Unusual trends in housing sales and rentals in the Canary Islands amid supply shortage and peak prices

Adding to this, the allure for the tourists, who possesses a "much higher" purchasing power, results in the "housing displacement" of local residents from certain areas in the Canary Islands, remarks María Matos, Director of Studies at Fotocasa.

María Matos, the Director of Studies at Fotocasa, highlighted that the Canary Islands concluded the year 2023 experiencing unconventional trends in the housing market, both in terms of sales and rentals. This was primarily attributed to a constrained supply, a natural consequence of the islands’ geography, and the escalation to record-breaking price levels, as evidenced by the Fotocasa Real Estate Index data.

In detail, the archipelago witnessed the peak sale price reach 2,421 euros per square meter by the end of 2023, alongside recording the second highest rental rate in its history at 12.79 euros per square meter.

Matos elaborated in an interview with Europa Press that the reasons behind these steep prices are multifaceted. The inherent limitation to expand housing supply due to the geographical isolation of the islands, compounded by the influx of tourists with significantly greater financial means, has effectively displaced local residents from certain areas.

Furthermore, Matos revealed that foreigners account for 28 percent of home purchases in the Canary Islands. This figure escalates to 38 percent in Tenerife and 23 percent in Gran Canaria, contrasting with regions like Alicante, where property purchases by non-residents hit 45 percent.

Unusual trends in housing sales and rentals in the Canary Islands amid supply shortage and peak prices

The market for pre-owned homes has seen remarkable year-on-year increases, marking one of the steepest climbs in recorded history, even surpassing the pre-2007 real estate bubble levels. Specifically, the price for pre-owned housing (2,421 euros/m2) was 15 percent higher than in 2007, when it stood at 2,101 euros per square meter.

Matos attributed the significant price surge primarily to the disparity between supply and demand, with the available supply being exceedingly limited. Additionally, the provision of public housing is described as grossly inadequate, barely reaching 2 percent.

Post-coronavirus pandemic, demand surged, triggering a real estate boom. Despite the archipelago’s resilience to the European Central Bank’s interest rate hikes, Matos noted that 28 percent of potential buyers halted their purchasing plans, though they might re-enter the market should interest rates stabilize.

Lastly, the rental sector witnessed a 13.6 percent annual increase, marking one of the Fotocasa Real Estate Index’s most substantial rises. Notably, rental prices have sharply increased since May 2022, further illustrating the dynamic and challenging nature of the Canary Islands’ real estate market.

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