Investment Property Trends in Lanzarote

Any island based estate agent will tell you that there’s “too much product out there at the moment”. An over supply of property for sale in Lanzarote which has been created by the growing credit crisis, falling pound and weakening consumer confidence in key overseas investment markets such as the UK. But over supply and declining demand is not the whole story. As certain types of property are still generating interest, enquiries and sales.

Historically, Lanzarote has been something of a property investment hot spot. Capital returns have averaged 10% plus per annum over the last five years and as a result the number of estate agents on the island has risen sharply. With many a canny expat thinking they can turn their hand to the property game.

Demand has been fuelled by the fact that this small speck of Spain, located just 70 miles off the coast of Africa, enjoys year round temperatures in excess of 70F and very low rainfall. Along with relatively controlled development, great beaches and a relaxed lifestyle. Making it an extremely popular year round holiday destination with British tourists – who account for around 850,000 visitors annually.

Lanzarote has also recently emerged as the destination of choice for visitors from Eire – who numbered close to a quarter of a million tourists in 2007. An incredible figure given the Republics overall population of just over 4 million.

Where tourism leads property investment tends to follow. And over the last five years local estate agents have been able to reap the benefit – often without having to expend a great deal of energy or expense in terms of marketing either their business or their portfolio. As higher priced property – such as top end villas – moved through just as swiftly as smaller units –such as studio apartments.

But now that all seems to have changed. As whilst demand retains some buoyancy interest in higher priced property has virtually vanished. With anything priced over €300,000 looking about as attractive as yesterday’s tortilla. A development that has been further fuelled by the application of more stringent mortgage lending criteria by local banks. Along with more realistic property valuations.

As a result the only movement in the market currently is at the lower end. With demand for studios and apartments – ideal for holiday rental – providing the vast bulk of activity. Reflecting the fact that investors in key markets such as the UK and Ireland have turned to low risk and lower cost options.

This trend is reinforced by figures recently released by one of the island’s leading property portals, Lanzarote Guidebook. Whose analysis of 636 property enquiries received during January and February 2008 revealed that 83% of all interest was in property priced below the €150,000 mark. Whilst property priced above €500,000 attracted just 3% of all enquiries.

Photo Credit James Mitchell.