Future of Balearic Islands under threat as Brits stop buying holiday homes

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An “alarming” drop in tourists buying up holiday homes in the Spanish Balearics has sparked an urgent warning about the state of their future economies.

The Balearics, consisting of Majorca, Menorca, Ibiza, Formentera and Cabrera are abuzz every summer with sunseekers enjoying their holidays – and contributing to the tourist drive many communities rely on.

Brits love Spain – in fact, many adore it so much they’ve moved to different areas in the mainland, the Balearics and the Canary Islands. A total of 293,171 from Britain are residents in Spain, according to the padrón census records.

But, it appears there is a hiccup in the population boom – and that is fewer Brits are buying abroad now, due to the cost of living crisis – and Brexit.

The Balearic Association of National and International Real Estate Agents warns their economy will start to suffer if “the downward trend persists”.

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Foreign buyers tend to snap up semi-luxury single-family homes, it is reported. But the ABINI has detailed a “worrying” trend which has hinged on a sudden drop in sales from foreign buyers this year.

According to data from the Association of Registrars, this drop came in the the second quarter, with transactions falling by 28 per cent.

The silver lining, perhaps, is that the Balearic Islands still holds the title of the second highest share of sales to foreigners, at 30.4 per cent.

‌Only the Canary Islands maintains a very slightly higher figure, at 30.6 per cent. But despite this, officials are still unhappy with the spiralling sales, which reportedly began in January.

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What is causing this sharp decline?

‌The economic state of northern Europe’s countries starting with Germany, which is said to be the main source of foreign buyers, followed by the UK. The US, China and Russia, on the other hand, do not even reach one percent of total sales.

‌In Germany, its recession and the impact on its own real estate market is thought to be a key factor. While in the UK, international reports cite Brexit and reduced buying power of the Swedish market.

‌But despite these international affairs being included in the list of contributing factors, the ABINI believes its own regional legislation is not helping. The increase in property taxes being one.

“No other region has higher purchase and wealth taxes than the Balearic Islands”, the association claims, adding that the islands pay almost twice as much as Madrid in Property Transfer Tax.

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This, it says, is 12 per cent for purchases of between one and two million euros and 13 per cent for those of more than three million euros.‌

The association chaired by Hans Lenz says that the Balearic Islands is immersed in “a scenario unknown in the last 10 years”.

Mr Lenz warns that the economy of the region “will be harmed if this decline in sales continues”. One of his arguments is that the foreign market has played a key role in boosting “a robust industry that generates more than 20 percent of the islands’ GDP.”

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