El enlace para la version español está aquí…The Spanish version is here
Oh, Tenerife is all youngsters getting drunk and having sex on the beach, NO…IT’S…NOT!
Unfortunately, this is the way that many people who consider Tenerife as a holiday destination think of the island.
It’s what’s caused many potential visitors to shy away from coming here for a break.
Listen, Amsterdam has its red light district – if visitors don’t want that, they don’t go there, if they do, they know exactly where to find it…Amsterdam is much more than the red light district and so is Tenerife…it’s MUCH more.
Many of the other things that Tenerife and the Canary islands in general have to offer, is what’s brought over so many foreigners who have decided to buy a property either as a holiday home or to move here permanently.
The influx of foreigners and tourists over recent years has obviously taken its toll on the island as well as the population.
I’m an estate agent here in Tenerife and even I, along with many of my colleagues in the industry, agree that property prices have risen out of all proportion.
But there are ways that the Canarian Government can handle this influx of people and benefit the population along the way.
During August it was my plan to record and post to social media platforms 15 ideas that the Canarian government could implement to help the local population that’s been affected by the price hikes and surge of foreigners coming to the islands.
As I was recording idea 6 – increasing the road tax charged on cars that are registered as rental cars – it occurred to me that really the government should be making the people that come here and make the islands their second or primary home pay for the privilege.
No matter what you say, even if you’ve lived here for a while and seen prices for everything shoot up, you’ve got to admit that in comparison to many…and I’d even go as far to say in comparison to MOST European countries, the cost of living is far less expensive overall in the Canary Islands.
So, a message to the Canarian Government.
Here’s an idea for you – you already have the diamond in your hands, you already own the Christian Dior tote bag that so many people want.
You’ve got pretty much the whole package.
It’s all here, it’s exactly what many, many others want and that’s why they buy property here…so why not make them pay for it.
OK, I’m in the real estate industry and of course, many of the people looking to buy property here are potential clients of mine…and my angle on this might not go down too well with them…but I like to think that the majority of my buyers would feel happy to be chipping in to help with the local population and infrastructure.
First of all…the charges that I’m talking about don’t have to be excessive and any Canarians and Spanish nationals will be exempt from any of these taxes, so they’re not going to be negatively affected…it’ll only be positive.
Here goes…
When someone buys a property here, one of the taxes that’s charged is called ITP – Impuesto de Transmisiones Patrimoniales.
ITP is a property transfer tax, you’ll almost certainly have it in your own country.
I looked into this and I did a bit of research to see what was charged elsewhere…
How about this?
In Hong Kong, the Buyer’s Stamp Duty (BSD) is an additional tax levied on certain property transactions, particularly targeting non-local buyers and some corporate buyers. 
Do you see that? – Applicable to foreign buyers…guess how much it is? – It’s 15%…but not “just” 15%…it’s 15% on top of the standard property transfer tax which ranges from 1.5% to 8.5%.
I think that’s a bit excessive but it’s there to discourage property investors from speculating.
Hong Kong is small at just 1,100 km square island, but it works well and has cooled the foreign investor speculation since its introduction.
As I said, it doesn’t have to be excessive though…
Spain has different percentages of ITP depending upon where you buy in the country.
Here’s what I found …
1. Catalonia – 10%
2. Valencian Community – 10%
3. Extremadura – 10%
4. Balearic Islands – 8% to 11%
5. Galicia – 10%
6. Cantabria – 10%
7. Murcia – 8% to 10%
8. Asturias – 8% to 10%
9. Aragon – 8% to 10%
10. Andalusia – 7% to 8.5%
11. Castilla-La Mancha – 9%
12. Castilla y León – 8%
13. La Rioja – 7%
14. Canary Islands – 6.5%
15. Madrid – 6%
Wow, look, one of THE MOST DESIRABLE places to buy property in Spain has an ITP charge of 14th on a list of 15…surely an increase of just 1% wouldn’t be a bad thing.
