The Graphs presented display the price indices of the Balearic and Spanish housing markets. After the disastrous impact coming as a result of the financial crash, property prices in the Balearic Islands and Spain as a whole have shown a strong recovery since the low in 2014.
The imposition of extensive austerity measures, necessitated by a European Bailout in 2012, severed domestic demand considerably. Paired with the overall impact of economic recession on the European market as a whole, depressing off-shore demand, the Balearic and Spanish property markets until 2014 underwent a difficult decline.
Since then (2014), the Spanish and Eurozone economies have shown encouraging signs of growth. Reported recently, the Eurozone in 2017 recorded growth at its fastest pace for a decade, with the 19-nation bloc growing at 2.5%. Growth estimates for 2018 have been revised upwards by the European Central Bank, with hopes for prolonged period of prosperity widely felt. Spain’s own performance has also been positive, with unemployment falling to its lowest point in almost 10 years. The revival of Spanish demand is crucial to national house prices, the Balearics included, where despite strong international demand Spanish buyers are still in the majority.
Provisions for the future are optimistic. Despite reduced British demand as a result of Brexit uncertainty, it is more than being accounted for by growth in demand from EU countries. French, from a 3.78% share to 6.3%, Russian and Italian buyers grew significantly in number between 2016 and 2017; with the upward trend predicted to continue in 2018. There are also signs that American and Chinese buyers are being enticed by prices considered good value, accompanied by all the charms of Spanish landscapes and culture. The Spanish economy is showing little sign of slowing, with home-grown demand likely to push the Balearic and National Price index continually upwards.
Given the buoyant economic outlook for Local and National property markets, index prices have made, and will continue, to make significant headway towards the pre-crash peak of 141.55. All things considered, both heart and mind can agree that 2018 is an excellent year to enter the market.
Recent growth in mortgage lending support optimistic views for the Spanish housing market. Since 2014 the number of mortgages issued annually has increased by 36% and looks set to reach pre-crash levels in the coming years. This has been identified as a key driver behind the revival of domestic consumption as people benefit from the growing economy and look to take advantage of low interest rates. Interest rates will remain low for the foreseeable future as the European Central Bank consolidates encouraging growth forecasts. Economists polled by Reuters asserted that inflation will not reach the 2% target until 2020, leaving the chance of interest rate increases unlikely.
Within the Spanish property market then, demand will continue its upwards trend. In the Balearic Islands 2017, there were a total of 5,068 transfers of property, a strong figure with the region’s population taken into account. Other Regions also performed strongly, smaller coastal towns in Andalucía and the Communitat Valenciana, such as Almeria and Alicante, attracted considerable sales as the Spanish look to recover their cherished holiday spots. For the Balearics and Spain as whole property prices, it can be safely presumed, will therefore continue to rise. For Ibiza in particular, the positive economic environments in France and Germany will drive invaluable foreign spending.