Your 2024 guide to buying property in Tenerife as a foreigner

Buying a property on the island known as the eternal spring seems like a fantasy. Imagine enjoying some of the most beautiful beaches in Europe when everyone else is freezing during winter.

It’s not just an escape; it's a wise investment, whether for personal enjoyment or renting out.

If you're ready to buy in Tenerife, this guide is packed with essential information, requirements, and tips to make an informed decision.

Read everything below.

What’s the property market like in Tenerife?

Tenerife, the largest of the Canary Islands, offers a diverse range of attractions, from nature spots to beach resorts, with the southern coastal areas like Costa Adeje and Playa de las Américas being the most visited. 

The property market varies across the island, with prices averaging under 2,400 EUR/m2 in popular zones, 2,512 EUR/m2 in Puerto de la Cruz, and rarely exceeding 4,000 EUR/m2, even in the best areas of the capital, Santa Cruz de Tenerife.

Where is the best place to buy in Tenerife?

Santa Cruz de Tenerife is the cultural and commercial heartbeat of the island, celebrated for its vibrant Carnival and architectural landmarks. In contrast, Costa Adeje draws crowds with its luxurious resorts and upscale appeal, which is reflected in its commanding the highest property asking price on the island, at 4,294 EUR/m2.

Los Cristianos, another southern hotspot, appeals to tourists and expats alike, with its sandy beaches and convenient ferry connections to neighboring islands. Up north, Puerto de la Cruz offers a unique blend of black volcanic sand beaches, lush botanical gardens, and traditional Canarian charm.

Tenerife presents a rich diversity of locales to suit various lifestyles and investment goals, but in the end, the ideal choice must resonate with your preferences, aspirations, and goals.

How easy is it to buy property in Tenerife?

Buying property in Tenerife is feasible but can become complex due to legal considerations, language barriers, financing challenges, and various taxes and fees. 

Engaging a local real estate agent and a lawyer specializing in Spanish property law can simplify the process, particularly for foreigners.

What are the legal requirements for buying a property in Tenerife?

When buying a property in Tenerife, non-residents must obtain a Foreigner Identification Number (NIE) and open a Spanish bank account. 

It's advisable to hire a local lawyer to check the property's legal status, oversee the sale contract, and ensure compliance with local laws, including payment of various taxes and fees. 

A Spanish notary must authorize the final sale, and the new owner must register the property with the local property registry.

How easy is getting a mortgage in Tenerife as a foreigner?

If you're a foreigner looking to secure a mortgage in Tenerife to enhance your budget for purchasing a property, it's indeed feasible, as Spanish banks are open to foreign applicants. 

However, be aware that the process can be more complex, requiring extensive documentation, a higher down payment, and higher interest rates.

Mortgage loan options for foreigners

Spanish banks such as BBVA, Caixa, Sabadell, Unicaja, or Santander offer mortgage loans to foreigners at a fixed or variable interest rate.

Non-residents may need a larger down payment, as banks often offer them a lower loan-to-value (LTV) ratio.

Eligibility criteria

Eligibility for Spanish mortgages varies among lenders and commonly includes income stability, employment consistency, credit score, residency status, debt-to-income ratio (DTI), down payment ability, and the property's type and value. 

Lenders assess stable income and employment, credit score (including from a non-resident's home country), and a lower DTI ratio to evaluate an applicant's ability to repay the mortgage.

Documentation

You will be required to provide payslips, bank statements, tax returns, and the Spanish NIE, including proof of income from your home country and verification of legal status in Spain. Continue reading to discover the documents checklist for a non-resident to apply for a Spanish mortgage.

What are the best Spanish mortgages for buying a property in Tenerife?

Finding the best Spanish mortgage for non-residents requires considering more than the interest rate. It must be tailored to personal and financial needs, including loan options, eligibility, and required documentation.

For instance, CaixaBank offers mortgages ranging from 100,000 to 2,900,000 EUR with competitive rates for non-residents. If you're seeking a straightforward online application, Unicaja or Bankinter could be your choice, as they offer convenience when you are outside of Spain.

Sabadell requires a minimum property purchase of 100,000 EUR, but aside from that, the application process is easy and user-friendly. Documents in English, French, and German are accepted without translation.

Fortunately, some services can help you compare the offers available on the market. Homevest is such an example that can match you with banks that suit your needs.

Homevest simplifies obtaining a mortgage in Tenerife from abroad

Homevest is a digital platform that simplifies applying for and receiving mortgage offers from local banks.

With Homevest, the process of comparing and appraising mortgage options is accelerated. By collaborating closely with leading non-resident banks, Homevest allows you to upload your required documents only once while receiving multiple offers. 

This simplifies your home-buying process and increases your chances of securing the perfect mortgage tailored to your needs. 

What are the tax implications of buying a property in Tenerife?

1. Property transfer tax (Impuesto de Transmisión Patrimonial) is a progressive tax paid by buyers of second-hand properties. It ranges from 6.5% to 10%, depending on the property's value. In Tenerife, the tax is set at 6.5%.
2. Value added tax (VAT) and Stamp duty. For new properties bought directly from the developer, you'll pay VAT (IGIC in the Canary Islands) instead of Property Transfer Tax. This is usually 7% in the Canary Islands. Additionally, there is a Stamp Duty that ranges from 0.5% to 1%.
3. Notary and registration fees are additional costs to cover the legal documentation and registration of the property. They vary but typically amount to 1-2% of the property's value.
4. Land tax (IBI) is an annual municipal tax on property ownership. It varies based on the location and value of the property but is generally around 0.4% to 1.1% of the cadastral value.
5. Rental income tax if you plan to rent the property (19% for EU citizens, 24% for British or non-EU citizens).

Tax laws can be complex and vary widely based on various factors, so you should consult with a local tax or real estate professional in Tenerife to understand the specific implications for your situation.

Pros and cons of buying a property in Tenerife

Pros

• relaxed lifestyle with plenty of sandy beaches 
• lower property prices compared to Madrid or Barcelona 
• great opportunity to rent out the property because Tenerife is a popular vacation destination 
• Tenerife is home to a large number of expats, and English is widely spoken

Cons

• a non-resident income tax ranging from 19% to 24% if you rent your property
• a minimum of 2000-2500 EUR monthly net income to be eligible for a mortgage in Spain
• if you plan to relocate, the job market can be limited, particularly for non-Spanish speakers

It's up to you to determine if buying a property in Tenerife is the best decision. If you are open to other opportunities, you can look into the costs in Mallorca or consider buying a house in Madrid or Barcelona.

Regardless of your choice, if you wish to boost your budget through a mortgage, finding the most suitable option for your situation is essential.

Keep in mind that if you're applying for a mortgage in Spain with income from another country, the process can be accelerated with proper assistance, such as the digital solution Homevest. Using this tool will save you time throughout the process.

Sources used and checked in December 2023:

1. Housing prices in Tenerife
2. Housing prices in Adeje
3. Tenerife property tax

We recommend obtaining professional or specialist advice before taking or refraining from any action based on the content in this article. The information in this article does not constitute legal, tax, or other professional advice from Homevest Limited. Prior results do not guarantee a similar outcome. We make no representations, warranties, or guarantees, whether express or implied, that the content in this article is accurate, complete, or up to date.