Accessing affordable housing in the Canary Islands, particularly for young people, has become an increasingly challenging issue. While potential solutions such as building more public housing or market intervention are often suggested, there are significant obstacles, including the growing trend of foreign buyers purchasing properties for use as holiday rentals.
A recent report by the Bank of Spain titled The Housing Market in Spain: Recent Developments, Risks, and Accessibility Issues, highlights the impact of this trend. The report, presented by Ángel Gavilán, the Bank’s Director-General of Economics, at the Spanish Congress of Deputies, reveals that 20% of property sales in the Canary Islands involve non-resident foreign buyers.
Rising Demand from Foreign Buyers
The report offers a detailed analysis of the housing market across different regions of Spain, focusing on the first half of 2024. During this period, the Canary Islands saw a significant share of property purchases by foreigners, trailing only behind the Valencian Community and the Balearic Islands, where nearly 25% of sales involved non-residents.
The trend is part of a broader national phenomenon, with foreign purchases peaking at 135,000 properties in 2022. Although this number dropped to 125,000 in 2024, representing approximately 19% of total sales, the influence of non-resident buyers remains a contentious issue. The Bank of Spain warns that high levels of foreign investment in property have reduced the availability of housing for local residents, particularly in tourist hotspots.
Impact on Property Prices and Accessibility
One of the report’s key findings is that foreign buyers tend to have a higher purchasing power, often acquiring properties at significantly higher prices than locals. In the first half of 2024, the average price paid by non-residents for a property in Spain was around €2,900 per square metre, compared to the average of €1,750 per square metre for Canarian buyers.
This disparity contributes to escalating property prices, particularly in high-demand areas. Additionally, the influx of foreign investors fuels the growth of short-term holiday rentals and seasonal leases, reducing the stock of homes available for long-term residential use.
The Strain on 'Tensioned' Zones
The consequences are particularly acute in so-called 'stressed' areas, where housing demand far exceeds supply. Las Palmas de Gran Canaria, for example, has requested designation as a stressed zone from the Canary Islands Government. Areas such as Las Canteras, La Isleta, Guanarteme, and parts of the city centre are becoming increasingly unaffordable for young people looking to move out of their family homes.
On a national level, the Bank of Spain also points to structural issues that limit the supply of new housing, such as a shortage of available development land, a lack of construction labour, and insufficient investment in new urban projects.
A Regional and European Dilemma
While the national average of foreign home purchases stands at about 10%, the Canary Islands’ 20% share shows the regional severity of the problem. In response, the Canary Islands Government began discussions in Brussels last November to explore the possibility of limiting property sales to non-residents, a proposal that has been met with a cautious reception from the European Union.
The price gap between properties bought by foreigners and those purchased by locals is vast. The average cost of a property acquired by a non-resident is €228,000, whereas Canarians typically buy properties with an average price of €157,000.
As housing accessibility becomes an increasingly urgent issue, the Bank of Spain’s report serves as a crucial reminder of the complex factors influencing the market. It remains to be seen whether regional and national policymakers can strike a balance between welcoming foreign investment and ensuring that local residents can afford to live in their own communities.
