The Canary Islands, a popular destination for British tourists, are facing a housing affordability crisis as a surge in holiday home purchases by foreigners sends property prices soaring to unprecedented levels. This trend is putting the dream of homeownership out of reach for many locals, with the islands experiencing the steepest rise in housing costs across Spain.
Skyrocketing Prices in a Beloved Destination
In 2023, the Canary Islands witnessed an astonishing 22.5 percent increase in house prices, the highest jump in Spain, as reported by the property website Fotocasa. This surge has propelled the islands to the top of the charts, with property costs now 15 percent higher than the peak of the 2007 real estate bubble. Specifically, the average sale price of homes reached £2,071 per square meter last year, compared to £1,797 in 2007, setting a new record for the market.
The Impact on the Rental Market
The rental sector is also feeling the heat, with costs escalating by 10 percent, marking one of the most significant hikes in the history of the Fotocasa Real Estate Index. Monthly rental rates climbed from £8.52 per square meter in March 2022 to £10.93 in December 2023. This represents a 67 percent increase compared to 2007, highlighting the acute pressure the rental market is under.
Foreign Interest Fuels the Fire
María Matos, director of studies and spokesperson for Fotocasa, notes that this price acceleration is unprecedented, with the islands reaching price levels not seen since the pre-2007 real estate bubble. The influx of foreign buyers is a key driver, with nearly 30 percent of prospective buyers not originating from the Canary Islands. This figure is even higher in tourist hotspots like Tenerife and Gran Canaria.
The increased interest from abroad, coupled with a shift in monetary policy and higher interest rates by the European Central Bank, has reinvigorated the demand for foreign purchases. Meanwhile, local demand has become more focused on investment opportunities rather than homeownership, exacerbating the housing accessibility issue.