Property Squeeze Hits Costa Teguise

Once a vibrant holiday resort and an overseas investment hot spot the resort of Costa Teguise in Lanzarote is starting to hit the buffers.

Whilst other sectors of the Lanzarote property market have remained relatively buoyant the island’s third largest resort, Costa Teguise, is displaying clear signs of a downturn. With major new developments now sitting unoccupied and a number of estate agents closing their doors for business altogether.

Costa Teguise first evolved in the 1980´s under the aegis of the well known Lanzarote artist and architect Cesar Manrique. Who sought to create a sister coastal resort to the former island capital of Teguise, located 5km inland. Resulting in an all new, man made development anchored by the Sol Hotel groups prestigious five star establishment the Gran Melia, still one of the best quality hotels in Lanzarote.

Initially Manrique´s vision was vindicated. As package tourism took off the resort exploded in popularity, attracting well heeled visitors from across Northern Europe, with particular emphasis on the German, Scandinavian and British markets. Along with a number of high profile VIP´s from the Spanish mainland, such as no less an eminence than the King of Spain – who established an official residence, Las Maretas, on the outskirts of the resort.

Where tourism leads, property investment tends to follow – and many other overseas buyers also went on to purchase apartments or holiday villas in Costa Teguise.

And for a time the resort really blossomed – but the downturn in the German economy in the 1990´s and the introduction of all-inclusive packages within many of the hotels in Costa Teguise, plus the entry of more exotic destinations into the holiday market, all took their toll.

Now fast forward twenty years and this former picture of prosperity looks very different indeed. As the property market in Costa Teguise has been squeezed on two sides by changes in the islands tourist infrastructure and the impact of the current credit crisis – so eroding demand amongst both overseas investors and island residents.

Whereas Costa Teguise was once the second biggest resort on Lanzarote it now ranks a poor third – thanks to the evolution of Playa Blanca in the south of the island. Which has sucked visitor numbers away from their northerly neighbour. A process that was transforming Costa Teguise into more of a residential overspill to the nearby capital city of Arrecife than a holiday resort even before the advent of the current economic crisis.

Now that mortgage lending on the island has started to dry up too, as local banks tighten their criteria, demand from Lanzarote residents has disintegrated – leaving many estate agents and developers with interests in the Costa Teguise property market high and dry.

The impact of this double whammy is evident across the resort. Former holiday complexes such as Playa Rocas that were being re-marketed as residential units sit largely unoccupied. The highest profile new development in the resort – Residencial La Mareta – has registered few sales, despite increasingly desperate price reductions and inducements, such as a mortgage payment holiday until 2010. And a number of estate agents in Costa Teguise have now closed their doors for business altogether.

Elsewhere on Lanzarote the picture is a little less gloomy. As the island’s main holiday destination of Puerto del Carmen is currently undergoing something of a rejuvenation as island authorities press ahead with plans to create a new marina in the Old Town harbour area. And overall visitor numbers to the island remain stable. But many local observers agree that Costa Teguise is now experiencing a serious downturn and is set to face its most challenging year yet.