The foreign have become an effective catalyst for the rise in real estate prices in Spain. attempts to Balearics to put a stop to the phenomenon they have run into perhaps unavoidable legal difficulties and a lack of consensus, but alternative measures are being prepared to cushion the effects on prices. Similar strategies could be applied in other areas of Spain where foreigners create a parallel demand for housing that breaks prices upwards.
In the case of the Balearic Islands, foreign buyers purchased more homes than ever in the Balearic Islands in 2022: a total of 6,133, the highest number since the Association of Registrars handled this data, 10 years ago. This figure also represents 34.4% of the total sales registered on the islands, the second highest percentage since the 35.6% represented by the 3,784 purchases in 2015. The purchase of homes by foreigners in Spain is a much smaller average percentage. José María Basáñez, president of Tecnitasa and president of Atasa (Professional Association of Valuation Societies), calculates that the percentage of foreign buyers of homes in Spain “has stood at an average of between 10% and 15% in recent years. %, having closed 2022 with a figure of approximately 12%”. But in practice, the housing sector is the natural enemy of averages, which do nothing more than mask trends. Where foreigners are in the majority, prices skyrocket and create their own real estate universe, as happens in the Balearic Islands.
According to Basáñez, the highest percentages of home purchases by foreigners are located in the Valencian Community, in Andalusia, Catalonia and the Balearic Islands. The coastal towns are a magnet, where prices are set by foreign demand. According to Tecnitasa, British, German and French are the usual buyers of homes in Spain. Although in some areas such as the Costa del Sol, the demand from Russians or Norwegians is also important.
After the confinements due to the pandemic, the sale and purchase by foreigners rose sharply, due to the dammed demand during that period. Tecnitasa’s forecast is that it will remain strong during 2023 despite the rise in interest rates “and that it may rise depending on how the economic and geopolitical circumstances that currently have a notable impact in the prevailing context of general uncertainty evolve.”
Despite undoubted legal difficulties established by the free movement of capital in Europe, the Balearic Government with the impulse of United We Can is willing to seek brakes on foreign demand, which influences both sale and rental prices. The deputy Pablo Jiménez (UP) defended vetoing the purchase from foreigners in the Balearic Parliament, but PP and Vox opposed it on all points. Alternative paths remain. The purple formation has reached an agreement with the Socialists to urge the Balearic Government to “promote in coordination with the State Government and the institutions of the European Union a law that contemplates the necessary measures that allow restricting the purchase of homes to natural persons or legal non-residents in order to avoid the current speculation around housing”.
Suspension of real estate in the Balearic Islands
A basic tool already in place are the inspections of both real estate agencies and rental contracts. In 2021, 174 actions were carried out in the Balearic Islands and 90% of the real estate companies failed, so they had to correct errors. In 2022, there were 56 actions (35 in Mallorca and 21 in Ibiza) and 52 detected irregularities. All but eight were corrected. There are currently eight files open (all in Mallorca).
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Sources in the real estate sector deny that weighing down the sale of homes to foreigners is going to have an impact on prices. But their experience adds even more suspicion, since foreigners tend to buy new, high-priced housing, with better construction materials. An offer largely designed for that demand. A good part of these foreign buyers bought homes for more than 500,000 euros, when the average price of homes purchased in Spain is just over 170,000 euros.
Although the large urban centers on the coast and beach are usually the main destinations for home searches among foreigners, Idealista determines the 22 towns with less than 5,000 inhabitants where interest in buying a house is greater from abroad than in Spain. These are Fuente Obejuna (Córdoba), where 77% of the visits received by the portal in recent months came from abroad; the Salamanca municipalities of Garcirrey (69%) and El Milano (66%); Cala Ratjada (63%), in Majorca; Laroya (61%), in Germany; Valle Gran Rey (57%), in La Gomera; Cómpeta (Málaga), also with 57% and Ciudad Quesada (55%), in Alicante. Also, Canillas de Albaida and Sayalonga (both in Malaga), with 54% of visits from foreigners looking for housing; Benitachell (Alicante), Cala Millor (Mallorca), Arboleas (Almería) and Cala Bona (Mallorca), with 53%; Sa Coma (Mallorca) and the La Gomera town of Alajero (Santa Cruz de Tenerife), with 52% of foreign searches, and Albanchez (Almería), Deya (Mallorca), Cala D’Or (Mallorca) and Lubrín (Almería), with 51% According to Idealista, Jete (Granada) and Portbou (Girona) are equally interested in buying a house by foreigners and nationals.