Capital investments in foreign real estate have long been recognized as one of the most effective investment strategies. The advantages of long-term investment of money in housing include the minimization of risks and a stable profit. In terms of investment attractiveness, European real estate markets have long gained a good reputation proven by a number of indisputable factors. Firstly, real estate can bring income not only through the capital growth, but also through renting. Secondly, real estate is a unique investment vehicle in the sense of its self-repayment, since rental income may cover mortgage payments. Finally, it is also important that the ownership of real estate abroad simplifies visa procedures, and in some cases gives grounds for obtaining a European residence permit, the so-called "golden visa".
Today, foreigners buy more housing in Spain than ever. According to the notarial deeds, compared with last year, the number of purchase and sale transactions concluded by foreign citizens increased by 13 percent. Same as before, the British predominate among the foreign buyers of real estate in Spain, but their percentage begins to decline gradually due to Brexit. The top five leaders also include the French, Germans, Belgians and Italians. Russians make up about 3% of all foreign homebuyers.
The largest number of transactions takes place in the coastal regions: Costa Brava, Costa Daurada, Costa Blanca, as well as the Canary and Balearic Islands. The Spanish market was slouching through a recession from 2008 to 2015, but over the past two years the country managed not only to get out of the crisis, but also to show unprecedented rates of economic growth. Despite these recent improvements, average real estate prices per square meter in Spain have not yet reached the pre-crisis level, which makes the Spanish market today economically attractive, promising and relatively inexpensive.
The Canary Islands are an archipelago in the Atlantic ocean, off the west coast of Africa. Thanks to the climate, the tourist season here lasts all year, providing a constant demand for rental housing. Tourism in Tenerife and Gran Canaria is developed more than on other islands of the archipelago, but the target customers of the entire tourist service sector are quite different on these two islands. More youth go to Gran Canaria, while Tenerife is considered the mainstay of family recreation. Considering this, it is worth choosing the housing that is in demand among the married couples for the investment in real estate in Tenerife. Thus, two-bedroom apartments located if not in the first line near the ocean, then at least within a walking distance to the sea are in the greatest demand for rental in Tenerife. The purchase of this kind of real estate in Tenerife will not only pay for itself through rental, but also will bring a stable income to its owner. The taxation system in Tenerife differs from that adopted on the mainland. For example, VAT (or IVA) in mainland Spain is 21%. In Tenerife, it was replaced by IGIC (Impuesto General Indirecto Canario) at the rate of 7%, which explains why real estate here is cheaper than in Europe. At the same time, the development of tourism in Tenerife in recent years has sustained a steady and strong economic growth, which in its turn has a positive effect on the pace of construction of new real estate.
There are two key advantages of real estate investment in Tenerife:
1. Prices for real estate in Tenerife are lower than in the prestigious resorts of mainland Spain.
2. The profitability of real estate is ensured by the year-round demand and rising rental prices.
-Purchase of housing in the secondary market
This is the most common and, perhaps, the most reliable way of investing money in the overseas real estate. Secondary market real estate is the main indicator of the state of the real estate market in the country, since it is the demand for "secondary housing" that determines pricing. According to statistics, 16% more transactions of the real estate purchase and sale were registered in Spain in the first half of 2017 compared to a year earlier. At the same time, 80% of these transactions were concluded in the secondary market. The increase in demand, in turn, led to a price increase of 4.9%. This stable and uninterrupted growth of the market gives experts grounds to anticipate further growth.
Furthermore, the fact that the banks are issuing more and more loans serves as additional evidence that Spain has come out from the crisis and that the economy is gaining momentum. Thus, when buying a flat in Tenerife, up to 70% of the cost of housing can be mortgaged.
-Investments in commercial real estate
The purchase of commercial real estate - hotels, restaurants, bars, retail spaces - is another way to get a stable return on investment. Properly chosen commercial property in Tenerife has the same advantages as residential and benefits from high profitability and year-round demand for rental.