PROPERTY
WINDS OF CHANGE
As Tenerife and Lanzarote escape their package-holiday pasts, how is the property market affected? Michel Cruz takes a look at the prospects for buyers
Although they’ve drawn a steady stream of tourists for years, the Canary Islands have long been overshadowed by Mallorca and mainland Spain when it comes to residential tourism. They may be a little further out, but as interest in buying property abroad continues to boom in Britain, the Canary Islands’ dramatic scenery and climate (the sunniest in Europe) are becoming a big draw for second home buyers.
The 1980s saw the islands, particularly Tenerife, succumb to a wave of package tourism and resort hotels. Since then, huge investment has transformed Tenerife into a luxury destination. There are now more five-star hotels, golf courses and marinas here than on all the other Canary Islands and Ibiza combined.
Tenerife
Historically, the main focus of Spanish colonisation in the Canary Islands has been Gran Canaria, but Tenerife attracts the lion’s share of tourist attention. The smaller islands may be developing as tourist centres, but Tenerife still forms the backbone of the region’s tourist and residential economy. “Most people come to the southern part of Tenerife where the weather is always clement and there’s an established infrastructure for tourists and foreign residents,” says Leslie Beeson of the Tenerife Property Shop (www.tenerifepropertyshop.com). “Although Tenerife is dogged by its reputation as a tourist destination, we have recently seen a marked increase in interest from investors.” Tenerife has been reinventing itself as a luxury getaway and shedding its package-holiday image. Due to a potent combination of warm climate, low-cost airfares and increasing uncertainty in alternative, more speculative property markets, investors are coming back to the security of the southernmost outpost of the EU.
Dubbed the ‘makeover island’ by The Times, Tenerife has understood the changing market and risen to the challenge. “Recent investment has given the island a facelift, with an improved infrastructure and the development of luxury holiday resorts like the Gran Hotel Bahía del Duque and Abama Golf Resort, which draw celebrities to the island,” explains Beeson. Golf courses abound, restaurants boast Michelin stars and the presence of glossy shopping esplanades bursting with designer brands bears testimony to how Tenerife is changing.
The effort has paid off. With summer 2006 breaking all tourist records, the future looks very sunny for the isle – and for buy-to-let investors. Five million visitors a year ensure the rental market stays healthy, and a 2001 moratorium on new buildings has kept the speculators from swamping the market with new properties.
Among the increasing number of UK buyers are many first-timers attracted by prices that are still well below British levels. “There’s always been a market for foreign residents here, but it’s growing steadily,” says Beeson. Those wishing to settle can find an attractive alternative to beachside properties in Tenerife’s rustic villages.
What do you get for your money?
This kind of controlled development protects rental income rates and supports a safer market in which property prices can achieve sustained growth. The south coast is the most popular with buyers, as this is where the main golf courses, beaches and other facilities are concentrated. Prices here begin at around £67,000 for a one-bedroom apartment. It’s also possible to find a three-bedroom home with a private pool for £250,000. Lower construction levels mean off-plan projects in key areas such as Amarilla Golf and Palm Mar are highly sought after.
Inland, the mountain villages have plenty of character, with fincas (rural houses) starting at about £135,000.
Lanzarote
A bit smaller than Tenerife, the northernmost island is also more sparsely populated and its landscape is covered in extinct volcanoes. The most dramatic scenery can be found in the Timanfaya National Park, but even along the coast much of the land is protected from over-development. “Stringent planning keeps it an attractive, low-rise and low-density destination that has been drawing more and more property buyers,” says Gemma Lee of Lanzarote Investments real estate agency (www.lanzaroteinvestments.com).
Indeed, property values have risen by more than 10% a year in the past decade, and show no signs of slowing down. “Strong demand and limited supply produce a solid market in which property values are further bolstered by the general attractiveness of the area,” explains Lee. The lack of construction projects appeals to home buyers and visitors alike, supporting a rental market in which agents confidently predict returns of 5% to 7% a year.
How does the market fare during the rest of the year? “We have a quieter spell after Easter,” says Lee. “But otherwise it’s a year-round season. This is why most of our buyers look for well-built properties in good locations close to services and amenities.”
