The Benefits of
Property Investment in Tenerife
MARCH 2018
I am now going to give you my thoughts regarding property purchase here in Tenerife and why I think it is the ideal place to invest now, for the future, in comparison to other destinations. Having been here in Tenerife for more than three decades, running our estate agency business alongside Mary, with Damian and Zoe taking progressively more involvement in our family business, I have a pretty good insight to give an objective opinion. I hope you find this interesting and informative and manage to read to the end before you fall asleep! I know it is going to be fairly long because it is a very important subject, so perhaps you had better rustle up a sandwich and a flask of tea or coffee before you continue reading.
Your intended investment in a property overseas will principally be for two reasons. The first and probably most important will be for the enhancement of your life style and wellbeing and the second is from the point of view of value for money and potential future investment prospects. You must weigh up the benefits of both.
With all the hullabaloo of recessions, faulting economies, property prices and exchange rates, it’s easy to lose sight of the basic reason why you would buy property in Tenerife in the first place. It’s the reason why Tenerife is, and always will be, a good investment and the reason why our population continues to expand. Quite simply, Tenerife is just a great place to be.
Of course, the most important thing that makes our lives so much more enjoyable is the weather in Tenerife. Warm winters and summers that are cooled by ocean breezes give Tenerife the best possible climate throughout the year. For non-resident owners it means the flexibility to visit their home at any time of the year and expect glorious, sunny days. For investors it is measured in the future potential growth in the value of their properties and their enjoyment of usage, while for those of us who are lucky enough to live here, time slows down and we enjoy every minute of the sunny outlook to our lifestyles!
Surrounding us is the incredible variety of Tenerife’s landscape and of course the beaches! And there are so many ways to enjoy the natural bounty of the island. From outdoor activities and sports on land, such as golf cycling and walking, to water based fun with scuba, snorkelling, fishing and sailing; Tenerife has a huge amount to offer. Days are never boring in Tenerife, whether you live here or own a second home and visit whenever you can.
There are many different factors that have to be taken into account when looking at the investment potential in investing in overseas property right now. The problem, which most people understand, is that life is relatively short and there is limited time to better one’s lifestyle. People are now more and more realising that they deserve it and it is relatively easy to evaluate current prices, exchange rates and future capital growth, but how do you value lifestyle. It is priceless!
There has been some confusion which is attributable to a general misconception in the marketplace. The misconception was a basic confusion between Tenerife and mainland Spain, and specifically the Costas. A short summary of goings on in the Spanish property market will start to make it all clear. There has been a massive amount of building along the coastlines of Spain, and despite warnings from the IMF, plus dire predictions in publications ranging from the Wall Street Journal to the Economist and even pessimistic reports from Spain’ s own Banks and Government, the pace of building continued unabated.
This caused a massive glut on the market and vendors are still trying to sell the backlog, with many properties spending years on the market. This, combined with corruption scandals in Marbella and land grab exposés meant that consumer confidence in the market became further eroded.
In contrast, Tenerife had limited building applications as the island authorities voted in a moratorium on touristic building in 2001, which continues to be extended to this day. But although Tenerife has experienced no such greed inspired feeding frenzy by developers, it is still part of Spain and for a while, it was tarred with the same brush.
So, although there was inevitably a dip in demand for property in Tenerife due to the recession, it was also partly due to the misconception that the Tenerife market was the same as the Spanish mainland market. Misconceptions don’t last long, property interest is now buoyant, confidence has returned, and property purchasers are now far more active than at any time during the past ten years.
Initially we thought that the moratorium was bad news, but it has subsequently proved to be very beneficial and unlike the rest of Spain, we do not see hundreds of cranes towering over unfinished developments or hundreds of thousands of finished properties that have still not been sold. The housing stock of new unsold constructions on the island is paltry by comparison and officially stated as the lowest in the whole of Spain!
With its all year-round perfect weather, winter does not cause Tenerife to have a string of ghost towns, like those that litter the Spanish coastlines and other tourist destinations in Europe; rather it is a time when the island is at its busiest and most vibrant. Comparing the sunny south of Tenerife to the Costas in the mainland or other destinations in Europe is like comparing chalk and cheese!
The holiday home glut on the Costas will take several years to clear, but unlike mainland Spain, as stated, Tenerife did not experience the huge over building that has decimated the Costas. Even so, building has come to a standstill in Tenerife and new projects have been pushed into the future, so the supply of new Tenerife property has been effectively cut off at source. This current imbalance for future demand and supply increases the urgency for those hoping to buy a Tenerife property. Demand is increasing at pace and as there is little slack to be taken in, this will reflect on prices.
