The housing shortage has become a top priority for the Balearic Islands. The high season is approaching, and workers are needed—and those workers need places to live. The lack of supply is driving up prices and creating a bottleneck that is difficult to resolve in the short term. Even so, the Balearic economy is booming, outpacing the rest of Spain.
In 2024, the region’s Gross Domestic Product (GDP) grew by 4.2%, making it the second-fastest-growing autonomous community after the Canary Islands and Murcia. In per capita terms, it ranked second. Productivity in the region rose by 3.5%, also placing it at the top of the regional rankings, with average earnings per employee nearing 40,000 euros.
These are the latest official figures from the National Institute of Statistics (INE). According to BBVA Research, growth would have continued to be strong in 2025, at 3.2%. Growth of 2.5% is projected for 2026, which is more in line with the average recorded between 1995 and 2019 (2.3%). In any case, these growth rates are higher than those expected for the country as a whole (2.8% in 2025, and a forecast of 2.4% in 2026).
Tourism as a major driver
Tourism underpins a large part of the Balearic Islands’ economy. Nearly 19 million people visited the islands last year, the vast majority of whom were from abroad. Looking ahead, a certain slowdown is expected, as tourism may be reaching its capacity limits and also faces rising costs due to the geopolitical context.
According to the bank’s research department’s real-time analysis of tourist spending—based on card payments made by Spanish and foreign nationals—Easter week in the Balearic Islands was weaker than in previous years, a temporary slowdown that experts attribute to the wintry weather and the challenges posed by the geopolitical situation.
In any case, economists also point out that this geopolitical uncertainty, which largely affects competing markets, may temporarily allow the tourism industry to benefit from a certain “safe-haven effect.” They note that events such as the Arab Spring or terrorist attacks led to shifts in travel patterns that benefited tourism in Spain.
More housing for newcomers
Employment continues to rise as well. In April, the most recent data available, Social Security recorded an average of 605,630 new enrollments, a 3.1% increase from a year earlier. Nationwide, the increase was 2.4%. This is the first time this month that the 600,000-job mark has been surpassed in the Balearic Islands, with services—particularly hospitality and retail—as the main drivers.
The unemployment rate has reportedly already fallen to 9%, according to BBVA Research, and is expected to end the year below that level, at 8.6%. The challenge now, however, is to match that decline in unemployment with job openings in manufacturing, construction, and certain service sectors. Companies are finding it increasingly difficult to find workers with the training they need, compounded by a lack of generational turnover, particularly in construction.
In this regard, the housing shortage is the main bottleneck for the resident population and also for attracting workers. Data from the INE and the Ministry of Housing show that since 2021, 26,000 new households have been formed in the Balearic Islands, while 17,500 homes have been built. This represents a shortfall of 33%. Nationwide, the gap between households created and homes completed between 2021 and 2025 exceeds 55%.
In absolute terms, the shortfall stands at 8,500 homes. However, the Balearic Islands are in a better position than the vast majority of provinces when it comes to another existing bottleneck: the lack of electricity for construction. BBVA’s research department estimates that more than 90,000 homes could be built on the islands using the existing electricity capacity.
