The cost of housing in Spain is rising in unthinkable proportions. The big questions that everyone is asking are:

Will the cost of housing continue to rise?
When will it reach its peak so that it can come down again?

The experts in the Spanish real estate sector do not have the answers to these questions. According to the Spanish company Tinsa that specialises in real estate appraisals, the average price of new and used housing in Spain has gone up by 14% between June of 1999 and June of 2000. In the Canaries, the prices have risen 22% compared to 1999. The experts say, that the rise in prices is beginning to reach its maximum and later it will stabilise but not fall sharply. The predictions are that in the year 2002, the prices will stop climbing so quickly. There have been many causes for such high costs: a good economic situation, low interest rates for mortgages (Spain has never had such low interest rates for mortgages, although they are beginning to increase a little bit), an expanding tourism market, etc.

The experts say that the price of housing will not com down, but if it does, it will not come down by much. Despite the increases in mortgages, they still continue to be accessible. Additionally, the estimates for the Spanish economy are very good and the number of new jobs created is increasing.

Land costs have increased even more than building costs. Prices of plots of land have more than doubled. In the Canaries in general and Lanzarote in particular, the price of land is exorbitant. Real estate experts say that the price of land will never go down for the simple reason that there are few sites that allow for construction.

Another factor in the rise in land prices and construction in the Canaries is the strong investment by foreigners, mainly the British. With the pound reaching an exchange rate of above 265 pesetas. This makes buying property in Spain very attractive to the British, who benefit from a strong currency against the Spanish peseta.

The European Central Bank has raised interest rates. In August, they reached 4.25%. Real estate experts say that we will finish the year at an interest rate above 6%.

As for the fiscal aspects of housing, one should also take into account that the Hacienda favours investments for a first house. The purchase of a house for a family has fiscal benefits of 15% in paid quantities with the maximum of 1.5 million pesetas.

Fiscal benefits have also been established for when a housing account is opened. In reality, they have the same benefits of purchasing a house when savings are made in this type of account, and in addition, it generates interest. However, there is a compromise with the Hacienda to invest these accumulated savings in the house during no more than 4 years.

The price of a square meter of a new house in Spain is approximately 157,400 pesetas.

However, in some cities, a square metre costs more than 200,000 pesetas (areas near the Playa de las Canteras).

The price of a normal square meter of a living space depends on several factors that can be summed up in the following:

Location, proximity to costal areas, views, the quality of construction and the state of preservation , the age of the house, the state of the installations, quality of the materials used, services and infrastructures in the area, public transportation, proximity to schools, commercial centres, and sporting and leisure facilities, the absence of noise, and proximity to roadways with a lot of traffic, etc.

To conclude, we can safely say that the real estate sector currently finds itself in a very good situation. It is not known when the prices will come down, although the experts say that the decrease will never be very great. Perhaps it is of greater interest to invest now than in a year, but the economy is not mathematical and it depends on many factors that sometimes give unexpected surprises.