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What is happening in Palma de Mallorca’s real estate market? Are prices going up or down? Is Palma still a hotspot for foreign investors? How are local government policies impacting real estate and taxes in 2025?
These are the questions everyone is asking us every day—professionals, buyers, and sellers alike, from the bustling city center to the serene coastal areas. Perhaps you’re wondering the same thing.
We know this because we stay deeply connected with local professionals and people like you, diving into the Palma de Mallorca real estate market every single day. That’s why we created this article: to provide clear answers, insightful analysis, and a well-rounded perspective on market trends and dynamics.
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.
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1) Scandinavian buyers will increase, drawn by Palma's climate and lifestyle
Scandinavian buyers are increasingly eyeing Palma de Mallorca for their next property investment.
Over the past decade, there's been an 80% surge in property purchases by Swedes, making Mallorca a top destination for them. This isn't just a passing trend; with around 3000 permanent Scandinavian residents already settled on the island, the community is thriving.
One major draw is the lower cost of living in Palma compared to cities like Oslo, Copenhagen, and Helsinki. This financial advantage, combined with Palma's sunny Mediterranean climate, makes it an irresistible option for those looking to escape the colder north.
Adding to the appeal, the strong Swedish currency against the euro boosts Swedes' purchasing power, making property investments in Palma more attractive and feasible.
The vibrant Scandinavian expatriate communities, such as those organized by InterNations, offer regular events and activities, helping newcomers integrate smoothly. This sense of community makes the transition to life in Palma even more appealing.
Real estate agencies in Mallorca are noticing a trend, with a rise in inquiries from Scandinavian clients, signaling growing interest in the area.
Sources: Yes Mallorca Property, InterNations
2) Central Palma will see higher rental yields as short-term rental demand rises
The rental yields in central Palma are expected to increase as demand for short-term rentals grows, primarily due to the rising tourism statistics. In 2023, over 12.47 million tourists visited Mallorca, marking a significant increase in tourism since the pandemic. This steady rise in visitors creates a higher demand for accommodations, particularly short-term rentals.
The growing popularity of Palma as a travel destination also plays a crucial role. Media coverage and celebrity endorsements have made Palma more visible, attracting even more tourists. This increased visibility boosts the demand for short-term rentals, as tourists often prefer these over traditional hotels for their flexibility and amenities.
Additionally, data shows that short-term rentals often provide higher returns compared to long-term leases. In high-demand areas like central Palma, short-term rentals can command higher nightly rates, making them more profitable for property owners. This profitability attracts more investors to the market, further driving up demand and rental yields.
Sources: Road Genius, Lifestyle Properties Mallorca, Global Property Guide
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3) Property prices in Palma de Mallorca will keep rising due to high demand and limited supply
In recent years, property prices in Palma de Mallorca have been on the rise, and this trend is expected to continue. Back in 2023, the average price per square meter was 3,587 euros, and by January 2024, it had increased to 3,877 euros, marking a 7.3% rise. This upward trajectory is projected to persist, with an anticipated year-on-year growth of 11.2% from January 2023 to January 2024.
One of the main reasons for this increase is the limited availability of land for new developments. Areas like Port Andratx have experienced significant price hikes due to these land constraints. Additionally, government restrictions on new construction, such as reducing tourist beds, further limit the supply of new properties, contributing to the rising prices.
On the demand side, Palma de Mallorca continues to attract international buyers due to its appealing location, mild climate, and high quality of life. The growth in tourism has also boosted the demand for vacation homes, making them highly sought after. Moreover, trends in remote working have allowed more people to live abroad, increasing the demand for properties in desirable locations like Palma de Mallorca.
Sources: Balearic Properties, Balearic Properties, Kleber Group
4) Rents in new developments will rise slightly with improved infrastructure
In recent years, we've seen a noticeable trend in Palma de Mallorca where rents in newly developed areas have experienced a slight increase. This is largely due to significant improvements in infrastructure. For instance, the Palma City Council's 2025 budget has allocated a substantial amount of money, 78.7 million euros, specifically for infrastructure projects. These projects include the refurbishment of key areas like Plaça Major and the creation of a botanical garden, which enhance the overall appeal of these neighborhoods.
Moreover, the introduction of the Trambadía Light Rail Line, fully funded by the Spanish government, is set to transform public transportation in Palma. This new rail line will connect major points like Plaza de España and the airport, meeting an estimated 27% of public transport demand. Such improvements make these areas more accessible and attractive to potential tenants, who are often willing to pay a premium for better connectivity and reduced congestion.
Historically, we've observed that rental prices in the Balearic Islands, including Palma, have surged by 30% in just one year, reaching record highs. This increase is closely linked to the enhanced infrastructure and the growing demand for housing in these well-connected areas. As infrastructure continues to improve, it's reasonable to expect that rents will follow suit, reflecting the added value these developments bring to the community.
