The Canary Islands are one of the regions with the most homes bought by foreigners

  • Canarian Weekly
  • 07-11-2023
  • Business
  • Photo Credit: Stock Image
The Canary Islands are one of the regions with the most homes bought by foreigners

The demand for mortgages from foreigners in the Canary Islands accounts for 7.7% of the national total, the fifth-highest rate among all the regions of the country, only surpassed by Valencia (28.4%), Andalusia (20%), Catalonia (15.9%), and Madrid (9%), according to a mortgage study carried out by Idealista.

This summer has seen a shift in the profile of foreigners seeking mortgages in Spain, as for the first time, Germans top the list of nationalities. Previously, it was the British who held the first position, but they now rank second with 12.9% of mortgage applications.

Following them are the French, who have reclaimed the third position after a year and a half, gaining ground over Americans and Swiss nationals, who had previously alternated in third, and now account for 11.2% of loan applications for home purchases in Spain.

According to the study, other nationalities represented less than 10% of the demand for mortgages for home purchases in Spain. The United States ranks fourth on the list, at 9.8% of the total, followed by Switzerland (7.5%), Ireland (7%), the Netherlands (6.1%), Belgium (4.9%), Sweden (3.6%), and Italy (2.6%). These ten countries have accounted for nearly 80% of all mortgage applications by foreign citizens during the third quarter.

Idealista also highlights that in recent quarters, there has been a notable increase in mortgage demand from citizens of France, Ireland, and Sweden. Conversely, the Netherlands has been losing its share since early 2020, reaching a minimum.

Another noteworthy aspect of Idealista's quarterly report is that Americans, despite not being the largest group, have the highest income and request the highest mortgage amounts.

According to the study, the average monthly income of American households requesting a loan for home purchases in Spain during the third quarter stood at 9,090 euros, significantly higher than the foreign average of 6,425 euros per month.

Switzerland follows as the second most prominent country, with an average of 8,414 euros per month, and several other countries have monthly incomes above 6,000 euros: Germany, the Netherlands, and Sweden. In contrast, Italian and Belgian applicants have an average income of less than 5,000 euros per month.

In addition to their income, American applicants also lead in the average price of homes they wish to purchase and the average mortgage amount, at 272,211 euros and 200,030 euros, respectively. The average for foreign applicants is 216,426 euros for the home purchase price and 153,250 euros for a mortgage.

Applicants from the Netherlands rank second, with an average home price of 251,658 euros and an average mortgage amount of nearly 170,300 euros. On the other hand, Irish applicants have homes with an average price of 153,250 euros and a loan amount of only 109,500 euros.

Regarding the financing needed by foreigners to acquire homes in Spain, the Idealista mortgage study shows an average of 71%, slightly above the typical range offered by Spanish banks for financing second homes (between 60% and 70% in general).

Swedes and Italians require the most bank resources to complete the purchase (around 74-75%), while the Swiss and the Dutch need about 67-68% to carry out the transaction.

As for the average age of foreign applicants, Idealista places the mean at 40 years, with Swedes being the oldest among the major nationalities (43 years) and the Swiss being the youngest (38 years).

When it comes to location, the Valencian Community leads the way, accounting for 28.4% of all applications, followed by Andalusia and Catalonia at 20% and 15.9%, respectively. The quarterly mortgage report from Idealista emphasizes the trend of non-residents seeking mortgages in coastal areas.

Madrid (9%), the Canary Islands (7.7%), and the Balearic Islands (5.9%) are the next most prominent regions, ahead of Murcia and Galicia (2.7% in both cases). On the other hand, there are several areas where the demand for mortgages from foreigners represents less than 1% of the total: Castilla-La Mancha, Navarra, Extremadura, Aragón, and La Rioja.

According to Idealista's mortgage broker, the average mortgage signed by non-residents in the third quarter amounts to 195,241 euros, which is 9.7% higher than the same quarter in 2022. The purchase price, on the other hand, is 33% higher than the overall average, at around 350,000 euros.

Regarding the chosen type of loan, the majority of foreigners opt for fixed-rate mortgages, accounting for 73% of the total, while 15% choose a mixed-rate, and the remainder opt for variable-rate mortgages.

The report also indicates that the average debt-to-income ratio for foreigners is 21%, with two-thirds of mortgages financing between 60% and 70% of the property's price.

In the first six months of 2023, the foreigners who purchased the most homes were the British, accounting for 9.6% of total transactions, followed by Germans (8.1%) and Moroccans (7.3%).

According to data from the General Council of Notaries collected by Idealista, this translates to 6,498 units, 5,519 units, and 4,931 units, respectively, ahead of the French (4,926) and Romanians (4,336).

However, the transactions that have seen the most growth in annual terms are those involving Russians (50.2%), Ukrainians (41.6%), Americans (13.6%), and Chinese (11.8%), breaking the overall decline in foreign property purchases (-7.5% year-on-year in the first semester).

Idealista emphasizes that some of these nationalities had never bought so many houses in Spain in these six-month periods analysed by the notaries.

Americans reached 1,339 property purchases, doubling the figures from the first half of 2021 and setting a new record, thanks to factors such as the euro-dollar exchange rate, the climate, lifestyle, and real estate taxation.

According to notaries, the average price paid by foreigners was 2,095 euros per square meter, a 1.4% increase year-on-year and the highest figure since late 2008, surpassing the average price paid by nationals (1,574 euros per square meter).

By nationality, the highest prices per square meter were paid by buyers from Sweden (3,036 euros per square meter) and Denmark (2,930 euros per square meter), both reaching their historical maximum, followed by the United States (2,921 euros per square meter), Switzerland (2,812 euros per square meter), Germany (2,724 euros), and Norway (2,584 euros).