2008 - The Year Ahead For Property in Lanzarote

Author: Nick Ball, editor of Lanzarote tourist information guide, Lanzarote Guidebook.

What does 2008 hold for overseas investors and owners of property in Lanzarote?

On the debit side, transactions on the island fell sharply during 2007 – down over 20% according to the Spanish property registry.  As Lanzarote felt the reverberations of a global credit crunch that had a similar effect on property markets in both the US and the UK.

Any retraction in the UK is bound to have a negative impact on the island – as a large percentage of property investment here is accounted for by British and Irish residents.  Keen to create a bolt hole in the sun – and often a lucrative letting vehicle.

House price inflation on the island during 2007 was also below the historical norm – running at 5.1% - a good few percentage points lower than the recent historical annual norm of 8-9%.  Thanks again to the post Northern Rock and sub-prime induced crash of confidence amongst consumers and homeowners.

However in the credit column the island welcomed more holiday makers than ever this Christmas - according to figures recently released by ABTA.  As the dismal British summer of 2007 spurred many sun starved citizens to head south at the first available opportunity.  Budget airline operator easyJet has also just announced the opening of the first cut price route from the UK to Lanzarote.  A development that has been eagerly awaited by holiday villa owners for years.

The encouraging Christmas tourist figures would also suggest that family finances are possibly not as parlous as the media would have us believe.  And more often than not, as the old adage goes, where tourism leads, property investment tends to follow…

Certainly, anecdotal evidence from many local agents suggests that sellers are now being advised to accept more ´realistic’ offers for property should they wish to make a quick sale. Which is in turn great news for buyers – as this is effectively creating the market conditions that enable overseas investors to negotiate price reductions.

Local banks – like lenders worldwide – are also being more stringent about who they lend to and how much they will lend.  In Spain, the banks valuation of a property is crucial – as this is the figure that is lent against.  Not the purchase price displayed in estate agents windows.  And again, all indicators suggest that island banks are effectively driving down the asking price of property for sale in Lanzarote but returning much lower valuations.

In the long term property in Lanzarote is still priced some way below the sort of figures that are commanded by similar properties in other Spanish sun spots.  And the island – along with its Canarian cousins – remains the only location in Europe capable of delivering genuine winter sun and temperatures in excess of 20C in the depths of December and January.

2008 then would appear to be a good year in prospect for anyone seeking a longer term investment on the island.  Whilst property owners may well be best off staving off any sale unless forced to do so.

The views and opinions expressed in this article are strictly those of the author. Spanish Property Guide publishes these articles in good faith and with the understanding that there are no intellectual property infringements. If you feel there has been such an infringement, please contact us stating your claim.