Sources: Immobilien Portal Mallorca, Rail Journal, Mallorca Global Mag
5) Virtual reality tours will become more common, simplifying property viewings for international buyers
Virtual reality tours have become increasingly common, especially for international property buyers. This trend is largely due to the rapid growth of the global virtual tour market, which expanded significantly from 2023 to 2024 and is projected to continue growing at a fast pace. The market is expected to reach $17.88 billion by 2035, driven by advancements in VR technology that make these tours more immersive and accessible.
In the past, international buyers faced challenges when trying to view properties from afar. However, the increasing affordability and availability of VR headsets and augmented reality technologies have made it easier for them to explore properties without needing to travel. This is particularly beneficial for buyers interested in places like Palma de Mallorca, where foreign investment in real estate has been strong, with international buyers making up a significant portion of property transactions.
Real estate agencies in Palma de Mallorca have embraced this technology, offering virtual tours that allow potential buyers to explore properties remotely. Companies like Neptunus International and Inmovisual Mallorca provide state-of-the-art 3D tours that can be accessed anytime, anywhere, making it convenient for international buyers to view properties. These tours not only save time but also help buyers form an emotional connection with the property, which can be crucial in the decision-making process.
Sources: Neptunus International, Yes Mallorca Property, Inmovisual Mallorca, Travel and Tour World
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6) Non-EU buyers will increasingly seek residency through property investment, boosting demand
In the Balearic Islands, especially Mallorca, over 35% of real estate deals in 2023 involved foreign buyers.
One big reason for this surge is the Spain Golden Visa program, which lets non-EU citizens gain residency by investing in Spanish property. This program is a major draw for those looking to secure a foothold in Europe. Even though it's set to end in April 2025, any applications submitted before then will still be honored under the current rules.
Many non-EU buyers are eyeing Spain because of economic and political issues back home. Spain's stable economy and favorable exchange rates make it a safe bet for those seeking a reliable investment and a new place to call home.
In Mallorca, the property market is buzzing with activity. Buyers are not just looking for vacation homes but also long-term investments that offer both lifestyle and financial benefits. The island's charm, combined with its strategic location, makes it a top choice.
Local real estate agents have noticed a shift in buyer profiles. There's a growing interest from countries experiencing economic uncertainty, as people look for stability and security in their investments.
With the Golden Visa program still in play, the demand from non-EU buyers is expected to keep rising as they seek residency through property investment.
Sources: Yes Mallorca Property, Global Citizen Solutions, EIG Law
7) More favorable regulations will boost international purchases by attracting foreign investors
In recent years, regulations have become more favorable for foreign investors, encouraging more international purchases, especially in places like Palma de Mallorca. One of the key reasons is the increased government initiatives. In 2023, the Spanish Government approved new regulations, specifically Royal Decree 571/2023, which came into effect on September 1, 2023. These regulations were designed to provide clarity and streamline the authorization process for foreign investments, making it easier for investors to ensure their transactions are valid and compliant with the law.
Another important factor is the recent changes in property laws. Although specific changes favoring international buyers weren't detailed, the trend has been positive. For example, in the Balearic Islands, foreigners accounted for 31.93% of property purchases in the third quarter of 2023, showing a slight increase from the previous quarter. This indicates a growing interest and a favorable environment for foreign investors.
Additionally, the streamlined processes for foreign investors have played a significant role. The new FDI regulations aim to reduce documentation risk and promote transparency, which is expected to support the growth of the real estate market. This makes it easier for foreign investors to navigate the process and encourages more international purchases.
Sources: Yes Mallorca Property, Majorca Daily Bulletin, Dentons
8) Tax incentives will boost investment in energy-efficient properties
In recent years, the Spanish government has been proactive in encouraging investments in energy-efficient properties by extending tax deductions for such renovations until the end of 2025. These deductions range from 20% to 60%, depending on the type of renovation, which makes it financially attractive for property owners to invest in energy efficiency.
In Palma de Mallorca, there has been a noticeable increase in the sale of energy-efficient homes. This trend is largely driven by a growing awareness of sustainable living benefits and the desire to cut down on utility costs. As more people become environmentally conscious, the demand for energy-efficient properties is expected to rise.
Moreover, improving the energy efficiency of homes can lead to significant savings. For instance, enhancing thermal insulation can result in energy savings of over 50%, while upgrading windows and installing condensing boilers can reduce gas consumption for heating and hot water by up to 30%. These savings make energy-efficient homes more appealing to buyers.
Sources: Private Property Mallorca, Spain Houses, Spanish Property Insight
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Spain versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you’re planning to invest there.
9) Long-term rental yields will rise as more residents look for stable housing options
Palma de Mallorca is experiencing a population boom, with an expected increase of 60,000 people in the next 20 years.
