Lanzarote Property Prices Soften As Mortgage Approvals Fall

The eastern most Canary Island of Lanzarote has long been a favourite with property investors from the UK and Ireland. Thanks to a year round clement climate that attracts millions of foreign tourists every year. Providing a steady twelve month stream of rental income for owners of holiday homes on the island.

But now all that looks to set to change – as new figures just released by Spain´s National Institute of Statiscs reveal that mortgage approvals in the province of Las Palmas - of which Lanzarote is part – fell by nearly 36% during the first quarter of 2008. As the international credit and mortgage crisis starts to bite into the hitherto healthy market for property for sale in Lanzarote .

The NIS figures show that new mortgage approvals fell from 14,456 during the first three months of 2007 to 9333 in the same period this year. Despite the fact that the island’s tourist market has in fact enjoyed a buoyant start to 2008 – with total foreign visitors numbers up by 8.7%.

This fall in new approvals can be attributed to a number of factors – such as the weakening of sterling against the euro, declining disposable incomes and falling consumer confidence in the UK and the tightening of credit criteria by local banks. Who play a key role, as the vast majority of British investors opt to take out mortgages locally in order to take advantage of the cheaper credit available in the euro zone.

Local banks have also been imposing more realistic valuations on vendors. Many of whom are now having to market their property at prices someway below their original expectations as potential buyers become scarcer.

As a result of this combination of factors property prices are now starting to soften. With all of the island’s leading estate agents reporting a sharp increase in the quantity of price discounted property coming onto the market.

Some observers suggest that this adjustment is in fact long overdue – as the island has witnessed annual consecutive price growth of around 9% across the last five years. Whilst others believe that property on Lanzarote is still under priced in relation to other Spanish holiday hotspots.

Either way – it is clear Lanzarote is now becoming a buyers market. With discounts of up to €90,000 now visible on estate agents websites for luxury villas and up to €30,000 on apartments in the main holiday resorts.

Nick Ball, editor of leading Lanzarote property portal Lanzarote Guidebook reinforces this view: “There is still a decent level of demand out there – but buyers have become more cautious and are leveraging the current economic position to secure discounts wherever possible. As a result – vendors are now being forced to accept offers way below the levels of even six months ago if they are serious about securing a sale.”

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