The Balearic limit to the purchase of housing threatens to cause a call effect

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The Balearic Islands are looking for a solution to the serious problem of access to housing that affects the local population that, for a few years, has been expelled from the real estate market due to the escalation of real estate prices. The high demand from foreign buyers with greater purchasing power -they represented 37% of the total of the operations that were closed on the islands from January to June, compared to the 17% average in Spain as a whole – has added fuel to a market where the shortage of affordable housing and land is chronic. The Balearic Parliament approved last week an initiative of the regionalists of El Pi that is committed to limit the purchase of homes to non-residents or those who have settled in the archipelago for less than five years. A measure that, according to the experts consulted, could generate the opposite effect to that desired in the shortest term.

The autonomous chamber gave the green light, specifically, to 10 of the 16 points of the initiative of El PI to curb human pressure and saturation on the islands, in which it is shown how the increase in population and tourist places in the last 25 years has become “unsustainable”. The Balearic Councilor for the Economic Model, Tourism and Work, Iago Negueruela (Socialist Party of the Balearic Islands PSIB-PSOE) was committed this Wednesday to carrying out an in-depth debate on the best way to establish a limitation of this type. The spokeswoman for the Socialist Group in the Senate, Eva Granados, pointed out on Wednesday that it would be necessary to see how “those that are not first homes can be taxed.”

According to the data published by the National Institute of Statistics (INE), the Balearic Islands recorded the largest increase in house prices between April and June, both in relation to the previous quarter (2.9%) and in interannual terms (10.9%). In both cases, these are increases that are well above the national average. The data from the College of Registrars provide another important detail. The Balearic Islands was the second province with the highest housing prices (3,180 euros per square meter on average), only behind Guipúzcoa (3,208 euros). By capitals, Palma de Mallorca (3,075 euros) is also among those with the highest property prices, behind San Sebastián (4,992 euros), Barcelona (4,272) and Madrid (3,765).

The “stress” to which the Balearic property market is subjected can be explained by the strong demand from foreigners with more bargaining power than locals (they are mostly British and German) and because of the decoupling that has occurred between a scarce supply and a demand that increased strongly as the Covid pandemic subsided. This demand by foreigners with greater purchasing power can skyrocket in the short term if the processing of this possible limit on sales to non-residents continues, Félix Lores, an economist at BBVA Research, explains to ‘La Información’, who does not rule out that there is a “call effect” during the time the measure is under study.

The price of rents and the labor market

“The contribution of foreign buyers in the Balearic Islands represents more than half of the increase in total sales”, he recalls, so an initiative of this type also would have repercussions on the insular real estate market. At the moment, the rising cost of housing on the islands implies, among other things, that Balearic families have to spend 32% of their income to be able to acquire one, according to calculations recently published by the Idealista real estate portal.

The maneuverability of the local population -or that of workers from other regions who come during the tourist season and seek affordable rentals- is much less. The latter also has effects on the labor market. The rise in rents has caused a lack of qualified labor in the tourism sector (affects hotels, catering and nightlife), as the majority unions, CCOO and UGT, have been denouncing over the last few months . A Fotocasa report warns of a ‘bubble’ bigger than the one that burst in 2007with higher prices for both sales and rentals (which reach almost 14 euros per habitable meter).

Source: lainformacion.com

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