In 2022, the municipality of Santa Cruz de Tenerife recorded the largest increase in residential real estate prices in Spain, as evidenced by data from the Idealista real estate portal.
According to a report published by the portal a few days before the end of 2022, in Santa Cruz de Tenerife, the capital of the province of the same name on the island of Tenerife, housing prices increased by 18.7% over the year, resulting in the cost per square meter reaching 1,712 euros. For context, this is the highest point of growth since 2008. Then the price per square meter stood at around 1,822 euros.
The Santa Cruz indicators are a good illustration for the growth dynamics of the entire island's market, reflecting general trends. Back in September, Tecnocasa noted that Tenerife is becoming one of the most attractive destinations in Spain for real estate investment. A direction that relies on large foreign demand.
The data demonstrated in the study «Analysis of the housing market in the Canary Islands» indicate that over the year the number of investment transactions on the island increased from 20.5% to 27%.
The impact of foreign investment
The end of the pandemic has led to a significant increase in real estate sales in the Canary Islands, mainly due to the attractiveness of the archipelago as a place to buy a second home. First of all, we are talking about a second home for wealthy foreign buyers. Atlántico Hoy reported that every third transaction was made by foreign citizens.
The quality of life, the availability of various services and the convenience of infrastructure, as well as the mild climate throughout the year, make the Canary Islands one of the best options for buying real estate.
Perhaps that is why, after Santa Cruz, Palma de Mallorca is the second city in Spain with the highest increase in real estate prices - 15.7%, which indicates an overall increase in demand for sunny, beach destinations in Spain. This is quite obvious if you evaluate the prices of local real estate with similar offers in other EU countries. Spanish analogues are still cheaper.
One of the main factors of the price increase is the shortage of new construction in the archipelago, and in Santa Cruz in particular. In recent years, there are practically no new projects on the market, and demand is growing month by month.
For this reason, most sources of real estate market analysts, including such as S&P Global Ratings, predict a slowdown in house price growth until 2025. This will happen as part of the natural process of exhaustion of supply in the market. The greater the deficit, the higher prices rise, but only until buyers realize that there is nothing left to catch on the market and leave it, leading to a decrease in demand.