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Resurgent Spain: Tenerife a Top-Tier Destination for International Investors

The heart of the Canary Islands felt the force of foreign buyers in 2015 and the trend looks to continue

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San Andres City and Las Teresitas Beach in Tenerife.

Calle Montes / Getty Images
San Andres City and Las Teresitas Beach in Tenerife.
Calle Montes / Getty Images

Long a favored destination for tourists and expats in search of year-round warm weather, the Spanish island of Tenerife, also known as the “Island of Eternal Spring”, is steadily emerging from the country’s economic crisis on the heels of increased foreign buying.

In the second quarter of 2015, nearly 50% of all homes sold in Tenerife were bought by foreigners, according to data from Spain’s National Institute of Statistics. The percentage of prime property purchases, defined as $1 million and above, are thought to be even higher. Sales to foreign buyers had fallen below 20% during the peak of Spain’s housing bubble between 2008 and 2009.

Situated in the heart of the Canary Islands, Tenerife is attracting an increasingly diverse range of international buyers. “Its global appeal coupled with the lack of over-building experienced in many other Spanish regions, meant that the property market remained relatively buoyant during the recent difficult years,” said Ash Smith, sales manager with Clear Blue Skies Group, a real estate agency based in Tenerife. “When one nationality of buyers becomes scarce, another potential market comes to the fore.”

A six bedroom, five bathroom villa currently on the market in Tenerife for about $2.52 million.

Engel & Völkers Costa Adeje

Russian buyers flooded the Tenerife market prior to the fall of the ruble. In 2015, they disappeared almost entirely and British buyers, buoyed by the strength of the pound, lead the tally of international investors. The majority of foreign buyers come from Belgium, Germany, Switzerland, Italy and the UK, with an increasing number hailing from Scandinavia, according to Caroline Müller, office manager of Engel & Völkers in Tenerife.

Another draw for foreign investors are the bargains available on coastal property. Prices in the prime property sector remain 30% to 40% down from pre-recession levels, according to Simon Sutton George, partner at Tenerife Property Group. At the height of the downturn in 2009, new construction came virtually to a halt but it has picked up again, he added.

A custom-built villa at the Abama Luxury Residences.

abamahotelresort.com

New luxury developments are currently underway. Among them is the Abama Luxury Residences, a five-star project featuring a golf course overlooking the sea.

Home to 10 restaurants, including two with Michelin stars, a spa, tennis courts, seven pools and thousands of palm trees across its 395-acre site, Abama will include both villas and apartments. The Residences are located on the same site as the Ritz-Carlton Abama hotel and have access to its amenities.

Seven out of eight turnkey villas starting at €1.650 million (around $1.794 million) have already been sold, along with 30 apartments, which comprised Phase I of the project. Phase II of the Las Terrazas apartments, featuring 35 units, is 95% sold. Sales have just been launched for Phase III, which will offer 35 more apartments priced at €350,000 (about $376,000). A number of plots for custom-built villas are also on the market.

TIPS FOR BUYING AND SELLING IN TENERIFE

• Closing costs usually add up to between 8% and 12% of the purchasing price, according to Simon Sutton George, a partner at Tenerife Property Group. They consist of various fees and taxes including land registry fee, notary fee and transfer tax.

• Real estate agents in Tenerife are paid by the seller, normally around 5%

• As a nonresident seller, you will have to pay 3% of the declared value to the Spanish Tax authorities to cover any public or private debts that may be outstanding. Provided that your taxes and other accounts are up to date, you can claim this money back within five to six months, according to George.

Other Useful Links:

- Taxes on Selling Spanish Property- Taxes on Buying Property in Spain