Mallorca’s once-booming real estate market is experiencing a noticeable slowdown as even wealthy foreign buyers are now hesitant to pay the island’s increasingly steep property prices
Luis Martín, President of the Mallorca Association of Property Developers (Proinba), highlighted in Diario de Mallorca that the island’s current property costs are no longer attractive, even to high-net-worth individuals from abroad. “For what they pay for an apartment here, they could buy a villa in other destinations,” Martín stated.
A disappointing summer for many sectors
Real estate is not the only sector in Mallorca feeling the pinch. The island’s hospitality, retail, and nightlife sectors have also reported a “poor summer” or, at best, a disappointing tourist season. Property developers, however, seem to be facing a more significant downturn than other industries, with Martín acknowledging that the situation is worse than it was a year ago.
Economic factors at play
While many in the service industry point to rising hotel prices and efforts by hotels to retain guests on-site as reasons for their struggles, property developers are identifying different causes. One key factor is the economic difficulties faced by two of Mallorca’s primary foreign markets: Germany and the United Kingdom. These countries’ economic woes have led to more cautious investment behaviour from wealthy buyers who once dominated the market for new properties on the island.
Martín notes that this downturn has come as a surprise to the sector. Early data from 2024 showed promise, but as the summer approached, signs of waning demand became more evident. By the end of the season, it was clear that the trend was not temporary.
Unsustainable price increases
In addition to external economic factors, the steep rise in property prices in Mallorca has made the market unattractive to many foreign investors. Martín acknowledges that escalating land and construction costs have contributed to the surge in prices, which are now “too high even for foreigners.”
Many developments were initially designed to cater to wealthy international buyers, but as these investors look for better value elsewhere, concerns are growing that Mallorca’s luxury property market is losing its appeal.
The local market struggles
The challenges faced by the property market are compounded by the lack of affordability for local residents. With property prices in Palma now rarely dipping below €400,000, the local market has all but stalled, and the majority of new developments are aimed at high-income buyers. Banks have also tightened lending criteria, making it even more difficult for local residents to secure mortgages.
Also read: American buyers flock to Mallorca’s luxury property market