What do you get for your money?
In Puerto del Carmen a studio apartment will set you back £60,000, while one- and two-bedroom apartments range from £85,000 to £170,000. You should expect to pay approximately £350,000 for a luxury three-bedroom villa with a private pool in the exclusive Los Mojones area, but that would be reflected in the potential rental income.
Case study
Buying to let in Tenerife
Even in a strong market, rental incomes can vary greatly. Here, Tenerife homeowner Brian Yardley shows how a bit of perseverance can turn a second home into a highly successful earner.
Brian’s first challenge was to find tenants for his two-bedroom Golf del Sur apartment. “It wasn’t difficult but you have to work at it,” he says. “You can’t just sit and wait for the phone to ring.”
He started by advertising in a local UK paper. “It has a lot to do with enthusiasm,” he explains. “When I’m enthusiastic about Tenerife and the apartment it rubs off on people. You have to mention it to friends and colleagues. I meet quite a lot of new people playing golf, and when the conversation turns to our favourite golf destinations I always mention Tenerife.”
From the beginning the apartment was rented out for two thirds of the year. “I stopped advertising pretty soon and got a website,” he says. “It was a cost decision.
I paid about £2,000 in advertising that first year, while the website costs only £200 a year. The calls trickle in more slowly, but the end result is the same.”
Now in his fourth year of renting, Brian is starting to benefit from re-bookings and referrals, pushing last year’s occupancy rate up to an excellent 82%. “I have a couple who stay three months every winter, and when they leave another couple who stayed last year will be spending six weeks in the apartment. So far it’s become easier every year.”
EXPERTS BUYING ABROAD
They know the UK property market backwards, but when it came to buying in Mallorca, Barbara and Martin Croxen found the expert decision was to ask for help. Interview by Michel Cruz
Buying abroad can be a time-consuming challenge even for the most experienced. Martin Croxen, Chief Executive of a Leeds-based commercial property company and his wife Barbara, who has her own residential property business, took a shortcut by using the services of a locally based independent property search company in Mallorca.
“Although we work in real estate in the UK, we didn’t have a clue about the local processes, and our extensive experience in property has taught us to seek sound professional advice,” says Martin. “We considered Spain, Portugal, Italy and France, but eventually chose Mallorca because it offers everything and is so easy for us to get to.”
Martin and Barbara are keen golfers and like to be physically active, but they also wanted access to cultural activities, quality restaurants and shops. They contacted a property-finding company to help them narrow down the search. “We found a company called Shortcuts Property Search. Their knowledge saved us time and energy we would have spent researching the local market,” explains Martin. “They prepared a portfolio for us by liaising with local agents and developers, organised and accompanied us on all viewings and gave us good advice. It just helped to speed the whole process up.”
Now the couple own a new build three-bedroom penthouse apartment on a small development overlooking Santa Ponsa Golf Course in the South West of the island. It’s 20 minutes from Palma and the airport. “We like the diversity of Mallorca,” says Barbara, “and the ease of travelling to our destination was a major factor in our decision-making process, especially as we live so close to Leeds Bradford airport and the Jet2 hub. The ‘long weekend’ is totally feasible and was a major factor in choice of location.”
Knowing that their grown-up children would also use the property was another deciding factor, and with nightlife close by and the Santa Ponsa Country Club (a health & social club) about 400 metres away, the apartment in Santa Ponsa was an easy choice. Barbara considers the property-finding company’s advice to have been invaluable. “They explained the buying process, sourced an English-speaking lawyer, helped us to open bank accounts an even introduced us to an interior design company, First Impressions,” she says. “We had an idea of how we wanted the interior to look, but no idea where to purchase and no time to do so” she says. “After choosing our main pieces of furniture, First Impressions had them delivered and placed in situ whilst we were back in the UK.”
The property search is over, but the couple continue to explore. “It’s easy to drive around, so we see a different part of the island on each visit. We love the fact that within 20 minutes we have mountains, sea, city, barren landscapes, beaches, golf and other sports.”
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