House prices in Gran Canaria and the rest of Spain have been in freefall since the 2007 financial crisis. They are now down about 40% from the peak. However, due to local circumstances, we believe that Gran Canaria property prices are close to the bottom.
The huge rise in Spanish and Canarian property prices in the 1990s and early 2000s was fuelled by cheap credit and lax lending standards. The banks threw money at anyone with a job regardless of their financial circumstances. When the boom ended, thousands could no longer afford their repayments. Many people who can pay the bank are trapped in negative equity.
Canarian banks are now sitting on a huge number of repossessed properties, mostly worth a fraction of their original, albeit inflated, valuation. They are now trying to sell these properties for anything that they can get. This is pushing prices down further, despite the fact that most of them are a long way from prime areas.
The bottom of the Gran Canaria property market?
Despite the gloomy situation there are a couple of compelling reasons to think that the Gran Canaria property market is reaching the bottom. The first is that, unlike the rest of Spain, there aren’t thousands of empty properties on the island. It has a big population and a serious lack of space. If anything, there is a lack of available homes in Gran Canaria. This creates demand for houses and puts a floor under the price. It is also the reason why Gran Canaria rental prices have hardly fallen at all.
In fact, Las Palmas is now the city with second highest rental yield in Spain (see article here). The average property generates a return of 4.7%, much higher thanLondon’s 3.4% and Barcelona’s 4%. These are average figures. Find the right rental property in Gran Canaria and you can easily double your yield.
Another bit of good news is that Gran Canaria property prices has now fallen to the point where they reasonable again. A wise friend of ours once said that prices would continue to fall until a single teacher with a 20% deposit could afford to buy a starter flat. We are now approaching this point.
The Spanish Ministry of Development expects house prices in Spain to drop another 10% from their 2007 peak. It predicts that prices will bottom out at the end of 2013. Given the lack of homes in Gran Canaria the bottom here may arrive earlier.
So, is it a good time to buy Gran Canaria property?
This depends largely on what you want it for. If you want to invest in a Gran Canaria property and sell it quickly to make a fast buck, then look elsewhere. However, if you want to buy property with an eye on renting it out long-term and getting an income, it’s an excellent time to invest. If you plan to come and live in Gran Canaria for at least five years, then buying also makes sense.
House price falls haven’t been uniform in Gran Canaria. We estimate that many of the newest developments on the outskirts of Las Palmas and the larger towns (Telde, Vecindario, etc) have lost at least 50% of their peak value. However, beach front property in Las Palmas and Playa del Inglés is down only about 30%. These high demand areas are also going to be the first ones to see prices rise again.
Foreign buyers are already jumping back into the Spanish market, attracted by good deals and low prices. In Q2 2012 the numbers of buys by foreigners rose 12% compared to 2011, according to the Spanish Ministry of Development.
The price crash has left many people in denial. There are owners who won’t or simply can’t sell their houses at current valuations and you still see houses and flats in Gran Canaria listed at 2007 prices. The key to getting value for money in Gran Canaria is to make sure that you work with someone who understands the local market intimately and can find the best Gran Canaria property at the best prices.
Are you looking for a property in Gran Canaria? We are expert property finders and work our socks of to find you the ideal home in Gran Canaria. Contact us today and let us know what you are looking for.