Biel Horrach, the director-general of urban planning at Palma town hall, puts it this way: “Much of the Balearic economy has gone from being tourist business to residential; the main economy in the Balearics has become the real-estate business.”
In Palma, but not only Palma, there is said to be a phenomenon of de-heritage: owners who sell in a market with homes that have been revalued with seven-figure prices. In the city, this has spread from the old centre to Santa Catalina, El Molinar and even, so it is now reckoned, Pere Garau. Properties are sold at prices that the children and grandchildren will never be able to afford. And the reason? Foreign buying, or so it is maintained.
Natalia Bueno, president of the College of Real Estate Agents in the Balearics and also of the API estate agents association, says that when she meets owners with an inheritance home who don’t know whether to sell or rent, she always recommends that they keep hold of it – to ensure that there is a property for the children. “It will be very difficult for them to buy.”
Bueno says that “gentrification wreaks havoc“. “We’ve witnessed it in Ibiza for years. The children can no longer live there and so go to the mainland. There is emigration because they are unable to pay for a house. Today’s sales are tomorrow’s impoverishment. Owners choose to sell with foreign real estate agents because they will give them more money.”
Biel Horrach doesn’t blame people who are selling their homes. “Right now, we are subject to extreme social dynamics. The middle class from northern Europe, who earn twice or three times as much as Mallorcans, are coming here. With the salaries they’re on, people here won’t be able to compete unless regulation is put in place for foreign buyers.” He admits that Mallorca is “one of the most desirable regions in Europe”.
His observation about the shift in the economy draws on the fact there is “hyper-connection of Mallorca with Europe”. “Regular flights all year mean that people no longer choose to visit the island and stay in a hotel. They now want to have a property in Mallorca.” At one time, people with very high purchasing power bought an estate. “Now it’s the middle-class in Europe who can fulfil their desire to live in Palma or elsewhere on the island. This creates strains for workers in the tourism sector. It’s why regulation is necessary to access decent housing in order to prevent an imbalance.”
For next generations, he believes, there will be “an unsustainable future if this dynamic continues”. And his observation extends to the aim in the Balearics for an innovative economy – “it’s impossible to find young talent because they are more concerned with investing in housing than in innovation”. And as Sonia Vives, a geographer from the University of the Balearic Islands, notes: “Being an owner has become a way of life thanks to rents. You can earn more money from rents than by working.”
Economist Eduardo Robsy points out that 27% of people in the Balearics rent compared with a 12% national average. “Buying a home is incompatible with working here, and direct aid is absent for housing development and purchase. The state seems to have abandoned the housing plan.”