To Tenerife as to yourself. How much does an apartment cost and how can the new law spoil business for foreigners?

In the first quarter of 2024, Poles bought as many as 800 houses and apartments on the Iberian Peninsula, according to official data from Registradores de Espana. This is an increase of 21 percent compared to the previous quarter and three times more than in the period before the pandemic. There is a chance to break the record from 2023, when Poles bought as many as 3,118 apartments and houses in Spain.

Poles fell in love with Spain

Poles are the ninth most active foreign investors in the Spanish market, accounting for 3.72% of transactions. Their activity has increased significantly since 2022, when Spain began to appear as a country sufficiently distant from Russia to provide a semblance of security.

Spain is a country with an area of ​​506 thousand m2 (for comparison: Poland occupies 322 thousand m2). Poles can be found mainly along the coastline and in the Balearic Islands and Canary Islands. Of course, there are small Polish communities in other regions, but most buyers have decided to buy a house in a place that meets two conditions: guarantees good weather and access to the sea or ocean. Hence, the most popular areas among investors are the areas of Valencia, Alicante (in this region, Poles are particularly fond of the city of Torrevieja), Andalusia, Majorca, Gran Canaria and Tenerife. Many apartments have a dual function: they are a holiday home for the owners, and for the rest of the year they are listed on services such as Booking and welcome tourists. In Spain, there are hundreds of companies specializing in managing holiday properties: in exchange for a commission, they keep a booking calendar, issue keys to tourists, provide cleaning and ongoing repairs.

Tenerife: Dreams of a Beachside Apartment

We check how much it costs to buy a flat on one of Poles’ favourite islands: Tenerife. What formalities are involved in the purchase and how much money do you have to spend on it? Finally, can you easily earn money on a holiday apartment and rent it out to tourists?

Piotr Adamczak from the Zamieszkaj na Tenerife real estate agency says that Poles most often buy apartments with one or two bedrooms for “combined” use, i.e. they want to rent the apartment commercially for part of the year.

– The average price of real estate purchased by Poles is around 300 thousand euros. You have to add to this the purchase tax, which varies depending on whether you buy on the primary or secondary market. The tax on the purchase from the secondary market is 6.5 percent of the property value, and when buying from a developer – 7 percent. You have to add to this around 3-4 thousand euros for notary fees, entry in the register – says Adamczak.

North vs South

His observations show that Polish clients are primarily interested in new investments, but due to limited supply, many of them decide to buy second-hand apartments. To put it more simply: Tenerife is an island the size of a quarter of the Opole province. Its central part is occupied by the Teide National Park, which houses a volcano and the highest peak in Spain, Teide. The national park is surrounded by forests and only on their outskirts are there small towns where families have lived for generations. Individual foreigners decide to settle there, but these are people who really want to escape from the life they know and live “like locals” rather than investors who hope to earn money on real estate from time to time.

In addition, to the very north are the Anaga Mountains – beautiful and attractive to hikers, but preventing settlement.

Thus, the overwhelming majority of cities and towns are located along the coast, which in many places suddenly jumps out in the form of a sharp cliff or precipice or bulges out. This naturally limits the activities of developers, who can build on a relatively small area. Let’s subtract from this the huge hotel areas and it turns out that there are not many areas for development.

Let’s go further. In terms of leisure, Tenerife is usually divided into the more touristy south – built up with hotels and apartments for rent, where one resort merges into another – and the north, which is definitely more “livable”. The largest cities are located in the north – the capital Santa Cruz de Tenerife and Puerto de Santiago, as well as the seat of the university La Laguna. Some tourists choose northern cities and towns. The south guarantees weather all year round, the north is very rainy, but not enough to discourage tourists. On the contrary, many declare that they do not want to have anything to do with the resorts in the south and choose the north, from where it is closer to the mountains and trails, and there is no shortage of tourist infrastructure.

Developers can’t keep up with construction

There is a group of Poles living in Tenerife. They work primarily in tourism and real estate. Polish travel agencies and Polish real estate agencies are developing intensively there. There is even a Polish shop in small San Juan. However, the majority of Poles buying real estate are people for whom it is a holiday home.

Most people who want to buy a flat – whether for the summer or permanently – choose the south. They want to live in resorts on Costa Adeje or in the vicinity of Puerto de Santiago. Since the 1960s, when the Canary Islands opened up to tourists under General Franco, these areas have been built up with hotels. All this means that developers have nowhere to go. Even if they built twice as many, they would still be happy to find flats. The restrictions mean that flats are scarce and expensive.

This does not stop those who have money – and rather cash, because it is difficult to buy a flat abroad on credit. Piotr Adamczak admits that his agency has sold at least 120 properties a year in the last two or three years. What formalities need to be completed?

– The basis for the purchase is the NIE number, i.e. the tax identification number for foreigners. It is also worth opening a bank account for later property management – ​​explains our interlocutor.

How to rent an apartment to tourists?

Renting an apartment to tourists requires meeting certain conditions. The owner must have a short-term rental license. If they provide the property despite not having one, they may be fined a hefty fine. The appropriate services constantly monitor which apartments are being added to booking services and can quickly detect if someone is operating without a permit.

– According to the current regulations, a rental license cannot be obtained when the tenant community adopts such a ban or in buildings for tourist purposes, such as aparthotels, where the license can only be held by one entity and it is for the entire complex or its part. In order to obtain a license, you must sign a declaration of responsibility, in
which includes, among other things, that the property is not subject to the above restrictions and meets the requirements of the Ministry of Tourism – explains Piotr Adamczak from Zamieszkaj na Tenerife.

What about people who do not want to rent an apartment, but host family and friends there and, as they declare, do so without financial gain?

– If someone buys an apartment for themselves, they can use it as they wish, i.e. share it with family and friends (unless any institution proves that they receive remuneration for this), unless the status of the complex/building prohibits such sharing. Such a ban may apply to aparthotels – our interlocutor reassures.

“Tourists go home.” The Canary Islands have had enough

The people of Tenerife – those by birth, not by choice – are fed up with uncontrolled tourism and the fact that they cannot afford to live on their island. Apartments in tourist complexes are unavailable to them – at most they can live in old buildings in smaller towns. The average salary in Tenerife is 1000-1100 euros, and 1500 euros is already a very good salary. The cost of living is high. Goods are brought in by ship from the mainland, which increases their price. In April this year, tens of thousands of Canary Islanders took part in protests against mass tourism. The largest demonstrations were organised in Tenerife and Gran Canaria.

The protesters called on the regional government and local governments to introduce restrictions on the construction of hotels and tourist resorts in order to limit what they believed to be an uncontrolled influx of holidaymakers. The protesters argued that the excess of tourists in the Canary Islands has led not only to traffic chaos and noise, but also to the pollution of local nature.

Local authorities of individual islands have prepared legislative proposals restricting the rental of real estate. According to them, short-term rentals would be allowed only if the spatial development plan clearly allows such an additional type of use. Thus, in some multi-family buildings, tourist rentals would be prohibited. The project has not yet been adopted.

– Government proposals formulated in this way practically eliminate the issuance of new licenses. Anyone who knows the local realities knows perfectly well that there are no such development plans for tourist rentals in the communes and if they were to be created, it would take a very long time. The government must find some compromise, because the hotel base on the Islands is not able to accommodate all the tourists, and in addition, the tax profits from tourist rentals are significant. If the project were to come into effect in this form, it would certainly affect the market – says Piotr Adamczak.

The project is radical in its form, on the other hand: it would organize rentals and make popular locations into housing estates for tourists and permanent residents. People interested in buying real estate for rental purposes should be aware of the stage of legislative work.