“I started looking for a house two years ago, and I have already reached a point where I have seen that it is more profitable for me to build my own house than to buy it.” Ruth Martinez lives with his mother in Los Realejos, north of Tenerife. She has a partner and they both enjoy stable and reasonably well-paid jobs. But not for those. They try to find a single-family home in the northern region, not necessarily in Los Realejos, but the prices are out of control. So Ruth and her boyfriend have had to give up, at least for now. “I keep looking at houses from time to time to see if I see a drop in price, but it seems to keep going up instead of down,” she explains. And so it is. If buying a home has long since ceased to be an accessible option for the majority, now, with skyrocketing inflation and rising interest rates, it is an unaffordable effort even for those who count, like Ruth, who is a professor of High school English, with stable income. In fact, the average monthly mortgage bill from new buyers is in Canary Islands about to cross the red line marked by the experts, about to eat more than 30% of the salary, which is that percentage from which the mortgaged person compromises his domestic economy. In other words: the point from which the payment of the loan forces to cut other habitual expenses. That in the best case; because at worst, the family has no choice but to delay payments at the risk of ending up in the delinquent files.
Tinsa, one of the leading property appraisal firms, publishes an X-ray of the regional and local mortgage markets every quarter. At the beginning of 2021, when almost no one imagined how much the cost of living would skyrocket, island families buying a home assumed a mortgage payment well below that 30% red line. On average, Canarian households had to allocate 21% of their income to pay the first year of the mortgage. A family with two salaries that earned 3,000 euros a month paid the bank 630. Well, two years and a wave of inflation later, that same family of new mortgagees would have to pay a monthly bill of 840 euros. If, before the price crisis, buying a flat or a house required an economic effort for the islanders equivalent to 21% of their income, it turns out that this percentage has now skyrocketed to 28%. In other words, it is close to the maximum recommended by experts in the real estate sector.
Not even in the bubble years did real estate reach the current values
Analysts from Tinsa Research, the entity’s study service, calculate the effort that families make to pay the first year of a mortgage based on the average disposable income of households in each Autonomous Community and the average value of housing also in each Autonomous Community. This is for a mortgage type that finances 80% of the price of the house, since banks do not usually grant loans for the purchase of real estate that exceed that percentage. All in all, and despite the notable greater effort that must be made by those who venture to take out a mortgage in the current situation, the truth is that the Canaries may well find themselves with a song in their teeth, given the situation of the real estate market in other regions of Spain.
There are places where families who buy a house allocate a whopping more than 40% of their available income for the mortgage. These are the cases of the province of Málaga, where acquiring a home owned takes up to 42% of the family income; and from the Balearic Islands, the other archipelago of the country, where the average mortgage payment consumes a whopping 53% of the salary, that is, more than half. Along with those of Malaga and the Mediterranean islands, the most inaccessible real estate markets are those of the province of Barcelona, where it is necessary to use up to 35% of the income to pay the mortgage, and the Community of Madrid (38%). . The national average is 30.9%, which is already beyond the red line.
provinces
Again in what is strictly related to the Canary Islands, there is hardly any difference between provinces. Mortgaging in the eastern islands means losing exactly 27.8% of income; while in the province of Santa Cruz de Tenerife the percentage is very slightly lower (27.7). That is why Ruth’s problems in finding a house in the north of Tenerife are identical to those suffered by Nerea González in the metropolitan conurbation of Gran Canaria. His case is different because he is looking for an apartment that allows him to become independent and not a family home, but the prices in the palms of Gran Canaria or Telde for buildings between 45 and 70 square meters “are nonsense.” Like Ruth, Nerea also has a stable income, but she doesn’t have a partner and wants a house that she can afford with her salary. “With current prices it’s impossible, so I’ll have to continue living with my parents,” she resigns herself. And what are those “current prices” that this 32-year-old alludes to? Nothing less than the highest in history.
The cost of houses has shot up with greater intensity in the province of Santa Cruz de Tenerife
In March 2021 -the inflationary wave began to take shape towards the second quarter of that year-, the average cost of the square meter of housing in the Archipelago was 1,873 euros. At this time, according to data from the Idealista real estate portal for last month, the price has already risen to 2,083 euros. The cost of houses has skyrocketed in the Islands by an average of 11.2% as a result of inflation, although here there are differences between provinces. In the demarcation of Las Palmas, the average price per square meter is 2,046 euros, 5.5% more than before inflation went crazy but still 2.4% below the all-time high, which was recorded at the beginning of 2007, when the real estate bubble had not yet burst, with 2,097 euros. On the other hand, the 2,113 euros that the value of the square meter currently marks in the western islands is the highest figure ever. In addition, the increase in the price of housing since the beginning of the inflationary wave in the province of Tenerife is 16.6%, triple that in the eastern demarcation.
The delegate of the Professional Association of Real Estate Experts (APEI) in the Canary Islands, Isidro Martín, explains that one of the great problems of the real estate market in the Autonomous Community is the shortage of supply. Something that comes from afar – there have been years in which not a single public housing has been built in the Archipelago – and that is now worsening with the price crisis. Like any other good, houses are also subordinated to the dialogue between supply and demand; And like any other good, prices rise in situations of scarcity of supply and high demand. And in the Canary Islands, where the population has not stopped growing even in the years of greatest socioeconomic difficulties, the demand is not that it is high, it is that it is very high. It is therefore not surprising that inflation has only intensified this characteristic of the island real estate market.
The market in the region is suffering from an acute shortage of supply that is now aggravating the price crisis
What’s more, to this combination of lack of supply and high demand, factors such as the boom in vacation rentals have been added in recent years, which has made many owners see it as more profitable to rent their second home or house to tourists. inherited from their parents than to sell it. Fewer houses, therefore, in the market for sale. It is true that in recent months, with the legal uncertainty to which the intervention of the Government of Pedro Sanchez In the rental business, many owners have changed their minds and sold the homes they had rented until now to avoid problems, “especially many heirs,” says the APEI delegate. But it is no less true that it is a situation that is, in principle, short-term, which by itself does not correct the historical lack of supply.
In addition, as Martín points out, there is also the factor of massive purchases by foreigners, which already account for 30% of sales in the Autonomous Community, that is, three out of every ten. And that only non-resident foreigners, because if the subjects of third countries residing in the Canary Islands are included, then it turns out that foreigners are the protagonists of 50%, half, of home purchases in the Archipelago. This, of course, also contributes to the increase in the cost of real estate and the reduction of the offer for the premises. The few promotions underway in the Islands do not last like this for a second. Those who can buy take advantage of the opportunity to acquire a newly built house, flat or chalet, knowing that there is hardly any market for new housing. “They buy before they are built, they buy off-plan,” the expert deepens.
