THE rising house prices in Majorca have mainly been caused by the dramatic increase in land prices, which have gone up by 261 percent in the last twelve years, according to a study drawn up by the President of the Majorcan Quantity Survevors and Architects College, Jaume Gibert Salamanca.
This study is based on results from 140 property developers building average housing in the outskirts of Palma between 1992 and 2004.
The conclusions show that the price per square metre of land to build housing was 216 euros in 1992, which then grew to 781 euros for the same type of land in Palma last year.
The study looked at land in areas like Santa Catalina, Son Cotoner, Son Nadal, Plaza de Toros, Reyes Católicos and even included Molinar and Cala Gamba amongst others. It confirmed that the price of land is the most outstanding factor in the increasing house prices in Palma and even the rest of Majorca, which has made it impossible for young people to get on that first rung of the housing ladder. This diagnosis is shared by the Balearic Property Development Association, which also believes that certain political policies that help to promote tourism development, have led to this house price spike which has in turn kept the young people out of the housing market.
The second biggest factor for these expensive house prices is the increased production costs, said Gibert. He cited the avalanche of rules and regulations from the central and regional Governments in the last fifteen years as the culprit. The Governments have been trying to improve the quality and safety of new buildings and a result all these regulations have made it more costly for house builders, as well as making the materials and architectural services more expensive.
The house building costs have increased by 171.9 percent in this same period, said Jaume Gibert, who added that the new laws state that property builders must guarantee the building for ten years.
The historic fall in interest rates in this period (from 15 to 3 percent) has meant that demand for houses is still high and buyers are still in a position to purchase.