Lack of foreign demand and residents' loss of purchasing power has caused a 10% drop in rental prices since the beginning of the coronavirus pandemic, according to the Balearic Association of Real Estate Services, or ABSI.
The Real Estate Sector was badly affected by the Covid-19 crisis and apartments that used to be snapped up within hours are now taking much longer to rent.
ABSI says small apartments that are cheaper apartments are still renting relatively quickly, but the larger, more expensive properties that cost upwards of 900 euros per month are much more difficult to rent.
Prices are expected to slide even further in the coming months when more properties are available for rent.
Many properties were rented to seasonal workers who travel to the Islands every summer and some were used as holiday rentals, despite the ban on renting flats to tourists in Palma.
According to a recent ABSI survey 74% of estate agents agree that there has been an increase in the supply of long-term rental housing in the last few months, causing a "radical change" in the rental market.
Before the coronavirus crisis, demand for rental properties far outstripped supply and prices soared to almost the same level as Madrid and Barcelona.
Real Estate Agents started to notice an increase in the number of rental properties at the end of August and ABSI estimates that 500 new homes were added to the rental market within a few months.
ABSI says around 30% of holiday apartments have been changed to long term rentals, but that most of those were not previously registered as tourist properties and that legal tourist rentals have not changed their use.