Crisis in Spain as Balearic Island property prices shoot up by another 15%

The housing crisis in the Balearic Islands has hit a new low, with housing increasingly becoming a luxury instead of a necessity. According to a new report, flats have become more expensive in the archipelago by an eye-watering 14.4% in only one year.

The rises in prices have multiplied sevenfold in line with the rise of the Consumer Price Index (CPI), according to a report by TINSA, a property valuation company. It reveals that housing prices are 25% higher than they were in 2007 and 2008, in just 18 years. The problem is also unlikely to stop anytime soon, the report has warned, as the real estate bubble continues to swell.

The Balearics, including popular islands Majorca and Ibiza, are one of two places - the other being the capital, Madrid - where the price of each square metre extends past €3. In Madrid, it is €3.487 euros a metre, while in the popular holiday archipelago it is €3.417 a metre, reported The Olive Press.

The latest figures from TINSA show that the highest year-on-year price increases were seen in these two locations and along the Mediterranean coast, including Malaga in the south and Valencia in the southwest.

Price increases of between 7 and 10% were also notable in the provinces bordering Madrid, mirroring the trend in prices seen elsewhere.

Spain is suffering from a significant housing shortage, which is driving up prices and making it increasingly difficult for both buyers and renters to find affordable housing. The situation is now so dire that it has been described as a "social emergency" by the Spanish government, who estimate that between 600,000 and a million new homes must be built in the next four years to meet demand.

According to SpanishPropertyInsight, the supply of homes for sale is continuing to decline, with a 15% year-on-year drop in the final quarter of 2024. This decline, reported by the property portal Idealista, is the steepest on record since the company began tracking housing stock. The supply decline is widespread, affecting almost every major city and region across Spain. Girona in the northeastern Catalonia region, is the only major city to have bucked the trend, with a modest 5% increase in supply. In contrast, cities like Zaragoza, A Coruña, and Oviedo have seen their available housing stock plummet by a staggering 38-40%.

The news of this 15% increase in prices comes as the archipelago was warned by property developers it must build 45,000 new homes within five years to prevent a "total collapse" of essential services. The warning comes as essential workers, including doctors and police, have refused postings to the archipelago due to skyrocketing rents. "We're facing a serious illness that's going to get worse," said Joaquín Chinchilla, president of APROVIBA. It was also recent revealed that over 21,000 residents have reportedly left Malaga over the housing crisis, which has been made worse by overtourism.