Like mainland Spain and other earlier holiday property hotspots, Lanzarote has suffered from a combination of the recession, restrictive mortgage lending, and the weakness of sterling over the past few years. After a large amount of development, especially around the newer resorts of Playa Blanca and Costa Teguise, property building came to a shuddering halt some 12 to 18 months ago.
As demand has weakened, so have prices, and there have also been a lot of resales coming on to the market from bank repossessions, as well as from residents who originally moved to the island to work in the building and development industries, but who have since gone home as the work dried up.
That said, long term and demographic factors weigh heavily in Lanzarote's favour, and the conditions for buying property on the island have seldom been better at any time in the past 10 years. We set out our reasons for saying this below.
Firstly, property prices. The average villa price on the island is probably changing hands now for about 15-20% less than it was four years ago, and if you shop around, you can probably drive a better bargain than this. It is certainly a buyers' market, with a wide choice of villas and apartments available in most areas.
Secondly, the exchange rate. This has actually favoured some British and non-European residents who have sold in recent times, even at the lower market prices. For those that purchased their property pre-2008, the loss on their selling price may well have been outweighed by the gain they made in converting euros from the sale back into sterling or another currency. That is now changing. The pound, dollar and other currencies are all now strengthening against the euro, especially with the recent talk of Europe bailing out the Greek economy, and the credit downgrading of Spain and Portugal. This turnaround starts to favour buyers again - especially as property prices are now probably as low as they will get.
Thirdly, mortgage funds are now more available than they were, and UK property prices are increasing once more - recent figures suggest by 10% per annum. This creates the headroom by which UK buyers can finance their Lanzarote property purchase by leveraging the equity in the value of their UK homes.
Which brings us to the fourth and fifth points, and probably the most long term factors in Lanzarote's favour. Buying property in Lanzarote, as well as mainland Spain and the other Canary and Balearic islands, is increasingly popular with UK residents. This applies to those that are approaching retirement, but also increasingly to those that are seeking a new environment with clean air, low crime and year-round sunshine, in which to work and bring up their young families. This factor alone has brought thousands of British people to live on the island since the turn of the millennium, and the majority are still here. Many German, Scandinavian, and increasingly Russian and Baltic nationals, feel the same.
Fifth and final point - the holiday market is easily Lanzarote's biggest industry, and the renting of holiday villas in Lanzarote, especially in the main resorts of Playa Blanca, Puerto del Carmen and Costa Teguise, is a big business on its own. Anyone buying a quality villa or apartment in a sought after area of Lanzarote, and that wishes to rent it out, should realistically expect to cover the majority of their costs and still enjoy it themselves for 6-8 weeks of the year, provided they furnish and market it correctly. This is a very attractive proposition for many that are seeking to buy a second home, possibly to live in permanently themselves at some future time.
So, whilst property in Lanzarote may have been in the doldrums in recent years, there seems to be a 'perfect calm' developing for real estate in Lanzarote due to lower prices, better access to finance, and the improvement of sterling. We think it's a great time to think about buying that property in Lanzarote.
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