Tenerife Property Market - Clear Blue Tenerife S.L.

Tenerife Property Market unaffected by Global Financial worries

Tenerife’s property market remains robust despite worries in the UK and elsewhere, about house prices and mortgages. The crisis started in America with the so called sub prime lenders (these are banks who lend large amounts of money at high interest rates to clients with less than perfect credit histories) getting worried that their clients were defaulting on mortgage payments.

The predictability of this was obvious; in a market where the tendency is for interest rates to go up, one would have thought it a likely outcome that borrowers with poor credit histories would come unstuck, particularly when they were paying premium rates of interest, and stop paying their mortgages. However the greed of the lenders to make the proverbial fast buck proved more tempting than financial prudence.

This has shaken down the line into the UK, and caused problems for lenders, particularly Northern Rock (assets 113 billion pounds), who suddenly found their source of funds drying up, and having to apply to the Bank of England for temporary funding. This is a particularly unusual situation, as Northern Rock, although a bank, borrowed not from it’s investors but from other banks and financial institutions.

In Spain and in Tenerife in particular however, it’s business as usual. The banks here have never wildly lent to unsuitable clients, indeed if you want a mortgage here, you will most likely find you will be required to provide a credit report from the likes of Equifax or Experian to check your credit history. Also interest rates are much lower (you can have a mortgage here for around 5.25% to 5.5%) which reduces the chances of people defaulting as the interest rate remains affordable.

Another interesting feature of the Tenerife mortgage market is that the UK habit of constant switching mortgages after the “3 year reduced interest period” has elapsed, is virtually non existent in Tenerife. Nearly every mortgage granted here has a permanent link to the dominant European benchmark “Eurobor” which in September 2007 sat around 4.8%. Mortgages are usually fixed between 0.5% to 1% above Eurobor, so big unexpected increases are avoided. This compares very well to the rates found in the UK, and the absence of surprise increases makes the market here extremely stable compared to the UK and America.

Another indicator of the confidence in the Tenerife market is the way major UK lenders are coming here. Already household names like Barclays and Lloyds TSB have a significant presence here, and in October, The Halifax, one of the major UK financial institutions, will be opening a large branch in the South of Tenerife, in Fañabé.

So, anyone interested in property in Tenerife can buy without worrying. There are an ever increasing number of British people fed up with the weather, the economy and numerous other things about the UK, who continue to swell the numbers of British ex-pats here in Tenerife. There is an expanding buy to let market, encouraged by the introduction of interest-only mortgages, which up till recently were unavailable in Tenerife and house prices continue to steadily increase so anyone waiting for prices to fall is likely to be very disappointed. So have no worries, if your dream is to own a property in Tenerife, in one of the world’s best climates, with a low cost but extremely stable economy, proceed with confidence, your investment will be secure!