Balearic and Canary Islands for new-build buyers
On the islands, land for new homes is scarce and planning is tight, so new developments are fewer and tourist letting of a new home is largely closed off for its first years. Taxes differ: the Balearics charge IVA and AJD of 1.5% or 2%; the Canaries charge IGIC at 7% and AJD at 1%.
By Investidad advisory team · Last reviewed 16 Oct 2026
Scarcity shapes the market
Both archipelagos protect large parts of their land from building, and island and municipal plans limit new residential supply. New developments are therefore fewer than on the mainland coasts and often smaller: a handful of villas or a single apartment building rather than a large resort. Buyers should expect to act quickly on suitable projects and to check planning carefully.
Access is by air: Palma and Ibiza airports in the Balearics; Tenerife South, Tenerife North and Gran Canaria in the Canaries. The Canaries have a mild climate all year, which supports year-round living and long-term letting.
Areas we cover
- Mallorca: Palma for city living, and the southwest (Calvià, Andratx, Santa Ponsa) for coastal homes and marinas.
- Ibiza: Ibiza town, Santa Eulalia and Sant Josep; a small, premium market.
- Tenerife: the sunny south (Adeje, Arona, Los Cristianos) and the north (Santa Cruz, Puerto de la Cruz).
- Gran Canaria: Las Palmas for city life, and the south (Maspalomas, San Bartolomé de Tirajana, Mogán) for resorts.
See the islands on the regions page.
Purchase taxes
- Illes Balears
- SALES TAXIVA 10%
- AJD1.5%; 2% from about €1 million
- NOTESince 2023. Check the exact threshold with your lawyer
- Canarias
- SALES TAXIGIC 7%
- AJD1%
- NOTEIGIC replaces IVA; lower IGIC rates apply only to a main home within value and income limits
| REGION | SALES TAX | AJD | NOTE |
|---|---|---|---|
| Illes Balears | IVA 10% | 1.5%; 2% from about €1 million | Since 2023. Check the exact threshold with your lawyer |
| Canarias | IGIC 7% | 1% | IGIC replaces IVA; lower IGIC rates apply only to a main home within value and income limits |
On a €900,000 villa in Mallorca, illustratively, IVA is €90,000 and AJD €13,500 at 1.5%; at €1.1 million, AJD at 2% would be €22,000. On a €400,000 apartment in Tenerife, IGIC is €28,000 and AJD €4,000. Compare with a resale purchase in the purchase cost calculator.
Tourist rentals: largely closed to new homes
- Balearics: by default a home must have had five years of private residential use before tourist letting, tourist places are capped, Decreto ley 4/2025 bars new tourist places in apartment buildings on all islands, and Palma has moved to stop new tourist rental places altogether.
- Canaries: under Ley 6/2025, in force since 13 December 2025, tourist use is allowed only where municipal planning expressly permits it, and a home must generally be at least 10 years old (5 on El Hierro, La Gomera, La Palma and in depopulation-risk municipalities).
In practice, buy a new home on the islands to live in or to let long term, not on the assumption of holiday-let income. Details are in tourist rental licences by region and letting long term.
Questions buyers ask
- Can I let a new villa in Mallorca to tourists?
- Generally not at first. The default rule requires five years of residential use, tourist places are capped, and some municipalities, including Palma, have stopped new places. A detached villa outside Palma is the most likely candidate in the long run, but check the island zoning and the availability of places before you buy.
- Why is the Canary Islands tax lower?
- The Canaries have their own economic and tax regime and charge IGIC at 7% instead of IVA at 10%, with AJD at 1%.
