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KENSINGTON – Market Report Balearic Islands for 2019

Germans continue to be the predominant foreign buyer group on the Balearic Islands in 2019

In 2019, the Balearic Islands will continue to be one of the leading economic regions in Spain. In this popular holiday destination, there is not only a high standard of living, but also a high price level for holiday homes. Since 2014, the prices for land, houses, fincas and apartments have risen every year.

However, the Balearic real estate sector had to assert itself in 2019 within a more difficult overall situation. The cooling of the economy in Europe plays a particularly important role here – growth forecasts for gross domestic product have been revised downwards in many countries. Spain itself still achieved a 2 % increase in GDP at the end of 2019 – and was thus above the EU average. The euro zone grew by 1.2 %. The EU Commission is forecasting growth of 1.5 % for Spain in 2020 and 1.4 % in 2021.

There is still particular uncertainty about Brexit. Among foreign buyers on the Balearic Islands, the British have so far been the second largest group with a share of around 15 % (2018 figure). The Germans have been in the lead for years, accounting for just under 38 % of purchases by foreigners. Overall, 29,41 % of buyers currently come from abroad. This makes the Balearic Islands the Spanish region with the highest share of foreigners purchasing property.

Another unknown factor for the real estate market are future policies concerning property sales and leases by the government of Prime Minister Pedro Sánchez, elected in January 2020. After all, he leads the first left-wing coalition since the Spanish Civil War.

The bankruptcy of the Thomas Cook travel company in September 2019 appears to be less dramatic for the Balearic economy than initially feared. With 13.68 million foreign tourists in 2019, the Balearic Islands remain Spain’s second most important holiday destination after Catalonia. However, the archipelago recorded a 1.23% decline in foreign visitor numbers compared to 2018.

Temporarily, the 2019 property market has been affected by the entry into force of a new mortgage law in June. Last summer, hardly any real estate loans were taken out, with corresponding consequences for transactions. As far as “mortgage lending” is concerned, things have been back to normal since September. Germans also generally buy their property on the Balearic Islands with their own money.

Against this backdrop, it must be noted that the number of real estate transactions declined on all the islands in 2019 (Official figures from the Spanish government are currently only available until 30 September 2019). This indicates that in the first three quarters of 2019, sales figures fell by 14 percent compared to the previous year. In these first nine months of 2019, the transaction volume totalled EUR 2.71 billion. In comparison, in the period mentioned above, the figure was around EUR 2.97 billion in 2018 and around EUR 3.08 billion in 2017. This has also had an impact on turnover in the property sector in 2019. KENSINGTON recorded declines of 7.9% in Mallorca and 6.82% in Ibiza compared to 2018. The high level of property prices plays a certain role in the slight decline in the willingness to buy. And currently, prices are still rising slightly: according to data from the Spanish government, the average value of privately financed properties in the Balearic Islands rose by 6,7% in 2019. Rents have tended to stabilize. In 2019, they rose by only about two percent.

The detailed KENSINGTON market report for the Balearic Islands 2019 / 2020, you can view here.

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