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<p>The Balearic Islands, like other tourism-dependent economies, face growing pressure on their real estate market due to rising visitor numbers and a&#xa0;growing resident and non-resident population. Given this context, this paper examines how the increase in real estate prices affects the prices of other goods and services in the Balearic economy by employing an input-output price model for the period from 2015 to 2023. With this methodology, it is possible to analyse how changes in housing prices propagate through the economy, affecting the prices of other goods and services and ultimately influencing overall inflation as measured by the gross domestic product implicit deflator (GDPD). The results indicate that the inflation generated in the rest of the economy due to rising real estate prices reached 3.5% in the domestic model, representing 15.1% of the GDPD. Similarly, in the total model, this inflation stood at 2.9%, accounting for 12.4% of the GDPD. The increase in inflation driven by real estate price increases in a&#xa0;tourism-dependent economy such as that of the Balearic Islands not only leads to a&#xa0;loss of purchasing power for the resident population but also reduces the region’s competitiveness as a&#xa0;tourist destination. These findings suggest that policy measures aimed at moderating housing prices—through fiscal, regulatory, or planning instruments—could also serve as effective tools for inflation control.</p>

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The impact of housing prices on inflation in tourist-Driven economies

  • 期刊论文

  • 发表日期：

    2025年11月21日

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  • Maria Sard,
  • Maria Tugores,
  • Elisabeth Valle

摘要

The Balearic Islands, like other tourism-dependent economies, face growing pressure on their real estate market due to rising visitor numbers and a growing resident and non-resident population. Given this context, this paper examines how the increase in real estate prices affects the prices of other goods and services in the Balearic economy by employing an input-output price model for the period from 2015 to 2023. With this methodology, it is possible to analyse how changes in housing prices propagate through the economy, affecting the prices of other goods and services and ultimately influencing overall inflation as measured by the gross domestic product implicit deflator (GDPD). The results indicate that the inflation generated in the rest of the economy due to rising real estate prices reached 3.5% in the domestic model, representing 15.1% of the GDPD. Similarly, in the total model, this inflation stood at 2.9%, accounting for 12.4% of the GDPD. The increase in inflation driven by real estate price increases in a tourism-dependent economy such as that of the Balearic Islands not only leads to a loss of purchasing power for the resident population but also reduces the region’s competitiveness as a tourist destination. These findings suggest that policy measures aimed at moderating housing prices—through fiscal, regulatory, or planning instruments—could also serve as effective tools for inflation control.