This surge in residents means more people are looking for rental homes, driving up demand. The island's charm and lifestyle are attracting newcomers, but there's a catch: land for new housing is scarce, limiting the number of new homes that can be built.
With fewer new homes, the existing rental market is becoming more competitive. This scarcity is pushing rental yields higher as people scramble for available properties. It's a classic case of supply and demand, where the limited supply of homes is not keeping up with the growing demand.
Adding to the mix, rising home prices are making buying a home less feasible for many. This economic shift is nudging more people towards renting as a stable alternative. Long-term rentals are becoming the go-to option for those who can't or choose not to buy.
As more residents opt for renting, landlords are seeing increased potential yields from their properties. The rental market is thriving, and those with properties to rent out are in a favorable position.
In this evolving landscape, long-term rentals are becoming increasingly attractive for both residents and investors. The trend is clear: as the population grows and housing remains limited, rental yields are set to rise.
Sources: Euroweekly News, CaixaBank Research, Macrotrends
10) Santa Catalina will experience increased demand for its vibrant culture and city center proximity
Santa Catalina is becoming a hotspot for both tourists and locals, thanks to its vibrant cultural scene and strategic location near the city center. In 2023, the neighborhood experienced a significant increase in foot traffic, largely due to its bustling nightlife and diverse dining options. This trend continued into 2024, with Santa Catalina being a major attraction for the 9.7 million international and domestic tourists who visited Mallorca from January to August.
The neighborhood's cultural appeal is further enhanced by events like the Mallorca Live Festival, which is set to take place in June 2025. This festival will feature over 60 artists and is expected to draw a large audience, adding to the area's cultural vibrancy. Additionally, Santa Catalina's proximity to key city landmarks and public transportation hubs makes it an attractive location for both tourists and residents, contributing to its growing popularity.
Moreover, the influx of younger, culturally-oriented residents to Santa Catalina indicates a growing interest in living in areas with a vibrant cultural scene. This demographic shift supports the idea of a surge in demand for properties in the neighborhood. The area's diverse dining options, with a wide range of traditional Mallorcan cuisine and international dishes, further enhance its vibrant atmosphere, attracting new restaurants, cafes, and bars.
Sources: Mallorca Tourism Statistics, Mallorca Live Festival 2025, Majorca Daily Bulletin, Best Neighborhoods to Live in Palma Mallorca for 2024
11) Suburban rental yields may dip slightly as city living becomes more popular
In recent years, we've seen a noticeable shift in where people want to live, especially in places like Palma de Mallorca. The city center has become increasingly popular, with property prices rising significantly. For example, the average price per square meter in the city center jumped from 3.587 €/m² in January 2023 to 3.877 €/m² in January 2024.
This trend is largely driven by a growing demand for urban living spaces. People are drawn to the city for its amenities and lifestyle, which include better public transportation, cultural activities, and job opportunities. The higher occupancy rates in city rental properties further highlight this strong demand for urban living.
Moreover, the government has been investing in city center developments, such as the new tram system, which makes city living even more attractive. These improvements in infrastructure enhance mobility and accessibility, making the city a more appealing place to live. As a result, suburban areas are seeing less growth in property interest, indicating a shift in preference towards city living.
Sources: Global Property Guide, Railway Pro, Yes Mallorca Property
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12) Suburban property prices may dip slightly as buyers favor central locations
In recent years, some suburban areas in Palma de Mallorca have seen a slight decline in property prices. This trend is partly due to a decrease in property sales in these areas. For example, in 2023, the average price per square meter in suburban areas like S'Arenal-Son Verí dropped by 2%.
Meanwhile, central Palma de Mallorca has experienced an increase in property sales. This is largely driven by the island's strong tourism industry and the high quality of life in central areas, which attract both local and international buyers. Consumer surveys also indicate that buyers are increasingly preferring central locations due to better amenities, services, and connectivity.
Additionally, demographic shifts show younger populations moving to urban centers for better job opportunities, education, and lifestyle. This trend contributes to increased demand for properties in central Palma, further reducing the appeal of suburban areas. Ongoing infrastructure projects, such as improvements to the Palma airport and road networks, enhance connectivity and make central Palma more accessible, attracting more buyers to these locations.
Sources: Balearic Properties, Homerun Mallorca
13) Son Vida properties will attract luxury buyers looking for privacy and exclusivity
In recent years, the demand for luxury properties in Mallorca has been on the rise, with a notable 7% increase in sales of properties priced above €1 million in 2023. This trend highlights the growing interest in high-end real estate on the island.
Son Vida, often referred to as the “Beverly Hills of Mallorca,” has become a magnet for high-net-worth individuals and celebrities. The area is known for its exclusivity, with properties reaching prices well into the tens of millions, attracting international figures like art collector Drew Aaron and former English football player Steve McManaman.
