Foreigners are increasingly buying up real estate in the Canary Islands. In 2022, international buyers accounted for 28.6% of all purchases made in the region, every fourth transaction was connected with foreign money.
Analysts have observed a stable and almost continuous growth in foreign demand over the past ten years and it shows no signs of slowing down. The only region of Spain showing even large numbers of demand is the Balearic Islands, where foreigners accounted for 34% of all transactions.
According to the Association of Real Estate Inspectors of Spain, 10 years ago the share of foreign demand in the real estate market of the Canary Islands was about 22%. During the decade of increasing influence of foreigners on the market, a serious problem of inaccessibility of housing for the local population has formed. It is not only about the lack of real estate, but also exceptionally high prices. In the last couple of years, this situation has become the subject of fierce disputes among the authorities of the region.
"Should we ban foreigners from buying real estate, at least residential, in our country?", "To what extent should the situation with housing affordability worsen in order for tough measures to be justified?" Such conversations are conducted regularly and a kind of "Pandora's box" in this aspect was opened by the Balearic Islands, especially suffering from the dominance of foreigners.
In the Canary Islands, the voices promoting the idea of expelling foreigners from the market were representatives of the Podemos Canarias party and nationalists from Nueva Canarias. The Balearic Islands are already actively working on a draft law banning the purchase of houses by international buyers. Steadily pushing it through the legislative bodies. Looking at the example of another archipelago, the politicians of the Canary Islands also feel the power.
The archipelago is not far behind the Bulgarian market in terms of prices and is the leader in the country in terms of the average cost of square meters of living space. Over the past year, they have grown by 12.7%, while the national average is only 6.7%. Some segments of the residential market of the Canary community show an increase in prices by 33%, for example, small-sized apartments up to 40 square meters.
The situation in the rental sector is also difficult. Over the past year, rental rates, on average, increased by 14% and reached the level of 11.8 euros per square meter. According to the market analysis from the Idealista portal, the Canary Islands are among the four regions of Spain in terms of house price growth.
At the same time, there is a strong imbalance of supply to demand in the region, a big shortage of new construction. Over the past 25 years, the population of the Canary archipelago has grown by 35.5%, including an increase in the number of foreigners. On average, foreigners make up 15% of the population in the community. In some cities from 30% to 43%.
This is a huge indicator for the local housing market, given that most of these expats are wealthy people, sometimes super-rich. Real estate sellers are looking at them, pushing up prices for all offers, and then pushing up prices even higher for a narrow layer of "affordable housing", to which ordinary buyers are fleeing, who can no longer afford to participate in a large market.
Is it really possible to ban the sale of housing to foreigners?
But is it really possible to legally prohibit foreigners from buying real estate in Spain or its individual regions? The Association of Real Estate Inspectors indicates that this may not be possible for citizens from EU countries. Maybe because the law is on their side, but it is impossible to exclude an unforeseen development of events.
Buyers from the EU account for the bulk of the foreign demand for housing in Spain, half of them not only buy, but also live in the country regularly.. Specifically, in the Canary Islands, the first two places are occupied by buyers from Germany and Italy. Germans account for 19% of foreign transactions in the Canary Islands. They are followed by Italians with 16.5%. With all other countries, European buyers account for 61% of all foreign demand in the archipelago.
All these people play a serious role for many aspects of the market, so business representatives will definitely try to speak out against a hypothetical ban. But the ban is also opposed by EU legislation, according to which unilateral decisions of countries and their regions to close borders for citizens of European Union countries are simply not provided as an option. Such a ban would be a direct violation of modern European law.
Nevertheless, Podemos Canarias, which occupy an important position in the executive authorities of the Canary Islands, as well as PSOE, Nueva Canarias and Agrupación Socialista Gomera (ASG) plan to apply directly to Brussels for the exclusive right to impose such restrictions within the Canary community. Politicians indicate that they have found a legal basis for such a request and even a positive decision of the EU court.