.
Sources: Tourism Review, Hostaway, Road Genius
11) El Molinar will attract more buyers as it revitalizes, thanks to its seaside location and local amenities
El Molinar is set to experience a revitalization due to several key factors. First, the reopening of the port in 2025 after extensive renovations will enhance the area's recreational and sporting appeal. This includes new pontoons and facilities, making it a more attractive destination for both residents and visitors.
Additionally, the neighborhood is seeing significant investment in local infrastructure, such as the new technical center for water sports in Caló d’en Rigo. These developments indicate a commitment to improving the area's amenities, which is likely to draw more interest from potential buyers.
Moreover, the growing demand for coastal properties, as highlighted by real estate reports, suggests that El Molinar's proximity to the sea will be a major draw. The area's scenic views and relaxed coastal lifestyle, often featured in media coverage and social media posts, further enhance its appeal.
Sources: SeaHelp, Predator SL, National Association of Realtors, CASAFARI
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12) Improved public transport in Palma will make less accessible areas more appealing to buyers
The expansion of Palma's public transportation network is making previously less accessible areas more attractive to buyers for several reasons. First, the significant increase in TIB bus ridership, which saw a 42.2% surge in the first four months of 2024 compared to the same period in 2023, indicates a growing demand for public transportation. This trend suggests that areas served by these routes are becoming more appealing to potential buyers.
Additionally, the introduction of new bus lines, such as the L131 connecting Santa Ponça with Banyalbufar, enhances connectivity in regions like the Serra de Tramuntana. Improved frequencies on routes like line 104 and line 302 further support this trend by making these areas more accessible and convenient for residents, particularly those working in hospitality sectors.
Moreover, the real estate market in Mallorca has experienced significant price growth, with the average price per square meter increasing by 11% in the first eight months of 2024. This growth is partly driven by increased demand from foreign buyers, and areas newly served by public transport are likely to see rising property values as they become more attractive. The Spanish Government's investment in public transportation infrastructure, including the extension of free public transport in the Balearic Islands, further enhances the appeal of these areas.
Sources: TIB Bus Ridership, Mallorca Global Mag, Yes Mallorca Property, Travel and Tour World
13) Palma will enforce stricter building codes to make new constructions more climate-resilient
Palma is seeing more intense climate events, like the fierce storm in August 2024 with winds over 110 km/h.
These storms are not just rare occurrences anymore; they're becoming the norm, exposing the weaknesses in our current buildings. The Balearic Islands, including Palma, are bracing for hotter days, rising seas, and more droughts, which means we need to rethink how we build.
Insurance claims are climbing because of climate damage, highlighting the flaws in our infrastructure. Government reports are clear: our building codes are outdated and need a serious upgrade to keep up with these changes.
People in Palma are starting to demand homes that can handle these climate shifts. This growing public concern is pushing for tougher building standards. Local news is buzzing about the need for change, making everyone more aware and possibly nudging policymakers to act.
Stricter building codes are on the horizon, aiming to make new constructions in Palma more resilient to climate impacts. This shift is crucial as scientific studies warn of future climate risks, urging us to adapt our building practices.
As the climate continues to change, Palma's construction standards must evolve to protect its residents and infrastructure. The push for sustainable housing is not just a trend; it's becoming a necessity.
Sources: Sea Help, PubMed, Got Law STL
14) New rules will limit short-term rentals in Palma, affecting Airbnb-style investment profits
In Palma de Mallorca, new regulations will be introduced to limit short-term rentals, impacting the profitability of Airbnb-style investments.
Locals have been increasingly vocal about the noise and overcrowding from short-term rentals, pushing the government to act. This pressure has led to a halt on new holiday rental licenses until 2026, mirroring steps taken by other Spanish cities.
With 1,627 active Airbnb listings as of September 2024, the surge in short-term rentals has squeezed the housing market, driving rents up by 22% since 2022. Many of these rentals operate without the necessary tourist licenses, exacerbating the issue.
