Rising housing costs across Kanaren push more residents into new mortgages

In the Canary Islands, significantly more new mortgages were taken out in June than a year earlier. The statistics office ISTAC recorded 2,118 newly registered property loans. This represented an increase of 29.3 per cent.

At the same time, housing remains stubbornly expensive. In the most recent quarter for which figures are available, the State Statistical Office’s property price index (IPV) stood at 178.5 points, eleven per cent higher than the previous year’s figure. The prices per square metre in the Canary Islands are reaching new highs month after month.

For years now, a large proportion of property purchases in the Canary Islands have been financed. For example, in the first eight months of 2022, banks in the Canary Islands granted 10,341 mortgages; at that time, one in every two property purchases in the Canary Islands was financed by a bank loan. However, the demand did not come solely from buyers who were resident on the islands.

Foreign capital is fuelling the Canary Islands‘ property market

Even now, money from abroad continues to play a part in giving the property market a further boost. The resulting increase in demand has been causing social tensions due to unaffordable housing on the islands for years.

The available housing stock is divided between permanent residences and holiday lettings. Rental prices in the Canary Islands continue to rise unabated as a result. According to figures from the Canary Islands Tourism Board, there were 30,596 holiday accommodation properties in Tenerife, with a total of 128,445 guest beds, listed in the tourism register. This stock has been the subject of a legal dispute since the reform of the rules governing holiday let properties in the Canary Islands.

For households on the islands, this price pressure is compounded by high costs for basic services. Inflation in the Canary Islands recently rose to its highest level of the year. At the same time, the family structure in the archipelago has changed: smaller households and young people’s reluctance to leave their parents‘ home were among the biggest challenges facing the Canary Islands.

Some families want to escape the spiralling cost of housing, at least, by buying their own home. Many of them finance this dream of home ownership through bank loans.