Spain’s Balearic Islands plan to scrap property purchase taxes for younger buyers

Buying your first home in Mallorca, Ibiza or elsewhere in the Balearic Islands could become significantly cheaper under new plans to remove two regional property taxes for younger buyers. The proposed changes would eliminate property transfer tax and stamp duty for eligible first-time buyers under 36, potentially saving them thousands of euros.

The measures were announced on Tuesday, October 20, by Balearic Islands President Marga Prohens during the regional parliament’s annual general policy debate. They would apply across Mallorca, Menorca, Ibiza and Formentera, with additional tax reductions planned for buyers aged 36 to 40.

However, the new exemptions have not yet come into force. The regional government has not announced an implementation date or published the full eligibility requirements, meaning buyers cannot currently assume they will qualify.

According to the Balearic government’s official announcement, the proposals form part of a wider effort to make homeownership more accessible in one of Spain’s most expensive housing markets.

Which property taxes could disappear for younger buyers?

The proposed reform focuses on two taxes that can add substantially to the cost of purchasing a property in Spain.

The first is Impuesto sobre Transmisiones Patrimoniales (ITP), or property transfer tax, which generally applies when buying a second-hand home.

The second is Actos Jurídicos Documentados (AJD), commonly referred to as stamp duty, which applies to certain notarised documents, including those associated with new-build property purchases.

Under the announced plans, buyers under 36 purchasing their first home would be exempt from both regional taxes, provided they meet the conditions eventually established.

People with disabilities buying their first home would also qualify for the proposed exemptions.

For buyers aged between 36 and 40, the government intends to reduce both taxes by 50 per cent.

The announcement also includes a separate 50 per cent stamp duty reduction on qualifying mortgage loans for buyers under 36 and people with disabilities, provided the tax saving is reflected in the cost of the mortgage.

These measures would expand tax advantages already available in the Balearic Islands.

Under the regional government’s existing housing tax rules, qualifying first-time buyers under 30 can already benefit from an exemption from property transfer tax. Buyers under 36 who meet the relevant conditions may qualify for a reduced ITP rate of 2 per cent, or 1 per cent for certain price-limited homes.

The new proposal would therefore be particularly significant for eligible buyers aged 30 to 35, who could move from paying a reduced rate to paying no property transfer tax at all.

How much could first-time buyers save in Mallorca and Ibiza?

The potential savings depend on the purchase price, the type of property and the buyer’s eligibility.

For example, someone aged 32 buying a qualifying second-hand home for €250,000 under the current 2 per cent ITP rate would pay €5,000 in property transfer tax. If the proposed full exemption were introduced and the buyer met the new requirements, that €5,000 charge could disappear.

The example is illustrative rather than a guaranteed saving. The final rules may include property value limits, income thresholds and other conditions.

Existing tax relief in the Balearic Islands already comes with restrictions. Depending on the benefit, buyers may need to demonstrate that the property will become their main residence, meet income limits or satisfy minimum residence requirements.

This distinction is particularly important for foreign buyers.

The announcement does not establish a general tax exemption for British buyers or other foreign nationals purchasing holiday homes. The measures are aimed at access to a first home, and the government has not yet clarified all the conditions that will apply to foreign residents.

The tax proposals are accompanied by other housing initiatives.

Funding for public mortgage guarantees under the Nova Hipoteca Jove scheme is set to increase from €30 million to €45 million. The regional government also plans to strengthen its existing €10,000 home purchase grants to help more eligible buyers.

A new regional income tax deduction is planned for young people saving towards their first home.

Together, the measures are intended to reduce some of the financial barriers facing people trying to enter the property market.

When will the new property tax exemptions take effect?

For now, there is no confirmed start date for the new exemptions.

The proposals must still be translated into the relevant legal measures, with their conditions and effective dates established before buyers can rely on them.

Anyone considering purchasing a property in Mallorca, Ibiza, Menorca or Formentera should therefore check the rules in force at the time of their transaction rather than assuming the announced reductions already apply.

The reforms come against a backdrop of significant pressure on the islands’ housing market.

According to figures presented by Prohens and reported by Spanish news agency EFE, the Balearic Islands’ population has increased by 47 per cent over the past 25 years, while the housing stock has grown by 31 per cent.

The regional government estimates that the islands face a shortage of approximately 17,000 homes.

Its broader housing strategy, known as HABITA_IB 4+4, includes around 50 additional measures planned for 2027 to 2031, alongside existing initiatives. The government says the overall programme is intended to benefit 87,000 residents.

Prohens has also announced plans to allow revenue from the islands’ sustainable tourism tax to support housing policies, subject to legislative changes.

For younger residents hoping to buy their first property, removing purchase taxes could reduce the amount of money needed upfront. However, the practical benefit will depend on the final eligibility rules, property prices and access to mortgage financing.

Until the new measures are formally approved and their implementation dates confirmed, the existing property tax rules remain the reference point for buyers across the Balearic Islands.