Property prices in Son Vida have surged compared to other areas, driven by its promise of unspoiled views of Palma bay and absolute privacy. This appreciation is further fueled by new developments and renovations that enhance the appeal of luxury homes to affluent buyers.
Sources: Homerun Mallorca, Balearic Properties, Helen Cummins
14) High-end rental prices will rise as luxury properties gain popularity
The luxury rental market in Palma de Mallorca is experiencing a notable increase in prices, largely due to the rising demand for high-end properties. In recent years, particularly in 2023 and 2024, the demand for luxury apartments and penthouses with stunning views has surged, leading to a 6% year-on-year price increase. This trend is driven by the allure of Palma's unique offerings, such as its beautiful sea views and historic old town.
Another key factor contributing to the rise in luxury rental prices is the increasing number of high-net-worth individuals attracted to Mallorca. The introduction of a wealth tax cut in 2023 has made the island even more appealing to affluent buyers, further boosting the luxury real estate sector. This influx of wealthy individuals has intensified competition for high-end properties, driving up prices.
Moreover, the limited supply of luxury properties in Mallorca plays a significant role in the price increase. With new developments in prime locations being scarce, the existing high-end real estate is in high demand, leading to competitive pricing. This scarcity, combined with the growing interest from international buyers seeking second homes, particularly from the UK, Germany, and Scandinavian countries, has created a perfect storm for rising luxury rental prices.
Sources: Mallorca Property, Balearic Properties, Savills
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) Luxury property prices will rise moderately with strong international interest
Luxury property prices in Palma de Mallorca are steadily climbing, with international interest keeping the market vibrant.
In 2023, the average property price saw a bump of about 5%, while luxury sales jumped by 7%, especially for homes over €1 million. This surge is largely thanks to international buyers, who make up 40% of the transactions, with many hailing from Germany, the UK, and Scandinavia.
By 2024, the price per square meter had risen noticeably, underscoring the ongoing demand for high-end properties. Foreign buyers are a strong force in the luxury real estate market, making up over 35% of all property purchases by foreigners in Spain. This shows how the Balearic Islands continue to be a top choice for investors.
Mallorca's property market thrives on its sunny climate, rich culture, and excellent quality of life. The island's bustling tourism industry also plays a big part, ensuring high occupancy rates for holiday rentals, which makes short-term rentals a smart investment. Spain's stable economy further boosts foreign investment in Mediterranean luxury living.
With its unique blend of natural beauty and modern amenities, Mallorca remains a magnet for those seeking a slice of paradise. International buyers are drawn to the island's charm, contributing to the steady rise in property values.
As the market continues to grow, luxury property prices are expected to see a moderate increase, driven by strong international interest and the island's enduring appeal.
Sources: Balearic Properties, Homerun Mallorca, Advocate Abroad
16) Luxury market demand will keep rising, driven by foreign buyers from Germany and the UK
Foreign buyers, especially from Germany and the UK, have been a significant force in the luxury market in Mallorca. In 2023, they accounted for a substantial portion of property purchases, with Germans making up 20% and Britons 15% of all real estate transactions. This trend continued into 2024, driven by the island's appeal and economic conditions in these countries.
The demand for luxury properties, such as holiday villas, has been particularly strong among these foreign buyers. The high cost of housing in the Balearic Islands, reaching record levels, reflects this ongoing interest. Real estate agencies have reported that Mallorca remains a hotspot for luxury home investments, attracting international buyers with its quality of life and beautiful landscapes.
Economic factors also play a crucial role. The strong German economy and the resilience of the UK economy, despite Brexit uncertainties, support continued investment in Mallorca's luxury market. Additionally, favorable currency exchange rates can further encourage these investments, making it financially attractive for German and UK buyers to purchase properties on the island.
Sources: Yes Mallorca Property, Balearic Properties, Helen Cummins
17) Affordable housing projects will stabilize prices in some areas, preventing sharp rises
Affordable housing projects can play a crucial role in stabilizing property prices in certain areas. When more affordable homes are built, it increases the overall supply of housing, which can help balance the demand and supply equation. This balance is essential because when there is more supply, it can prevent prices from rising too quickly.
In the past, like in 2023 and 2024, we saw that areas with ongoing affordable housing projects, such as Santa Ponsa and El Toro in Mallorca, experienced growth in property prices, but not as sharply as areas without such initiatives. This suggests that affordable housing can help moderate price increases by providing more options for people looking to rent or buy homes.
Moreover, government initiatives, like the Spanish government's plan to build 43,000 affordable rental homes, aim to increase the stock of socially rented or energy-efficient affordable housing. This kind of investment not only helps stabilize prices but also ensures that housing remains accessible to a broader range of people, preventing sharp increases that can make living in certain areas unaffordable for many.
Sources: Balearic Properties, Euro Weekly News, CaixaBank Research, La Moncloa
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.