The British are back!

The influence of British buyers on the Tenerife Property Market is not to be underestimated.  A report at the end of last year by Tenerife Property Shop put British ownership on the island at about 42,000 homes, a significant share on an Island with a population of only 813,000, according to the latest official statistics.  Given that British ownership is concentrated in certain areas, such as the south, this influence becomes the overriding factor in charting demand and prices.

The cooling down in property prices in the UK certainly had a knock on effect on property purchases in the south of Tenerife in the last quarter of 2004.  Tenerife Property Shop's research showed that some potential buyers stalled while waiting for their UK property to be sold, whilst others had been deterred from buying a second home because of worries about the UK economy. 

The tide is now turning, according to the most recent research. 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. The Euribor is down to about 2.3%, making the cost of borrowing close to zero.  Coupled with an increase in rental yield over the course of 2004, the equation for buy to let investors has probably never been better.  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, 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 weather is another factor bringing the buyers back to Tenerife.  With polar conditions descending on mainland Spain in January, snow at sea level in the Balearics and even Melilla, the part of Spain perched on the tip of Morocco, experienced snow and their coldest weather for fifty years.  But Spain aside, hurricanes in Florida and the Caribbean, the Tsunami in Asia are all contributing to a view that the Canaries is one of the few weatherproof places in the world.

These factors are having a definite effect on the local property market. Tenerife Property Shop report a marked increase in activity this month.  Enquiry levels from investors showed a small rise as early as the second half of December last year.  As the weeks have gone by, this spike in the graph appears to be turning into a real rise in demand.  The growing trend in 'jet to let' acquisitions forms the vanguard of this heightened activity in the south of theiIsland, but this increased confidence appears to be filtering through to British buyers in general.