Rise in the cost of Balearic housing one of world´s highest

This week's Economist quarterly global house-price index ranks Spain in third place with a third quarter rise in house prices of 17.2 percent, compared to last year.

However, the Balearic property price rise was slightly higher at 18.8 percent with Palma real estate posting a price increase of 20 percent.
In Ciutadella, Minorca, house prices have risen by 24.4 percent this year, in Mahon by 22.2 percent and Ibiza 18.6, all well above the Spanish national average rate listed by The Economist.

Nevertheless, despite the rise in house prices being higher in the Balearics than the national Spanish average, it has not been as sharp as in South Africa where prices have risen by 35.1 percent or Hong Kong's 31.2 percent.

The Economist global house price index was launched in 2002 and now covers 20 countries.
The conclusion to the third quarter report is that Spain, in particular the Balearics, has enjoyed the biggest rise among the developed countries more so than in New Zealand, France, Britain, Switzerland and the United States, for example.

In Germany and Japan, house prices have actually fallen.
In general, however the Balearics and Spanish house price trend is in-keeping with the rest of the developed world.
Over the past year, house prices have risen by 10 percent or more in 11 of the countries tracked.
Never before have so many countries had housing booms at the same time. What is more, in Spain, Britain, Australia, France, Ireland, the Netherlands and America, experts say that house prices have hit record levels in relation to income.

In other words, ratios of prices to incomes are now above levels that have proved unsustainable in the past and have been followed by a fall in house prices or the property bubble bursting.

However, while such a conclusion may apply to Spain in general, here in the Balearics, average earners are unable to afford adequate housing and the local government is having to subsidise first-home buyers to help them get on the property ladder. This year, the average wage increase in the Balearics has been the lowest in Spain - just 2.9 percent, well below the average increase in house prices.

The national average wage increase this year has been 2.95 percent, six points down on last year and with only the Balearics and Asturias falling behind.

In stark contrast, workers in the Basque Country, another area of Spain where property is expensive, enjoyed a 3.53 percent pay increase, Cataluña 3.30 percent and The Canaries 3.19 percent.

Higher wages and cheaper housing is one reason why many mainland residents in the Balearics are returning home.