Price Shock in Palma's Old Town: Townhouse Doubles Price Within Months

Price shock in the heart of Palma: Doubling within a few months

On a windy morning, the smell of freshly brewed espresso mixed with the sound of scooters and church bells, I heard in a small bakery near the Plaça Major someone say: 'That house there now costs €18.5 million.' A few steps further the listing was indeed on display — a lovingly renovated townhouse in a narrow side street, with a roof terrace, jacuzzi and heated pool. Where baskets were once woven, the agency now advertises luxury at €25,000 per square metre.

The central question

The guiding question is simple but uncomfortable: Should Palma's historic fabric become a commodity bought by a few, while the neighbourhood slowly dissolves? That the price rose from about €9.2 to €18.5 million does not answer that question. But it shows how quickly signals can be sent — and how little prepared the city seems to be.

What may be behind the price explosion

Several drivers can be identified in a brief analysis: first, the scarcity of truly historic, centrally located houses — they are simply rare and coveted. Second, the role of anchors: a high asking price sets expectations that other agents follow. Third, an investor is often behind the scenes who wants to flip quickly or to pad a portfolio for very wealthy buyers. Fourth, the phenomenon unfolds in a market where holiday rentals, second homes and foreign buyers have influenced prices for years.

Less visible but relevant: who buys such houses? Cash buyers from abroad, companies registered elsewhere, trusts. Such transactions leave few traces in the daily lives of the people who buy their newspaper in the bakery in the morning and fill the street cafés in the evening.

The local consequences

The impact is tangible for local residents: small workshops and shops face rising commercial rents. Rental apartments in side streets reach new price levels; craftsmen who have worked here for generations can hardly find premises. The old town is slowly losing its diversity — instead of weaving workshops or basket-makers, showrooms and expensive holiday apartments are appearing. The loss of daily life is subtle: fewer children in the street, more vans with designer furniture.

What is often overlooked

Two aspects are rarely discussed. First: the paradox of tax revenue. Luxury sales do bring high taxes in the short term, but they also raise the cost of living and can shrink businesses in the medium term — leading to lower everyday purchasing power. Second: cultural dilution. A façade may be preserved, but the interior is often refitted to international standards — displacing local craft knowledge.

Concrete opportunities and solutions

There is more than outrage. The city administration and citizens can act. Some concrete proposals:

Transparency: Reporting obligations for exclusive offers and documentation of ownership structures to clarify investor access.

Light regulatory measures: Municipal pre-emption rights for particularly protected houses, short-term rental limits in sensitive neighbourhoods and targeted occupancy obligations that tax vacant luxury flats.

Support for the local economy: Rental subsidies or tax incentives for craft businesses, pop-up spaces for local shops and workshops, affordable studio rents for artisan makers.

Common-good models: Community land trusts or cooperatives could secure parts of the old town for permanently affordable uses — instead of leaving everything to the free market.

Looking ahead

Whether the house in question will actually sell for €18.5 million is unclear. The enormous sums are signals that reach far beyond a single listing. Palma stands at a threshold: do we want an old town that only shines for photos on social media — or spaces where people live, work and carry on traditions?

The decision is not made by regulations alone. It arises on the street, over espresso, when neighbours say: 'The neighbourhood is changing, you can feel it.' Write to me if you have comments, observations or your own story from the old town. Such discussions often start right here — with an honest remark between church bells and coffee steam.