Holiday home boom to continue in the Balearics

PALMA
THE number of holiday homes built in Spain will drop by 11.4 per cent this year, to adapt to a much more moderate demand, although this is not expected to affect the Balearics, where demand is rising.

This was revealed in a market survey by the Grupo i, who canvassed property developers.
It said that the construction of holiday homes will drop over the next few years unless there is a change in the factors affecting demand, which is now more moderate.

The demand for holiday homes will grow by 1.6 per cent, to 90'200 homes, 30'000 of which will go to foreign buyers.
Raul Garcia, the director general of Grupo i, said yesterday that the holiday home market is undergoing a period of readjustment, caused by an increase in prices, a drop in return for people who buy as an investment, scaremongering in the media following a series of real estate scandals and what he described as an obsolete system of marketing.

Demand for holiday homes in Spain by the Portuguese and Irish will rise by three percentage points by 2011, although there will only be a moderate demand from the United Kingdom, Holland and Norway. Demand from Germany, Sweden, Italy and France is expected to drop.

Garcia said that real estate promoters had tried to improve the image and sale of holiday homes abroad to reactivate the market and increase potential demand by about 90'000 units.

Demand for the Balearics and the Canary Islands will rise, he said, to the detriment of the Costa del Azahar, Costa Blanca and Costa del Sol.
However, the rate of growth in sales has started to slow down, after peaking at 8.7 per cent in 2005, and dropping to 4.9 per cent last year.
The increase in prices is also slowing down, and forecasts for this year are an increase of 5.3 per cent, and for next year, on a par with inflation.