The boom goes on

The Financial Times have released a special report on Spain showing that the Spanish property boom continues, fuelled in part by an abundance of cheap credit. Bank loans in mid-2004 were growing at an annualised rate of 16.3% - six times the 2.6% rate of growth in the economy. House prices, which have more than doubled since 1996, rose by 17% in the first six months of 2004.

Elsewhere in Europe, such buoyancy would lead to a hard fall. But there are unique factors in Spain which would explain the sustained demand for homes, and which may shield it from a violent crash, the report goes on to say.  The strong demand for homes is underpinned by a rising population (thanks to a large influx of immigrants), a sharp growth in employment, up 22% since 1995, and the demand for retirement or holiday homes from sun-starved north Europeans.

According to the Bank of Spain, foreigners bought almost 100,000 holiday homes in Spain last year, spending a record 7.2bn Euros on Spanish properties, an investment accounting for almost 1 per cent of gross domestic product.

Trends in the local Tenerife market support this report.  Tenerife Property Shop, the leading Estate Agent on the island, produced a research paper citing various reasons for the island being such a sustainably popular location, especially for the British.  Tenerife has a well established environment, which necessarily means a much greater infrastructure, not just in terms of roads, health and communications but also in the availability of British culture, like schools and local papers printed in English.  As we are in Europe, residents can also still receive UK pensions.  Mary Spencer of Tenerife Property Shop commented, 'The increase in the number of flights has also made the island a more convenient place to escape to.

Mary went on to say, 'With house prices in Britain having gone through the roof, Britons all have more money in their pockets to spend on luxuries and investment purchases.  There is generally more wealth around and people want a better quality of life so buying a home abroad is perfect for them." Between 1998 and 2003 personal disposable income has risen by just over 23 per cent. The unexpected paper wealth has inspired many to swap their semi in Manchester - and still have enough left over for a decent pension.

New foreign investment is being channelled into luxury resorts, golf courses and residential tourism - responsible for almost half of the new housing starts last year. MedGroup, owned by the US financier George Soros, is spending nearly 700m Euros on seven resorts and five golf courses.

Millions of us return from our summer holiday each year determined to trade in cold, rainy Britain for a better life abroad - only to slump back into our dull daily routine within a week. But now, it seems, record numbers of Britons are living their dream. More than 190,000 of us upped sticks and moved abroad last year, according to the latest figures from the Office for National Statistics who said 191,000 British citizens were among 362,000 long-term residents who left the country to live elsewhere.

Research by Mintel found rising levels of disposable income, the growth of low-cost airlines and the proliferation of television programmes focusing on living abroad was driving demand.

Spain is still the most popular destination and the value of new homes purchased is set to nearly double from 12bn GBP today to 21bn GBP in 2009. As a nation we own over 1m second homes, of which 550,000 are overseas. In the past 12 months, Brits have purchased 75,000 Spanish properties at an average cost of 160,000 GBP. It is estimated that in 2009 that figure will grow to nearly 100,000 homes a year.