Investment opportunities in the Canary Islands: Exploring financial markets

Over 12 million tourists visit the Canaries every year. First, this is due to mild climatic conditions with no sudden changes in air temperature, which ranges from 19˚С in winter to over 30˚С in summer, the constant water temperature in the ocean, and low humidity. These factors create ideal travel and living conditions. Clean sea air and mild climate increase the local life expectancy, which averages 83 years, the highest value in Europe.

However, the Canary Islands are not only attractive because of the good weather. The local taxation system favours the development of the economy as well. Instead of VAT (or IVA), which in Spain is 21%, here the state applies IGIC (Impuesto General Indirecto Canario) at a rate of 7%. Therefore, buying food, clothing, fuel, and real estate in the Canary Islands is cheaper than in Europe. The combination of these advantages creates multiple investment opportunities.

Types of investments in the Canary Islands.
There are several options for investing in Spain. Both the continental part and the Canary Islands have their own peculiarities related to the adopted legislation and taxation, which directly relate to investments of foreign capital and determine the most suitable and profitable ways of investing. Thus, in order to successfully invest money, let’s study the most profitable local financial markets.

Under-construction property.
Equity participation in construction is one of the profitable investment options in the Canary Islands. On average, the construction period is two years. During this time, the price of a property increases by about 30-40%, depending on the project and its location.

When drawing up a contract between the construction company and the buyer, the selected property can be reserved for at least 6,000 euros. Then, you will have to pay another 30% of the cost during the construction process. Upon completion of construction, the company draws up a bill of sale in your name. For the remaining amount (70% of the cost of housing), you can apply for a mortgage loan for up to 25 years.

Thus, by only paying 30% of the lodging cost within two years, you become the owner of real estate in Spain upon completion of construction. Then, you can rent it out and make a profit.

Existing property.
The most common investment option in the Canary Islands is to buy an existing real estate. Due to the high level of demand for local apartment rentals, consider such housing as a source of permanent income.

Just like with shared construction, you can take out a mortgage for 70% of the full price when buying a ready-to-move-in apartment. Property in the rest of Spain has higher tax rates, and the cost of buying and maintaining property in the Canaries is about a third lower than on the continent. At the same time, the annual property tax (IBI) is very low and ranges from 150 to 600 euros depending on the property value.

The advantages of investing capital in the Canary Islands are benefits in obtaining a residence, the right to stay in Spain for 90 days in each half year, and the opportunity to receive income from renting apartments. Apartments with two or three bedrooms are in especially high demand. Therefore, this type of housing is the most profitable in terms of possible subsequent sale or rental.

Travel industry.
The Canary Islands provide ample opportunities for travellers. For example, you can hire a car in Gran Canaria to move freely around the island or stay at a luxury spa hotel to improve your health. However, from an economic point of view, both apartments and car hire in Spain generate income.

Indeed, the travel industry is a major contributor to the economy of the Canary Islands. According to calculations, tourism revenues account for about 30% of the local Gross Domestic Product (GDP). This means you are guaranteed to make a profit if you invest in this segment correctly.

So, invest in the purchase or construction of a hotel, resort, or car rental company. Favourable economic and climatic conditions promise high incomes for businesses involved in the local travel industry.

Commercial real estate.
One more way to earn income from investments is to purchase commercial real estate, such as retail space, restaurants, or bars. The profitability of investing in commercial real estate largely determines the high demand for rentals in the Canary Islands, where the tourist season lasts all year round.

Along with short-term investments, consider long-term ones. For example, invest in the construction of commercial real estate. Experts note the lack of retail space, especially in the south of Tenerife and Gran Canaria, where the flow of tourists and the need for new commercial centres are increasing every year.

So, the Canary Islands offer limitless investment opportunities, and most of them allow you to receive a constant income. What’s more, besides buying real estate and putting money into the travel industry, you may consider investing in some promising technology-innovation projects in the renewable energy, waste recycling, or sustainable transportation sectors.