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Foreigners are no longer allowed to buy in Mallorca?

Foreigners are no longer allowed to buy in Mallorca?
Foreigners may soon no longer buy houses in Mallorca? What is it? When is it so far?
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Real estate purchase over for non-residents?

Foreigners are no longer allowed to buy in Mallorca? No property, neither a house nor an apartment? Admittedly, this is a bit provocative. But at least it sounded so in a debate of the Parliament of Mallorca goes, as if there could be a majority in the meantime, that in the future only people who have been resident on the island for at least 5 years, can buy real estate here. Which does not mean that you have to be Spanish to buy in Mallorca, it basically means that you would have to have your primary residence on the island.

Foreigners are no longer allowed to buy property in Mallorca?
Palma, Spain - June 22, 2022: Balearic Parliament Inscription

What about the EU?

There are critics who believe that such a regulation would not be compatible with European law. I don't think there would actually be a conflict here. Of course, first the government would have to present such a law and the parliament would have to pass it. Then one could and would have to examine on the one hand whether it is in agreement with national Spanish right. And just conforms with European law. But basically it is true that as long as EU citizens are not treated differently, there is usually no discrimination involved. And since every EU citizen would be free to settle in Mallorca as a resident, it would be a permissible restriction in my opinion.

It would be particularly interesting to know whether it should continue to be possible for companies to buy real estate. Because then, on the one hand, foreign European companies should not be treated differently from a domestic European company. And actually, it should not be relevant whether the shareholders - i.e. the owners of the company - are nationals or foreigners. This would then also make the presumed first circumvention strategy of a possible law obvious. Or - should a government actually bring itself to pass a discriminatory regulation - a possible violation of European law would be given.

Foreigners are no longer allowed to buy property in Mallorca?

Parliament has not voted. Nor can it, because a bill would first have to be put to the vote. Viewed in isolation, it is basically largely powerless. Nevertheless, it is made up of deputies from various parties, and of course it sends a signal to the government, especially since the new elections are less than six months away.

On the initiative of the oppositional regional - party El Pi, the parliamentary debate was brought about. And unlike the last attempt in July, in which the Island Council in rare unity of conservatives and left-wing government blocked a similar move by the left-wing party Podemos, this time the mood of the majority of deputies was apparently different.

What does this mean in terms of content?

First of all, it is only to be understood as a party-political order to the own representatives in the island council. They would, of course, have to coordinate with the central government and other bodies involved. But in my view, it is now a clear expression of will by the people's representatives, who can hardly ignore their own party friends completely. Especially not before the elections.

No more houses for foreigners? Real estate purchase for non-residents to be restricted
Source: Mallorca newspaper online, meeting in the Balearic Parliament (archive image). CAIB

Why is this being done?

There has long been a major problem with affordable housing for locals. Comparable to any location in high demand, it has become almost impossible here in recent years to even find a rental apartment under 800 euros. That with an income level that lies however far under Munich. Likewise it is - like however in many parts of Europe - for normal income earners hardly still possible to develop real estate property by gainful employment. Against these grievances, vacation rentals have already been dramatically restricted for years. Then rent brakes were installed. Which did not function European-wide predominantly. And now this kind of sales stop is to follow as the next ineffective measure ...

Why does this not work?

Relatively simple. When demand is greater than supply, prices rise. Now it's actually a widespread ideology among left-wing and right-wing ideologues that you only have to ban enough to not have to get creative yourself.

That already went thoroughly wrong in the vacation rental and rent control examples above. But what's so bad about sales restrictions? Wouldn't that move prices down?

Yes, it would indeed. Suddenly, demand would collapse. Until investors would then collect the properties at a favorable price. Probably behind nested corporate structures. With a Spanish company at the front. So if the government should not succeed in effectively preventing this in a possible bill, this would be the first point where a law would simply be leveraged or, as already explained, would possibly not be in conformity with European law.

These villas, which have been built since about the 80s, especially in the southwest or even in Son Vida, were always conceived as luxury products in their time. They were never part of the normal housing market. Rather, they were developed as new residential areas by Mallorcans who owned huge tracts of land there. A beautiful Mallorca can't afford that ...

The people who would have liked to buy in Mallorca would then rent. So rents would continue to rise. Maybe not in the normal segment, but at least in the luxury segment. Other customers would go to other locations. Because Mallorca is fantastic. But if the disadvantages of the product get out of hand due to an excessive and non-targeted regulatory frenzy, more and more customers will turn away. After all, the package has to remain attractive.

In addition, I would also like to list the revenue side once. The land transfer tax here is so far at 8-11.5%, from next year probably 13% at the peak. In my opinion, this is the main source of income for the Balearic Islands. With every real estate transaction, the island government opens its pockets very wide. In a way that is alien to us even in Germany. This income would of course be massively reduced. And also the building activities, which consist meanwhile massively increasing of conversions of already existing objects, would reduce. With the whole chain reaction that would then follow.

Who does it better?

It pains me to bring this over my lips. But honestly, the northern Tyroleans do it better. They call themselves Tyroleans in a bit of a labeling gimmick. They have devised a so-called leisure residence designation, which only relatively few houses or apartments have. And only there may a person live who does not have his or her first residence. Has that worked? No, it actually only caused legal uncertainty and most southern Germans, if they could afford it, still threw themselves into the madness of property without legal security. And the enterprising North Tyrolean usually ignores his 11-month absentee neighbors because he knows that this is just how the region's income is generated. But how have the Austrians managed to solve the problem of affordable housing?

They have designated building areas created for people and families working in the region. There, the building land prices are affordable and the buyer has to live with a corresponding earmarking for decades. Has that solved the problem? Certainly not completely, but it is a good concept. Because it creates solutions up front. And not simply prohibits.

But what is the solution?

To solve the housing shortage, there is only one sensible answer: build! This has not been done significantly in the past. And this is something that runs through pretty much all governments. Housing construction packages are promised, social housing construction is announced.

This housing would have to be purpose-built. Not only social construction, but simply good residential areas that are affordable because of the affordable land, affordable also for the ownership of the residents. Not only for renting.

But as long as governments persist in dull inaction, they must then adopt populist measures that everyone knows will not achieve their goal.

References

https://www.mallorcazeitung.es/immobilien/2022/10/25/immobilien-verkauf-nicht-residenten-parlament-77700095.html

https://www.mallorcamagazin.com/nachrichten/politik/2022/10/26/106499/immobilien-auf-mallorca-parlament-will-verkauf-nicht-residenten-limitieren.html

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