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Debates on the reduction of real estate sales in the Balearic Islands to non-residents

The Executive's attempt to veto the sale of housing to non-residents goes against the requirements of the law.Baleares demand alternative measures to regulate real estate companies and reduce the impact on sales to foreigners.

Foreigners have been an effective catalyst for rising property prices in Spain. The Balearics may have faced the inevitable legal difficulties and lack of consensus in trying to curb this phenomenon, but alternative measures are being prepared to mitigate the impact on prices. A similar strategy could be used in other regions of Spain, where foreigners created a parallel demand for housing, breaking the upward trend in prices.

In the case of the Balearic Islands, since the Spanish Association of Registrars began collecting the data 10 years ago, foreigners bought more homes in the Balearics in 2022 than ever before: a total of 6,133. The figure also accounted for 34.4 percent of total sales registered on the island, the second highest percentage since 35.6 percent of the 3,784 purchases in 2015. The average percentage of foreigners buying homes in Spain is much lower.

According to the College's data, the autonomous communities where foreigners made the most purchases in the fourth quarter of 2022 are:

• Baleares (36,15%),
• Valencia (28,47%),
• Canarias (27,25),
• Murcia (21,87),
• Cataluña (15,58),
• Andalucía (14,70%).

Tongyuan found that at the provincial level, the number of provinces where the weight of foreign purchases has increased or decreased has shown some balance, with 24 provinces increasing and 26 provinces decreasing. The provinces with the highest proportion of foreign buyers in the fourth quarter were.

• Alicante (42,94%), 
• Baleares (36,15%), 
• Málaga (34,05%),
• Santa Cruz de Tenerife (32,55%), 
• Gerona (31,12%), 
• Las Palmas (22,15%),
• Murcia (21,87%).

 

What the experts say

José María Bassañez, president of Tecnitas and president of Atas (Association of Professional Appraisers Associations), calculates that the percentage of foreign buyers in Spain "has been between 10% and 15% in recent years, in 2022 this figure will be around 12%". But in practice, the real estate industry is a natural enemy of averages, which can only hide trends. Where foreigners are in the majority, prices soar and create their own real estate world, as happened in the Balearic Islands.

According to Basañez, the areas with the highest proportion of foreign buyers are the Valencian Community, Andalusia, Catalonia and the Balearic Islands. Coastal cities are like a magnet, with prices set by foreign demand. British, Germans and French are regular buyers of Spanish homes, according to Tecnitasa. Although in some areas, such as the Costa del Sol, Russian or Norwegian demand is also notable.

Following the restrictions caused by the pandemic, the number of foreign buyers and sellers has increased rapidly as demand has recovered during this period. Tecnitas forecasts that despite the increase in interest rates, they will remain strong until 2023, "and this may increase depending on how the current economic and geopolitical environment develops amidst the prevailing uncertainty."

While the free movement of European capital has undoubtedly created legal difficulties, the Balearic Government, led by UNO Podemos, is keen to try to reduce foreign demand, which affects sale and rental prices. Balearic parliamentarian Pablo Jimenez (UP) defended the right of veto against buying a foreigner, but the PP and Vox opposed on all fronts. Alternative routes still exist. United Podemos has reached an agreement with the Socialist Party of the Balearic Islands, asking the Government of the Balearic Islands "that in coordination with state governments and EU institutions promote a law that provides for the necessary measures to allow the restriction of the acquisition of real estate by non-resident natural or legal persons in order to avoid the current situation of real estate speculation."

 

Fines for real estate companies

A basic tool that already exists are real estate agents and lease checks. In 2021 there will be 174 transactions in the Balearics and 90% of real estate companies will fail and will have to correct their mistakes. In 2022 there were 56 actions identified (35 in Mallorca and 21 in Ibiza) and 52 infringements. All but eight have been repaired. There are currently eight open files (all in Mallorca). Real estate agent fined more than €30,000 for not providing information in Catalan or Spanish, not having a complaint form, etc. 

Sources in the real estate sector deny that the restrictions on the sale of homes to foreigners affect prices. But their experience generates even more skepticism, because foreigners tend to buy new, more expensive houses with better construction materials. An offer designed mainly for this need. A large part of these foreign buyers bought homes for more than 500,000 €, while the average price of homes bought in Spain was just over 170,000 €.

Although the large urban centers of coast and beach tend to be the main destinations for foreigners looking for housing, we have a list of cities with less than 5,000 inhabitants that give interest in buying a home more to foreigners than to citizens:

• Fuente Obejuna (Córdoba), which received 77% of the visits to the portal from abroad in recent months; 
• Municipalities of Garcirrey (69%) and El Milano (66%),
• Municipalities of Salamanca; Cala Ratjada (63%), 
• Mallorca; Laroya (61%) in Almeria; 
• Valle Gran Rey in La Gomera (57%), 
• Cómpeta (Málaga) also participates in 57%.
• Ciudad Quesada (55%) located in Alicante. 
• Canillas de Albaida and Sayalonga (both in Malaga), where 54% of foreigners come to look for housing; 
• Benitachell (Alicante), Cala Millor (Mallorca), Arboleas (Almería) and Cala Bona (Mallorca) with 53%; 
• The locality of Coma (Mallorca) and Alagero (Santa Cruz de Tenerife) on the island of La Gomera with 52% of foreign searches,
• Albanches (Almeria), Deja (Mallorca), Cala D'Or (Mallorca) and Lubrina (Almeria), 51 %. 
• Yete (Granada) and Portbou (Girona) are as interested in buying homes for foreigners as for nationals.