Rona Pineda owns a thriving restaurant just off the harbor in Palma de Mallorca where she cooks up paella and Asian dishes for tourists streaming to the Mediterranean island. But it’s still not enough to comfortably afford to live there.
Driven by an influx of foreigners and an upscale shift in the tourism sector, soaring rents and housing prices in Mallorca and its neighboring island of Ibiza are pushing residents like Pineda into tough choices, with some even forced to live in vans.
“People are now looking at how to survive,” the 32-year-old said, who’s been sharing a two-bedroom apartment with another couple since the end of the pandemic. “If you have a normal salary, it’s very difficult to find a place to live nowadays.”
The population of Spain’s Balearic Islands — which also include Menorca and Formentera — has increased 50% since 1996, mainly due to a surge in newcomers attracted by the beaches and sunny weather. The trend gathered pace over the past few years as the Covid pandemic increased the number of remote workers on the islands.
The growing population creates a need for more police, doctors and cleaners, which all need housing. Conditions that push up prices around the world are even more acute on islands, and in Mallorca, the natural constraint on space has been exacerbated by government policies limiting construction in order to conserve land. Surging inflation over the past year has added to the strain.
“More and more people are moving into campers, it’s still a minority but an increasing trend that we didn’t see some years ago,” said Matias Vidal, director of local real estate agency Inmovisa who’s been selling homes in Mallorca for decades. “Foreigners have more money available usually and they don’t look so carefully for bargains so that makes prices skyrocket.”
People from outside Spain bought about 36% of the properties sold in Mallorca and its neighboring islands in the fourth quarter of 2022, according to data from the Colegio de Registradores. Brokers say the buyers range from German and British retirees to investors from Latin America and Russia.
That demand boost has propelled home prices in the Balearic Islands to the highest among all the regions in Spain, including Madrid, where workers are paid 30% more on average, according to a report from staffing company Adecco Group AG.
Mallorca and Ibiza have also been trying to move away from the “party island” image by shifting more to luxury tourism. Mallorca has added 10 new five-star hotels since 2018, while its smaller neighbor has doubled the number of high-end resorts since 2016.
The shift makes the housing crunch even worse, because upscale establishments require more staff. Also, bars and restaurants need to dial up service to keep pace. Seasonal demand for staff squeezes the market even more and creates a spike in rental rates of as much as 46% on Ibiza.
Restaurant owner Pineda says rents have nearly doubled since she came to Mallorca 13 years ago. Because she hopes to one day buy a home and start a family, the priority is to keep living costs down as much as possible.
“We work all day so we decided to be economical and share the house,” she said “We respect each other and it’s working ok.”