Another 1%?…
If the average property in Tenerife is 250.000€, then that would make an extra 2,500€ in buying costs and only 10,000€ on a property priced at 1mm…
This extra 1% will still keep the overall property purchase fees and taxes at less than 10% – which is what I tell all of my buyers here in Tenerife.
Wouldn’t this put off buyers?
No, because people genuinely want to buy here.
Although some would disagree, for me, the Canary Islands is a jewel in the crown of Spain.
I really can’t believe any buyer would be put off buying in the Canary Islands because of the ITP being 7.5% instead of the current 6.5%.
Even if this changed, it would only make it only 13th on the list of 15.
In fact, as I mentioned earlier…some might even be happy in the knowledge that they’re helping to fund the island that they love so much and have decided to buy on.
In this article by the Canarian Weekly, the Cabildo of Tenerife has allocated 1.4 million euros to build 188 new social housing units across the island.
Let’s quickly do some maths…
If they can build 188 units for 1.4 million euros, then that means each property costs in the region of 7,500€ to build.
Obviously they’re building on a grand scale and they’re the Government, so will probably get a good price on labour and materials, but if they can do that with the funds they have now, what could they do with the extra 1% ITP that I’m suggesting?
More maths…
I’ve read various reports on the number of properties sold in the canary Islands in 2022 (OK it was a busy year, but let’s just go with this for now) – between 22,000 and 25,000 properties sold overall.
Non-resident foreigners bought between 50-52% of those properties.
So, let’s take the lower figure, 22,000 properties and let’s say that only 50% of those were bought by foreigners, so that’s 11,000 properties.
Let’s use 250.000€ as the average property sale…and to be honest, that’s a low average in my opinion.
If the ITP cost was an extra 1% in 2022, that would have given the Government an extra 27.5 million euros.
In broad terms…and don’t shoot me down, but, based upon what the Cabildo has decided to do in Tenerife, that’s potentially another 3.5 million social housing units.
Clearly that’s very very basic maths and it wouldn’t all be spent on housing, but that’s an increase in the number of schools, salary increases to attract more teachers, salary increases to the medical professionals, improvements in hospitals, improvements in environmental conservation, water desalination plants…the list goes on…and all that is, is a 1% increase on ITP for foreign buyers.
There’s going to be uproar amongst any resident property buyers and briefly my thoughts along those lines would be that maybe they’d be charged the 7.5% transfer tax but have that extra offset against their tax return at the end of the year…or maybe they’re not charged it at all…that all needs to be worked out, but it’s not rocket science.
One thing would have to be put in place though, NIE (the Spanish tax number for foreigners) holders might also be exempt from this tax on a sliding scale.
Let’s say 7.5% between year 0 up to year 5 of being a resident, and then from year 5 to year 10 perhaps they’d pay an extra 0.5% and then from year 10 of being a resident they’d be 100% exempt.
Of course it all needs thinking about…but come on Canarian Government, surely you can use this as a starting point to help the people that voted you into power.
The people who have suffered the most from the influx of foreigners over the years…this could help them.
Now, clearly, as many Canarians have commented on my social media posts, this is all great but how do we know that the extra money is going to be used for local people and their requirements, such as new buildings, better schools, improved healthcare, job creation, welfare programs and environmental conservation and so on.
This is something that has to be controlled internally, obviously and I know that’s something that much of the public don’t believe will happen.
There’s too much corruption, agreed, but something has to be done about raising the funds to help the local population, and there must be some politicians who can be held accountable to do it in a trustworthy fashion, surely.
Sorry, this post is getting too long…
I have other ideas and I’ll write about those over the coming months… 
The real estate industry will probably dislike me for it, but if it makes the industry overall put something extra into the system to help the Islands, then I’m all for it and so should any other agent/agency that has used the buying and selling of property here to make their living over the years.
In next month’s article I’ll be putting forward my ideas for the real estate industry and how the Government might obtain money from it and use that to help the local population of the Canary Islands as well, just so that the whole industry, not just buyers, can put money into the system.