Ask five people what effect Brexit will have on the property market and you’ll get five different answers.
Some are full of doom and gloom, whereas others (possibly with a sprinkling of bravado) are full of enthusiasm, reporting new buyers registering in their droves. The truth, of course, is somewhere in between.
Some of the media in the UK continue to be like the haggard witches and soothsayers of old, pointing grizzled fingers into a dark and gloomy future and assuring us all of certain doom. But as we all know, the media tend to follow what is happening, reporting after the event and if past recessions are anything to go by they will still be doling out dire warnings while the savvy investors are benefiting from their property investments in Tenerife. On the other hand there are those who have been quoting "the green shoots of a fantastic future" as the Brexit situation worsened, not because there were any real signs of the UK getting a good deal, but more because there is a combination of vested interest and wishful thinking. Investing your money is not a game!
Looking back to June 2010 the exchange rate between the euro and the pound was 1.20 and with all the concern and incredible hype about the problems of the UK leaving the Eurozone, it only dropped to around 1.10 before stabilizing again. It is expected that the euro will gain some further value against the pound during Brexit negotiations and therefore, some people in the UK are uncertain about investing in Tenerife property, but the rest of Europe are more interested now, than they have been for the past ten years.
We have been experiencing a very welcome surge in property purchasers during the past year, not so much because of the uncertainty of Brexit, but quite the opposite, it is more because of the certainty of the immediate and longer-term effects of Brexit.
It has been clear for a long time now, that the value of the pound was going to suffer against the euro and during the negotiations that is very likely going to continue. What is certain is that the Eurozone negotiators are not going to give Britain an easy ride, principally because they are in the driving seat and they will definitely continue to hold a very tough stance, to the further detriment of the UK. They cannot afford to be seen to do anything else.
On the other side, the politicians in the different parties are more interested in their own political ambitions and instead of clubbing together and showing a united strength to get the best deal for the UK, they will continue to fight their own corner for power, even though it is enormously detrimental to the negotiation strengths of the UK and will greatly reduce any chance of getting the best deal. The more they continue like this, the stronger the stance of the Eurozone to be dictators in the terms and conditions of Brexit, rather than negotiators.
What people are considering is that rather than have their money in a building society, bank or uncertain stock market, they would be better to ‘park’ their money in a euro based asset, which will have far more stability and strength in comparison to the pound. Rather than Euro stocks and shares, they are investing (not spending) their money in safer property assets, that will give good capital growth plus the benefit and enjoyment of personal usage, which cannot be valued.
Tenerife, with its 12-month season, being at the southernmost part of Europe, but still being part of the Eurozone is an ideal place for such an investment, and because of the Moratorium on new building consents being in place since 2001, the supply of properties is struggling to keep up with the demand, which augurs well for the future, where capital growth will be beyond normal expectations.
The stock of properties in estate agents’ portfolios is now only about 30% of what it was a couple of years ago and the demand continues, not just from people in the UK, but also from people in countries situated in the North of Europe who are looking for a warmer climate and from people in places like The Netherlands, Belgium, Italy and Mainland Spain, who are looking more from an investment point of view, with enjoyment of usage being a bonus.
As you will perhaps gather from the length of this article, I am somewhat passionate about the benefits of acting now and not sitting back to wait for the outcome of Brexit and then be in a more detrimental situation. Even if the outcome of Brexit is not as bad as some predict, it still makes sense to act now and not to wait and see.
It has already been established that Tenerife has the highest repeat visitor ratio in the whole of Europe, with more people returning here than to any other destination. Clearly there is a reason for this which is simply that well-travelled tourists once visiting Tenerife realise that there is nowhere else within striking distance of Europe that can equal it.
Apart from tourists and locals, there is also another extremely large potential influx of people who will be relocating and looking for a new home. The more people that come to visit Tenerife, the newer interest there will be in purchasing property.
Looking to the future, there is one major factor that promoters and purchasers do not seem to consider, which I find quite extraordinary and that is the effects of Global Warming.
Global warming was one of the hottest topics in the news before recession and hardship became all-consuming in the media, with the dire predictions of climate change becoming ever more imminent and evident. There is differing opinion as to why it is happening, but not to the fact that it really is happening.
