"The right to housing is a basic human right, but it can be achieved only through cooperation" — the words with which Francine Armengol, Chairman of the Government of the Balearic Islands, concluded the debate on the problem of housing affordability for ordinary citizens of the archipelago. Armengol's speech gathered a large and attentive audience interested in what steps the regional authorities plan to take to actually solve the problem.
The Chairperson listed several measures that had already been taken. These include cooperation with real estate agencies of the autonomous community and agreements with developers on state subsidies. The government will also have to actively develop a number of regulations that will support the operation of the new "Real estate Law".
Besides, large powers are transferred to city councils. They will have to speed up and simplify the process of registration and licensing of new land plots for construction. Developers have long complained about the shortage of free land suitable for development, and the one that is available appears on the market slowly due to the low efficiency of bureaucratic processes. The new plots will also be used as subsidized housing.
Another problem to be solved is the tourism sector of the real estate market. The state and the market will have to come up with an opportunity to divide the usual market, designed for an ordinary local buyer, and the housing market for foreigners: expats and tourists. The population of the Balearic Islands has doubled over the past 20 years, there is not enough housing for everyone and the market has almost been captured by wealthy foreigners.
Their activity leads to an increase in prices and aggravation of the situation with a shortage of residential properties for sale. Most Spaniards cannot turn to mortgage lending, since the increase in the Euribor rate has already led to an increase in monthly loan repayments to 1,200 euros. The rental market is also getting more expensive. Up to 43% of the population who live in rented housing, spend more than 40% of their monthly earnings on payments for it.
At the same time, it is necessary to take into account several economic aspects. The energy crisis receded at the beginning of 2023, but after the recent OPEC decision, energy prices went up again. The problem with inflation remains and the threat of recession is growing. Two more increases in the key rate in the EU are also expected by 0.25% each.
The problem with foreigners will need to be solved as soon as possible, as evidenced by the following data — in municipalities with high tourist attractiveness, housing market prices have increased by 49% since 2014, while the average growth in the region was at the level of 28%. So far, we can only hope that foreign demand will be less than in 2022.
Another tool for solving the crisis can be a clearing system and the development of a housing sub-market for the elderly. Such real estate is already gaining popularity among investors in other regions of Spain, so the Balearic Islands may try to develop this range of real estate assets. They can potentially attract up to a billion euros of investment per year.