Canary Islands expected to suffer big drop in property prices
The Canary Islands is predicted to be one of the Spanish regions that will suffer one of the biggest drops in property prices due to the Covid crisis. This is stated by the BBVA research service, in the latest edition of the Economic Observatory magazine on housing in Spain, published this week, and in which the sector is analyzed by region and provinces.
According to the report, the fall in prices will be general throughout Spain in the coming economic quarters due to the contraction in tourist activity, lower demand from foreigners, and increased uncertainty, but it will be more intense in those regions that depend more on tourism, as is the case of the Canary Islands.
Also particularly affected will be those regions that experienced a greater increase in prices in the last five years (2014-2019), which the Canary Islands falls into as well, especially the province of Las Palmas de Gran Canaria which includes Lanzarote and Fuerteventura. Although it should be noted that according to the latest Tinsa price report, housing is already getting cheaper in Las Palmas. In the last year, it has reduced by 1.2%, a rate that has been increased by the crisis, and in fact, between the first and third quarters of this year, the fall has been almost 3%.
BBVA Research has developed a price model that allows estimating the degree of imbalance in the real estate market, with respect to economic indicators, and making forecasts about the behavioural future. Regarding the former, before the pandemic, the Canary Islands were the region in which house prices were farthest from the ‘equilibrium level’ calculated by BBVA Research, based on a series of parameters, including the rate occupancy, mortgage interest rates, housing availability, and the volume of the population aged between 25 and 44, the main age bracket that demands a new home.
The Canary Islands exceeded the equilibrium level in 2017, and from there it continued to increase until the first quarter of 2020, when the coronavirus pandemic broke out. Within the Canary Islands, it is the province of Las Palmas that registered the greatest imbalance in prices.
The dynamism of the Canarian economy and the tourism sector made it one of the provinces with the highest price increases between 2014 and 2019, well above the average rise of 8.5% for the country as a whole. Along with the Canary Islands and the Balearic Islands, were the regions of Madrid and Catalonia, and to a lesser extent Alicante and Valencia, according to the BBVA report.