The growing paralysis in the UK property sector is starting to impact on overseas markets, and demand for property in Lanzarote for example, has started to show signs of decline with British based investors.
Lanzarote´s property market has traditionally been fuelled by UK buyers as the island welcomes over one million British tourists annually – along with hundreds of thousands of visitors from the Irish Republic – which actually creates a ready made rentals market and year round potential returns for the owners of apartments and holiday villas in Lanzarote.
The Eastern most Canary Island of Lanzarote is also a popular relocation and retirement destination, with around 7,000 British expatriates now residing there on a permanent basis, comprising around 5.5% of the island’s total population of 127,00 people. However, despite the fact that tourism to the island is on the up with British visitor numbers increasing by 7.9% so far this year, fears are growing that the island’s hitherto healthy property market could grind to a halt thanks to international economic events and the UK´s advancing case of‘brickor mortis!’
Earlier this week, HM Revenue and Customs revealed that only 62,000 homes in the UK found a buyer last month, down 60% on August 2007; whilst only 21,086 new mortgages were approved in August, a fall of 63% in a year according to the British Bankers’ Association.
Overseas property hot spots such as Lanzarote have also been adversely affected by sterling’s recent decline against the euro and the tightening of credit conditions by local banks, which further impacts on British buyers as the majority seek to source their mortgages locally in order to take advantage of cheaper Eurozone interest rates. Mortgage approvals in the Eastern Canary Island province of Las Palmas, of which Lanzarote is part, have in fact fallen by 35.8% in the first quarter of 2008, according to Spain’s National Institute of Statistics.
As a result of all of these factors, property prices on the island have softened considerably and the market has become becalmed and balanced with many local agents reporting a growing quantity of price reduced property on their books. Additionally, all of the main island based estate agents catering to the British and Irish markets have reported a marked decrease in transactions compared to 2007, with some smaller operators even being forced to close their doors altogether. Local observers are now pinning their hopes on an autumn bounce – which normally kicks in as the days start to shorten and the weather worsens back in the UK and Ireland. Let’s wait and see!