Short-term rentals are making it tough for locals to find affordable housing, as studies show they drive up prices. Media reports have spotlighted these challenges, and public support for stricter rules is growing, with surveys showing residents want action.
Officials are worried about the boom in short-term rentals and stress the need for regulation to balance tourism's impact. While some fear it might affect tourism and local businesses, the goal is a more sustainable industry.
Historically, Palma has adjusted regulations to tackle tourism-related issues like housing shortages. This pattern indicates that new rules are on the horizon to address current challenges.
Sources: Porta Mallorquina, Airbtics, Neptunus International
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.
15) More British buyers will enter Palma’s real estate market seeking holiday homes after Brexit
British buyers are increasingly eyeing Palma's real estate market for holiday homes, even post-Brexit.
In 2023, they made up 9.53% of all foreign buyers in Spain, second only to Germans. Despite a 10% dip in the first half of 2024 compared to the same period in 2023, British buyers remain a key part of the market. This shows their enduring interest, especially in places like Palma.
Real estate agencies are buzzing with British interest. Taylor Wimpey España, for example, reported a 120% jump in British reservations in April 2024 compared to April 2023. This surge highlights a growing fascination with Palma and the Costa del Sol. Lifestyle articles often rave about Palma's charm, mild weather, and quality of life, making it even more appealing to British buyers.
More flights and frequent routes between the UK and Palma are making it easier for Brits to visit and invest. Real estate agencies are also tailoring their marketing to attract British buyers, which is boosting their presence in Palma's market.
Palma's allure is undeniable, with its stunning landscapes and vibrant culture. British buyers are drawn to its unique blend of tradition and modernity, offering a perfect escape from the hustle and bustle of the UK.
As British buyers continue to explore Palma, they are not just investing in property but also in a lifestyle that promises relaxation and adventure. The trend is clear: Palma is becoming a top choice for British holiday home seekers.
Sources: Taylor Wimpey España, Porta Mallorquina, Spanish Property Insight
16) More digital nomads will move to Palma, boosting demand for flexible living spaces due to remote work trends
The rise of remote work has been a significant trend over the past few years, with a notable increase in the number of people working from home. By 2025, it's expected that 36.2 million workers, or 22% of Americans, will be working remotely, which is an 87% increase from pre-pandemic levels. This shift has opened up new possibilities for people to live and work from anywhere, leading to a growing interest in becoming digital nomads.
Spain has become an attractive destination for digital nomads, especially with the introduction of the Digital Nomad Visa. This visa allows non-EU/EEA remote workers and freelancers to live and work in Spain for up to 12 months, with the possibility of renewal for up to five years. This initiative has made it easier for digital nomads to choose Spain, and specifically Palma de Mallorca, as their base.
In Palma de Mallorca, the demand for flexible living arrangements has been on the rise. The city has seen growth in co-working spaces, such as the new flexible workspace opened by IWG, which offers private offices, meeting rooms, and coworking areas. This development caters to the needs of remote workers and startups, making Palma an appealing location for digital nomads.
Sources: Apollo Technical, Citizen Remote, Iberian Property
17) Mid-range property prices in Palma will stabilize with only modest growth
The market for mid-range properties in Palma is expected to stabilize with only modest growth due to several key factors. First, the average property price in Palma de Mallorca showed a moderate increase, but the growth rate plateaued by October 2024, with prices reaching €5,052 per square meter, marking a 12.42% increase from December 2023.
Additionally, the new housing market in Mallorca remains stable, but the pace of new construction has slowed. This is due to limited land for development and strict urban planning regulations, which suggest a saturation in mid-range property developments. This saturation supports high prices for new builds, indicating a stabilization in the market.
Moreover, the rise in interest rates to 4.5% in 2023 has affected mortgage affordability. While this hasn't led to a depreciation in property prices, it likely reduced speculative buying and encouraged more cautious investment decisions, contributing to market stability.
Sources: Yes Mallorca Property, Indomio
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.