WRITTEN QUESTION E-1635/01

by Pere Esteve (ELDR) to the Commission

(12 June 2001)

Subject: Property purchases in Majorca

Recent studies by the University of the Balearic Islands estimate that in the island of Majorca over 15 % of the land now belongs to German citizens. In the Serra de Tramuntana

in the north of the island this percentage is as high as 25 %, and in some municipalities German citizens already own over half the land. The German consulate in Majorca estimates that 90 000 Germans possess property in the island.

Meanwhile, the price of housing in the Balearic Islands has gone up by 26,6 % in the last year alone. The Balearic Islands are the region of Spain where house prices have risen the most.

The Commission has recently recognised that property purchases are a politically highly sensitive subject in most of the countries which are candidates for EU membership. and has proposed restricting the purchase of secondary residences during a five-year period.

At one point the EU Treaty included a Protocol No 1 under which Denmark was allowed to keep its existing legislation on purchases of property other than the houses of permanent residents.

In view of these precedents admitted by the EU institutions, and given the exceptional circumstances existing in the Balearic Islands as far as property purchases are concerned, can the Commission state whether it is aware of this situation? Does it intend to take any kind of measures to tackle this problem affecting the Balearic Islands? Why is it felt that protection in this field is owed to certain parts of Europe when a region like the Balearic Islands suffers from similar problems and yet remains unprotected?

Answer given by Mr Solbes Mira on behalf of the Commission

(31 July 2001)

The movement of capital is a fundamental freedom guaranteed by the provisions in Articles 56-60 (ex Articles 73b-73g) of the EC Treaty. Article 56 restates the principle of full liberalisation of capital movements between Member States as already introduced in Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the EC Treaty(1).

The EC Treaty does not itself define capital movement. However, the Court of Justice uses the nomenclature of capital movements annexed to the above mentioned directive as an indicative, non-exhaustive, list of capital movements. This nomenclature includes investment in real estate, both investment in real estate on national territory by non-residents and investment in real estate abroad by residents, as a capital movement category.

Consequently, the investment by Community citizens in real estate in the Balearic Islands is free. Any restrictions on such movements would represent an infringement of the EC Treaty unless it was allowed by Article 57 or justified on grounds of public policy, public security or public health. However, and according to the Court of Justice, these exceptions have to be understood in a narrow sense and exclude any interpretation based on economic considerations.

As far as the Honourable Member's last question is concerned, the Commission would like to recall that Danish restrictions on the purchase of second homes are the one Member State specific exception to the free movement of capital within the Community. Protocol No 1 on the acquisition of property in Denmark is an integral part of the EC Treaty and there are no time limits set on its duration. Any changes in this particular provision would require a modification to the EC Treaty agreed by all Member States, including Denmark, or a unilateral relaxation by Denmark of its restrictions.

As regards candidates for Union membership, certain temporary exceptions to the EC Treaty have been granted in the context of accession negotiations. Among these are the transitional measures on real estate (agricultural land, forestland and secondary residences). However, unlike Protocol No 1, these measures are temporary.

(1) OJ L 178, 8.7.1988.