Palma in Transition: Where Incomes Soar — and Who Still Owns the City

Palma in transition: Neighborhoods that gain — and those left behind

When the cortado steams on the plaza in the morning and the seagulls shriek above the Lonja, you can hear two stories at once here: the clatter of drills on a renovated façade and the quiet whisper of a neighbor saying she may soon not be able to afford the rent. The numbers confirm what many on Carrer de Sant Miquel already feel: Palma is drifting apart. The new figures are examined in Two Palmas: Why the wage gap in Palma is growing — and what should happen now. Citywide, average incomes rose by around 26.26 percent over the past ten years. The distribution, however, is far from even.

Who benefits: Sant Jaume, Nou Llevant and the new upper class

At the top are neighborhoods like Sant Jaume, where households now earn on average more than €60,000 per year and incomes climbed by almost 59 percent in a decade. In Nou Llevant there are similar jumps, almost +50 percent. Luxury apartments with glass balconies, concierge services and parking for SUVs are being built there. Buyers often come from abroad — Germany, Sweden, Italy — bringing capital with them. This changes the neighborhood both acoustically and visually: instead of Spanish chatter you hear English in the new cafés, and on sunny days the air conditioners of penthouses hum above the Passeig.

The other side: El Arenal and the widening gap

At the other end is El Arenal with an average income of only around €25,600. That is almost a third of what is earned in Sant Jaume. Such differences are more than statistics — they are audible at school, noticeable at the baker's, visible in closed shop windows. Sales prices that used to be around €140,000 are suddenly being offered for €220,000 to €300,000. New apartments in good locations often now cost between €500,000 and over €1.2 million. The consequences: rising rent pressure, displacement and a sense of alienation.

What is often missing from the public debate

The discussion is not just about numbers and luxury. Less noticed are mechanisms such as empty apartments used as second or holiday homes, the influence of international investors on land prices, and the interaction between tourist demand and long-term housing. In Sant Jaume residents report that many flats stand empty for months — owners only come in the summer. The result is a social vacuum: fewer stable neighbors, fewer local networks, more anonymous condominiums. This complexity is explored in Palma at Two Prices: Why the Same Square Meter Can Suddenly Be Luxury, and a concise assessment of cost pressures is available in Palma 2025: Second-most expensive city in Spain — what that really means.

Concrete effects on everyday life

You can hear it on the streets: the ticking of new parking meters, the whirr of electric scooters, the clinking of glasses in newly opened tapas bars that use English menus. For some this brings better infrastructure, a new bakery, cleaner façades. For others it means familiar shops disappear, rents rise and young families move away. Small craft businesses complain about rising shop rents; long-established bars close because their clientele changes.

What to do now — proposals from urban research and practice

The central question is: How can Palma prevent the city from becoming only luxury islands and socially weak peripheries? There are concrete levers that could have real effects beyond empty slogans:

1. Quotas for social housing — require a share of subsidized units with every new building permit. This helps preserve social mix.

2. Vacancy and second-home tax — those who leave properties empty as holiday homes should be charged more.

3. Tenant protection and transparent rental contracts — more legal certainty for tenants, stricter rules against short-term conversions into holiday rentals.

4. Support for local businesses — rent subsidies, cooperative retail spaces and grant programs for traditional crafts.

5. Municipal land policy — use city-owned plots for mixed, permanent neighborhoods, possibly in the form of a municipal housing fund or community land trusts.

Outlook: Negotiating instead of watching

Palma will change — that is inevitable with sun, sea and international interest. What matters is how the change is guided. If everything is left to the market, the city risks splitting into segments: exclusive zones with expensive penthouses beside neighborhoods where money is scarce. If politics, developers and communities now negotiate rules together, Palma can become a model for sustainable urban development: a city where you still greet your neighbor in the morning, where bakers and new cafés exist side by side, and where quality of life is not decided solely by a postal code.

Until then you sit on the plaza, drink your cortado, hear the hammering on the corner — and ask who the city belongs to. The answer lies not only in the numbers. It lies in the decisions we make now.