Social housing in the Balearic Islands at risk due to rising construction material costs: "It will be difficult for prices to come down"

PalmThe Balearic Islands Construction Association warned on Thursday that the already rising prices of construction materials will skyrocket in the coming weeks due to the conflict in Iran. At a press conference, the association's president, Climent Olives, and managing director, Sandra Verger, cautioned that this situation could impact the public housing developments (VPO) planned under the Balearic Government's stimulus plan through the Balearic Housing Institute (Ibavi). "The longer this conflict drags on, the higher prices will rise, and it will be difficult for them to fall afterward," Verger stated, also highlighting the fragility of costs in an unstable geopolitical context. Olives added that, before the outbreak of the conflict, the sector was experiencing a boom that has completely changed in a matter of days.

The price increase will be mainly due to the rise in maritime transport costs, which have already increased by 10%, and the price of key materials: bitumen (+40%), cement, steel, aluminum, asphalt, ceramics, and energy. Diesel A, used by cars and trucks, has already risen by 40%, while diesel B, used by heavy machinery, has increased by 20%. According to Olives, civil engineering companies will be the first to feel the increase, especially in projects that use asphalt as the main material.

To minimize the effects, the association has called on the regional government, councils, and municipalities to incorporate price review mechanisms in all tenders with contracts longer than one year, including those for materials and energy. This would guarantee the participation of companies and prevent unsuccessful tenders, a problem that already affected 66 bids worth €65 million in 2025. They also propose reinstating direct fuel subsidies applied during the war in Ukraine and returning to the pre-2015 contracting model, which automatically adjusted for cost overruns.

More investment in construction

Regarding investment in construction, in 2025 it increased by 26.5% to €3.186 billion, with a 31% increase in private investment and a 13.7% increase in public investment. In Mallorca, investment rose by 32%, with a 40% increase in housing, while tourism infrastructure fell by 15%. In Menorca, the increase was 46%, and in the Pitiusas Islands, 24%. In terms of housing, 4,842 new homes were registered in 2025, including 708 legalizations in rural areas. Without these, there would have been 1,645 single-family homes (+18.5%) and 2,452 multi-family homes (+18.6%), figures still far from the 6,000–7,000 units per year considered optimal to meet demand. Regarding affordable housing, only 298 subsidized housing units and 9 privately developed subsidized housing units were approved, an insufficient number to reduce the accumulated deficit. According to the Builders' Association, without immediate measures, rising prices could slow the start of developments planned under the Ibavi Emergency Plan, affecting both subsidized housing construction and access to public housing. Olives and Verger did not explicitly state that "subsidized housing will be affected," but their warning about lengthy bidding processes and price revisions indicates that rising prices pose a real risk to public housing projects.