Cheap apartments in Palma de Mallorca: investing beyond the tourist market

Mallorca has a perception problem in property analysis: media attention focuses on the luxury markets (Puerto Portals, Andratx, Cala Rossa), where international prices are sky-high, and that creates the impression that the whole island is out of reach for the standard yield-focused investor. The reality is different: Palma de Mallorca is a metropolis of 420,000 inhabitants (600,000 in the metropolitan area) with an urban housing market that has real opportunities for investors who know where to look.

We're not talking about the luxury villas of the Serra de Tramuntana or the beachfront apartments in the east of the island. We're talking about the residential neighbourhoods of the city of Palma, where Mallorca's middle and working classes work, live and rent.

The price per square metre in the city of Palma in 2026

Palma has an overall average price of between €2,800 and €3,800/m² in 2026. That is noticeably higher than on the mainland, but there are neighbourhoods where prices drop to the €2,000-2,500/m² range:

• El Coll d'en Rabassa and S'Arenal (Palma): The neighbourhoods on Palma's southern shoreline, the airport area. Prices between €2,000 and €2,800/m². Mixed demand from airport workers (AENA, airlines, ground handlers, duty-free) and seasonal tourism.
• Son Gotleu and La Soledat: Working-class neighbourhoods in the east of Palma with a high density of migrants and workers in the tourist service sector. The most affordable neighbourhoods in Palma (€1,800-2,300/m²). Strong rental demand, but tenant screening needs to be more rigorous.
• Son Cladera and Nou Llevant: Neighbourhoods in the north and east with prices between €2,000 and €2,600/m². Solid rental demand.
• Bons Aires and Nou de Bons Aires: Residential neighbourhoods in the north of Palma with a good quality of life and prices between €2,300 and €3,000/m². Upper-middle-class demand.

Real yields in Palma: lower than on the mainland, but with their own context

Rental yields in Palma are lower than in comparable mainland markets. An 80 m² flat bought for €200,000 (€2,500/m²) lets for €950-1,100/month, which gives a gross yield of 5.7% to 6.6%. In the most affordable neighbourhoods (Son Gotleu, La Soledat), the yield can reach 7.5-8.5%, but with a tenant profile that requires more hands-on management.

Why invest in Palma at 6-7% yields when there are mainland markets at 9-12%? Because a property in Palma has factors that the high-yield inland markets don't: very high liquidity (a flat in Palma sells within days if the price is right), consistent capital appreciation (prices in Palma have risen 40-60% over the last 5 years and are still rising), and the island has physical limits on growth that act as a permanent cap on supply (the PIAT, Mallorca's plan for tourist areas, limits the construction of new tourist beds and the development of new land).

The Airbnb tourist model in Palma: a market that is closing

Palma was one of the first cities in Spain to regulate short-term holiday letting aggressively. In 2018, Palma City Council banned holiday letting of flats in multi-family buildings (apartment blocks) throughout the municipality. With the amendment to the Plan General (the city's master plan) approved in May 2026, the entire municipality of Palma is a zone where tourist stays in homes cannot be marketed: no new ones are allowed, and only places already authorised can continue. For investors who want the Airbnb model in Mallorca, the alternative is the interior and the north coast of the island (Alcúdia, Pollença, Artà), not the city of Palma.

The Balearic ITP: progressive and high in the middle and upper bands

The Balearic Islands have a progressive ITP (impuesto de transmisiones patrimoniales, the property transfer tax): 8% up to €400,000; 9% from €400,000 to €600,000; 10% from €600,000 to €1,000,000; 12% from €1,000,000 to €2,000,000; and 13% above €2,000,000. For the residential investment market in Palma's working-class neighbourhoods (purchases between €150,000 and €300,000), the applicable rate is 8%, which is reasonable for an island with the demand Mallorca has. This 8% rate is better than Catalonia's (10%) or Valencia's (9%) and the same as Galicia's (8%).

Related resources: For the analysis of the Mallorca market beyond Palma (the luxury market, the north coast, the interior), which applies to different investor profiles, the article on investing in the Balearic Islands has the complete map of the island. For the inventory of assets in Palma, see opportunities in the Balearic Islands. For foreigners who want to buy in Palma (especially German, British and Scandinavian buyers, who are the most active on the island), the guide to buying as a foreigner covers the administrative and tax process.