Investors looking at build-to-let opportunities. | Alejandro Sepúlveda

According to a national study by real-estate consultancy CBRE, 35% of homes in the Balearics are rented - the highest percentage in the country. The national average is 25%.

This percentage in the Balearics is expected to increase in the coming years because of rising house prices. CBRE indicate that international funds are setting their sights on Mallorca in order to invest in new developments on a build-to-let basis. Profitability of this type of investment in the Balearics is put at around 4%, higher than in Barcelona and Madrid with 3%.

With regard to the housing market, the study shows that prices in the Balearics increased by 9.6% between the fourth quarter of 2020 and October-December 2021.

The increase in construction costs will continue to push up house prices, CBRE suggesting that this will be more so with modest-priced homes than those at the the upper end of the market. For the latter, the consultancy says, there will be "greater elasticity" in absorbing the higher cost of materials. However, the increase in costs will delay new developments, especially those for VPO "protected" affordable homes.

Another finding is that almost 39% of the homes sold in the Balearics in 2021 were purchased by foreigners. Tonia Vera, CBRE director in Palma, says that a shortage of land in the Balearics over the short to medium term will mean that the price of housing remains high and that there is a lack of supply.