The Canary Islands are the leaders in the sales of mini-houses and the volume of speculation with residential real estate

The Canary Islands are the leaders in the sales of mini-houses and the volume of speculation with residential real estate

The Canary Islands is an autonomous community of Spain with the highest sales volumes of mini-houses and mini-mansions, although the main share of sales is occupied by small apartments from this category. We are talking about apartments that are more like a studio — these are objects with an area of less than 30 square meters, more like a room with a bathroom and a kitchen attached to it than an apartment itself.

The popularity of this market segment is due to the high tourist attractiveness of the region. Small and cheap housing finds a great response among foreign buyers who do not plan to move to Spain for a long time. The high role of tourism in the local economy, however, affects other aspects of the market. Firstly, high investment attractiveness and, secondly, high volumes of speculation in the local market. In view of this, the main players in the market are not developers, brokers or mass buyers, but investment funds. This is indicated by the data of the Association of Real Estate Inspectors of Spain.

These companies enjoy the popularity of small-sized residential facilities and rental housing, which is due to the long absence of new development, primarily social. The population of the region is growing, and only studios and mini-houses remain out of the pocket of an ordinary home buyer. Large real estate is snapped up by wealthy foreigners and investors, and smaller housing works for rent and the tourism sector. In annual terms, sales to archipelagos increased by 30% by the end of 2022, reaching the mark of 28,170 transactions. The average cost of transactions was about 172,500 euros, which is 6.4% more than in 2021.

Real estate in trust ownership

With the growing investment attractiveness of the Canary Islands, a new form of ownership has gradually begun to develop in the local real estate market, which has enormous practical benefits and potential for investors. We are talking about "trust property", which implies the separation of full ownership of the usufruct and, directly, the trust right.

This is usually done by property owners who now need money that they could get from the sale of their house, but they do not want to part with it. They divide their right of ownership into the right of the usufructary (holder of the usufruct) and the right to the property.

The original owner of the full right reserves the usufruct, that is, the right to use housing for living or even earning, but the buyer of the trust right owns the object. The latter, thus, can buy a good object at a price below the market, and the former can get money for his housing and at the same time stay in it to live. Subsequently, he may simply move to another house or even die, thus transferring the usufruct free of charge and automatically to the holder of the trust right.

At this point, the holder of the trust right becomes the rightful owner of the object. This is a very profitable scheme when calculating investments for years to come. The buyer can enter the market, find a seller of trust property, buy it, and in fact a house, at a price cheaper than the market with the expectation that in X years the object will be released and will be transferred to him for free.

In 2022, only 132 trust property rights were sold, but market experts expect a steady increase in these indicators in the coming years.

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