Tenerife property draws UK investors back

Tenerife Property Shop predict an increase in confidence from UK property buyers.  British buyers are an important factor in fuelling the demand for property in Tenerife, and the cooling down in property prices in the UK had a knock on effect on purchases in the South of Tenerife in the last quarter of 2004.  Tenerife Property Shop's research shows that some potential buyers stalled while waiting for their UK property to be sold, whilst others have been deterred from the purchase of a second home because of worries about the UK economy.  The tide is now turning, and the report released by Tenerife Property Shop analyses the underlying reasons which are to be found both here and in the UK.

Despite an increase in the time to sell in Spain and Tenerife, official statistics confirm that property values have retained their robust growth levels.  Spain has some of the lowest mortgage rates in Europe, making the purchase of a home on the island comparatively inexpensive.  Coupled with an increase in rental yield over the course of 2004, the equation for buy to let investors has probably never been better.  Government policy changes by Pedro Solbes, Economy Minister, will introduce a new law prohibiting cancellation penalties by lenders, which will have a positive knock on effect on the fluidity of the property market by lowering selling costs.  Further changes may also come about if International Monetary Fund recommendations are accepted.  The IMF, now run by Rodrigo Rato, previously in charge of Spain's economy, has proposed the introduction of new fiscal incentives to stimulate the rental market.  The latter will again increase investor returns, a major incentive for UK buyers.  The demand for holiday homes is forecasted to rise, with foreign buyers overtaking Spanish demand by 2008, which will guarantee the sustainability of capital growth in Tenerife well into the next decade.  Meanwhile in local politics, the vision of turning Tenerife into a transportation hub as outlined by the Regional President Ad'n Mart'n in December sets down a sustainable economic future for the island which complements the tourist economy, while ensuring that not all the Island's fiscal eggs are in one basket.  Further good news for the Tenerife homeowner, as this reinforces the foundations of domestic demand and desensitises the island from the ebb and flow of the tourist economy.

Meanwhile, back in the UK, household incomes are increasing by 5% per annum, while unemployment continues to fall, reaching a 20 year low.  Mortgage lenders are increasing the multiples of income on which they will lend, stimulating the first time buyer market. Furthermore, interest rates are still historically low. Typical mortgage repayments as a percentage of average earnings are broadly in line with long term averages, and are two thirds of the previous peak back in 1989. There is no reason why any of these factors should dramatically change over the coming twelve months, and in combination will feed through to property prices as 2005 continues.  House prices are set to stabilise this year and recover in the second half.

The more astute property buyers, report Tenerife Property Shop, are already increasing their activity.  Enquiry levels from investors showed a rise as early as the second half of December last year and are predicted to continue to rise as more potential buyers start to appreciate the economic indicators.  The growing trend in 'fly to let' acquisitions forms the vanguard of this heightened activity in the South of the island which bodes well for the year to come.