Tenerife’ s long term future is likely to be defined by these changes!
A report commissioned by Halifax Holiday Insurance Services identified that almost all popular destinations of today will experience dramatic change by 2030. That really is not very far away and hopefully most of us will still be able to spend time enjoying the sun. But where will the sun be found?
Property buyers today need to take a close look at this phenomenon to make sure that their investment is not going to sink into a climate caused quagmire. Almost daily on the news programs we are already seeing droughts, hurricanes, tsunamis and extremes of freak temperature in various parts of the world and most agree that as the ice caps melt, rising sea levels will have the awful effect of flooding many low-lying areas. There will be increased extreme weather events with the seasons becoming unpredictable and meteorologists the world over concur that the world is changing, but what does this mean in specific terms?
Well, I am talking about property in Tenerife, so let’s take a look from that angle. Melting ice caps will affect the Gulf Stream which warms up Northern Europe. As a result of that, the UK will become much colder for a lot of the time and very wet at other times, as will much of continental Europe. Portugal and large parts of mainland Spain will become a desert, particularly in the south, Australia will be a sun blasted oven, much of America and Asia will roast as well, except the parts being buffeted by massive storms and torrential rain. Africa, which always seems to get a raw deal, will be even more inhospitable as the various deserts link up to form a giant dust bowl.
So, in the new world of extremes the options are largely to soak, freeze or fry and I really think that this should be a major consideration when buying property now. It is conservatively predicted by experts in this field that climate change will lead to the migration of an incredible 150 million people during the next 25 years! These people are going to have to go somewhere and they will be looking for a safe place that has clement weather.
The good news for us is that climatologists agree that Tenerife will be relatively unscathed, experiencing a few more tropical rain storms and some coastal erosion. One factor is that islands, whose weather is tempered by large bodies of water surrounding them, are likely to suffer less, as long as they are not low lying like the Maldives. Another factor is their whereabouts. As stated earlier the Gulf Stream, which controls our weather with a ‘conveyor belt’ of warmth, is at risk and a location too far from the Equator is likely to see freezing gales.
Tenerife is very fortunate. An island, well above sea level, situated by the Tropic of Cancer on the same line as Bermuda, close to the Equator and economically part of Europe at its southernmost point, is as close to the ideal as you will find. Spanish from the mainland and indeed wealthy Europeans from all over the Community are likely to start waking up to this phenomenon and imagine what that will do to property prices!
2030 may seem a long way off, but in reality it is not all that far away and during those years the weather will bring more and more property buyers to Tenerife in search of a decent place to live. The crazy thing is that this underlying trend is largely unrecognised or ignored by most ‘property experts,’ but the logic is undeniable. It is only a matter of time for property pundits to jump on the global warming band wagon and start to analyse the effects on the international property industry, and when they do, existing owners of property in Tenerife will benefit enormously.
Growing in popularity as a haven away from the cares of the Western World, our sub tropical island of perpetual sunshine forms the southernmost part of Europe making it one of the most perfect locations in the world. In a survey by N.A.S.A. the U.S. Aeronautics and Space Agency, the climate in the Canary Islands and the South of Tenerife in particular is officially stated as being one of the best in the world and this will prove to be even more so in the future.
As with any area, there are places that will be more in demand and where prices rise, while there will be others that lag behind by months or even years. The key for today’s buyer is to identify the type of property and area likely to benefit most, which I would consider to be in the south of Tenerife. The golf urbanisation areas of Amarilla Golf and Golf del Sur still represent very good value for money and have all the facilities that any normal family could want. For the wealthier investor, the area of Fañabé is desirable, whilst the resort towns of Playa de Las Americas and Los Cristianos will continue to attract those who enjoy all the razzmatazz.
During the good times and during recession the one thing that always endures is property in the most desirable areas, where future buyers have the attitude of "That’s what I want, and I will pay what it costs to get it." Properties in these areas are desirable now and will continue to be desirable in the future.
It is amazing how just a couple of days to top up the winter tan can revitalise you and enable you to better cope with the stresses and strains of normal daily life. Unlike most other areas, Tenerife’s ambient 12-month season gives you the best opportunities to really enjoy your overseas investment, not just now but also in the future for many years to come.
If you have managed to read this far I hope you have found my opinions interesting, useful and thought provoking.
Best wishes,
Bruce Grindley
Tenerife Property Shop S.L.
