Turning point or breathing space? What Mallorca's rental market is really revealing

Turning point or breathing space? What Mallorca's rental market is really revealing

Key question: Is this a sustainable turning point—or a valve closing because tenants have reached the limits of their means?

On Passeig Mallorca in the early morning the usual sounds are present: a van honks, a café owner sweeps the terrace, and the little slips reading "Alquiler" with hardly believable figures still hang in the windows of the estate agencies. The state observatory for the rental market (Observatorio del Alquiler) actually records a slowdown for 2025: while growth nationwide was around 11.3 percent in 2024, it fell to 5.9 percent in 2025 — in the Balearics Mallorca still records average monthly rents of about €1,643. At the same time, more than a hundred interested parties typically compete for a single apartment. The question is: why is the pace slowing?

Critical analysis: The observatory makes an important point: the slowdown does not stem from a sudden increase in supply, but from the fact that many households are no longer willing or able to accept higher prices. Anyone who spends almost half of their income on rent eventually has no reserves left. That dampens demand at the top — but it does not solve the underlying problem. A market that is "stabilized" because buyers and tenants are economically halted is not a socially acceptable market.

What is missing from the public debate: people often talk about averages, not about distribution. The figure €1,643 says little about the many households that have to get by on €700–900 or the pensioners who are being pushed out. There is also little open discussion about forced sales, evictions and the actual waiting times for social housing. Data on vacant apartments, conversions into holiday rentals and the turnover of rental contracts are missing from the headlines — although they are decisive for understanding whether anything will change in the long term.

An everyday scene: In Son Gotleu an elderly woman is having breakfast near the Mercado de l’Olivar. She says her grandson can no longer find a room in Palma, even though he holds down three jobs. On the way back to Plaza Mayor a young tradesman with a toolbox stands in front of a single-family house that has been empty for months — the "Se vende" sign has faded. Such small observations add up to a picture: scarcity remains, displacement remains, only payment capacity is collapsing.

Concrete solutions: In the short term, municipalities must increase transparency. A mandatory register for vacant apartments and holiday rentals, better information exchange between municipalities and tax authorities to detect conversions, and stricter sanctions for illegal short-term letting would ease pressure on the market. Tax incentives could motivate landlords to offer long-term leases instead of catering to holiday guests — tied to binding minimum rental periods.

In the medium term, more affordable housing is needed: municipal housing construction programs, accelerated conversion of suitable existing stock into social housing, and subsidized loans for cooperatives and self-help projects. It is important to consider mobility: better bus and bicycle connections in suburbs and peripheral areas allow people to live more affordably without being completely cut off.

Legally and financially, instruments are conceivable that address the imbalance: progressive vacancy taxes, a transparent categorization of rental properties in the land register and targeted subsidies for low-income households. All of this must be linked to clear deadlines and benchmarks, otherwise measures risk becoming mere symbolic politics.

What matters now: politics and administration must not hide behind falling percentage figures. A breathing space in price growth is no solution when 137 applicants compete for one apartment and families are pushed further to the periphery. The observatory has put its finger on the wound: demand is capped, not regulated. Those who want real relief must act on two levels — create supply and change market structures.

Pointed conclusion: Yes, the numbers point to a turning point — but it is a turnaround born of exhaustion, not of planning. In Palma's streets you hear the rustle of empty wallets louder than the debates about short-term breathing spaces. If the island government, municipalities and landlords do not now jointly set rules and create housing in a targeted way, the "stabilization" will remain a deceptive calm that will break apart at the next upswing.