After four months of booming operations, the sector is losing strength and is stabilising. The lack of 'stock' and the rise in rates will curb demand throughout 2022, although prices will continue to rise
The 'sprint' experienced by the purchase of homes in the Canary Islands in the first four months of this year by buyers fleeing from the inevitable rise in mortgages has come to an end and
the market starts to cool downalbeit slightly.
On the rise of mortgageswhich was already felt in May and will intensify in the coming months (the ECB is expected to raise interest rates to 0.25% in July and 0.50% in September), adds another problem that contains part of the demand in the islands and is the
lack of homes for sale.
It is estimated that the current 'stock' is barely 2.5% of the total park and many of them in areas that are not attractive for demand.
Projects held back by rising costs
In the short term, the problem does not seem to be solved as a result of the rise in construction costs, which is holding back many projects.
However, it is estimated that in the coming months
home sales on the islands range between 1,800 and 2,000 per monthat levels similar to April, when 1,959 operations were closed on the islands.
The previous months, due to the 'sprint' of flight from more expensive mortgages, the figures were higher: 2,032 in January, 2,125 in February and 2,332 in March. Total,
In the four-month period, 8,448 homes were sold in the Canary Islands, 13% more than in 2019when they were 7,476.
"In the coming months there will be a cooling but it will be slight because there are not many homes on the market," he says.
the broker of the Remax Arcoiris group, Rafael Bello. As he explains, although part of the demand is contained by the rise in rates, it will not be very noticeable because there is little property on the market, "everything that is put up for sale is placed."
In the Canary Islands, foreign demand must be added to residential demand, which on average accounts for 30% of operations. The foreigners returned with force in 2021, after the covid, and now they maintain operations.
Regarding the rate hike, Bello points out that even
it is possible to find mortgages at a good price in the marketat 1.75% or 1.80% at thirty years.
The rates so low to date "were not real"
“We cannot compare with what was there. Conditions are still good now, Bello notes. In his opinion, we have experienced a "financial joy" with interest rates that "was not real."
Bello's opinion that the real estate market in the islands is entering a stage of cooling and stabilization is shared by different
industry experts. From the real estate portal, the
Idealistichis spokesman, Francisco Iñareta, in the coming months there could even be a small drop in operations due to the increase in the cost of financing, economic uncertainty, inflation and the low 'stock' of houses.
The director of studies
flats.comFerran Font, speaks of «moderation» while from
photohouseits spokesperson, María Matos, believes that the start of the war has not had a direct impact on the search for housing and on the interest in buying, at least among national individuals, and that “the impact is probably indirect due to inflation.
The seller dominates the market and pulls the price: it will rise another 3% this year
The seller is currently the one that dominates the real estate market in the Canary Islands. At a time when supply is limited -there is little 'stock' of homes for sale, both used and new (especially the latter)- and demand is large, it is the seller who has the upper hand and set the price. This is the main reason why prices are rising and today the square meter on the islands has returned to the level of 2010.
In the first quarter of this year, the average price per square meter in the archipelago stood at 1,594.8 euros, according to data from the Ministry of Mobility, Transport and Urban Agency. You have to go back to the first quarter of 2010 to find a similar price: then it was 1,590 euros in the Canary Islands.
If we compare the current price with that of the first quarter of 2019, before covid, the rebound is 5.4%. Looking ahead to the coming months, the forecast for the real estate sector is that housing on the islands will continue its upward trend. It is estimated that it could become more expensive by up to 3% between now and the end of the year.
The maximum price in the Canary Islands was reached in the second quarter of 2008, with 1,841 euros per square meter. Housing is still 13% below then, with an average per square meter of 250 euros.