Investment property in the Canary Islands: Tenerife and Gran Canaria

The Canary Islands have something no other Spanish property market can offer: sun-and-beach tourism twelve months a year. While the Mediterranean has one dominant season of three intense months and low occupancy for the rest of the year, the Canaries receive visitors steadily all year round thanks to their subtropical climate, which turns the European winter into the islands' high season.

That changes the holiday-let equation radically: instead of calculating the yield on 3 months of high occupancy and 9 of low, the investor in the Canaries works with demand that is spread more evenly. The result, for well-located assets, is holiday-let yields above the national average with less seasonality.

But not everything in the Canaries is tourism and sunshine. The islands also have residential economies, long-term rental markets and price structures that investors who only know the tourist image don't always understand well.

The Canaries' special taxation: IGIC and the REF (the islands' economic and tax regime)

The Canary Islands have a tax regime different from the rest of Spain, a consequence of their status as an outermost region of the European Union. The two elements that most affect property investors are:

• IGIC instead of IVA: Sales of newly built properties (first transfers) in the Canaries are taxed under the Impuesto General Indirecto Canario (IGIC, the Canary Islands' general indirect tax) instead of the IVA (Spanish VAT) charged on the mainland. The general IGIC rate for homes is 7% (compared with 10% IVA on the mainland for housing); VPO homes (vivienda de protección oficial, state-subsidised housing) handed over by the developer are zero-rated, and a main home of up to €200,000 (more for large families) drops to 5% if requirements are met, or to 3% if the buyer is also 40 or under or falls into other cases (large family, disability, low income…). That significantly reduces the cost of buying a new-build home.
• ITPAJD on resales: As on the mainland, resales are taxed under the Impuesto de Transmisiones Patrimoniales (ITP, the property transfer tax, which together with stamp duty makes up the ITPAJD). The rate in the Canaries is 6.5% as a general rule, similar to regions such as Madrid but lower than Catalonia or Galicia.
• Zona Especial Canaria (ZEC, the Canary Islands Special Zone): For investors operating through companies, the ZEC offers reduced corporation tax rates (Impuesto de Sociedades, at 4%) for certain activities and subject to specific employment and capital conditions. For managing a property portfolio of a certain size, combining the ZEC with the right corporate structure can bring significant tax advantages compared with the mainland regime.

Tenerife: the islands' biggest and most diverse market

Tenerife has almost a million inhabitants and is the most populous of the Canary Islands. Its property market reflects that diversity: from the holiday apartments in the south (Playa de las Américas, Los Cristianos, Costa Adeje) to the residential housing of the Santa Cruz de Tenerife metropolitan area in the north.

• The south of Tenerife (the tourist area): Costa Adeje, Playa de las Américas and Los Cristianos account for the island's highest holiday-let demand. Prices of between €2,500 and €4,500/m² for good-quality apartments with access to tourist services. A well-managed holiday let can generate gross yields of 7-10% on the purchase price, but the regulation of holiday homes has tightened in recent years and you need to check whether a licence is possible before you buy.
• Santa Cruz de Tenerife: The island's capital is a residential market with little tourist presence. Prices of between €1,200 and €1,800/m². Rental demand from workers in public administration, the port and the service sector. Gross yields of 6% to 8% in the neighbourhoods of interest to investors. It's the market for those who want stable residential lets without the management complexity of holiday lets.
• La Laguna: A university city (the Universidad de La Laguna, with more than 25,000 students) and a UNESCO World Heritage Site. Prices of between €1,100 and €1,600/m². High demand for student lets in the neighbourhoods near the campus. For the room-by-room letting model, yields of 9% to 13%.
• Puerto de la Cruz and the north of the island: The north of Tenerife has a different tourist potential from the south: less guaranteed sunshine, more greenery, nature tourism and less saturation. Prices are more affordable (€900-1,400/m²) and rental demand is a mix of permanent residential and niche tourism.

Gran Canaria: Las Palmas as a big-city residential market

Las Palmas de Gran Canaria has more than 380,000 inhabitants and is one of the most populous cities in Spain. Its property market has a much more dominant residential component than a tourist one (tourism is concentrated in the south of the island, in Maspalomas and Playa del Inglés), which makes it a different market from southern Tenerife.

• The city of Las Palmas: A city with strong port, economic and university activity. Prices of between €1,300 and €2,000/m² in the main neighbourhoods. Vegueta (the old town) and Triana (the historic shopping district) have higher prices. The neighbourhoods of Ciudad Alta, Tamaraceite or Schamann have more affordable prices (€900-1,300/m²) with good rental demand. Yields of 6% to 8.5%.
• Las Canteras: Las Palmas' city beach is one of the most prized assets in the city. Sea-view apartments on the seafront or one street back have prices of €2,000-3,500/m² and very active summer rental demand. Las Canteras is also famous in the surfing world, which generates niche tourism all year round.
• The south of Gran Canaria (Maspalomas, Meloneras): The island's tourist area par excellence. Prices of between €2,000 and €4,000/m². Very active international demand (Germans, Britons, Scandinavians). For a well-positioned holiday let, yields of 8% to 12% a year. You need to check whether a tourist licence is available in each specific case.

Holiday-let regulation in the Canaries: what to check

The Canary Islands have their own rules on holiday homes, which have become more restrictive in recent years because of the pressure on the availability of housing for permanent residents. Since 13 December 2025 they have been governed by Ley 6/2025 on the sustainable regulation of the tourist use of homes (Ordenación Sostenible del Uso Turístico de Viviendas), which repealed the parts of Decree 113/2015 that conflicted with it.

The most relevant points for investors:

• Holiday homes in the Canaries must be entered in the Registro General Turístico de Canarias (the Canary Islands' general tourism register) before the activity begins.
• Some municipalities have imposed moratoriums or limits on granting new licences, especially in the most saturated areas of southern Tenerife and Gran Canaria. Check the situation in the specific municipality before any purchase intended for tourist use.
• Buildings divided into separately owned units (propiedad horizontal, with an owners' association) can ban tourist use by a resolution of the owners' meeting. Check the community's rules before you buy.
• Holiday letting brings specific tax obligations, including the owner having to account for IGIC.

The other islands: Lanzarote, Fuerteventura and the smaller islands

Lanzarote and Fuerteventura have active tourist markets, but with price and regulatory structures that deserve specific analysis. Lanzarote is a UNESCO Biosphere Reserve, which means limits on urban development that protect the landscape but also restrict the supply of new housing. That has led to sustained appreciation of existing assets in tourist areas such as Costa Teguise, Puerto del Carmen and Puerto Calero.

Fuerteventura, with sandy beaches that rival the Caribbean in quality, also has an active tourist market, especially in Corralejo and Jandía. Prices are somewhat more moderate than in Lanzarote.

The smaller islands (La Gomera, La Palma, El Hierro) have very small markets with little depth of sustained holiday-let demand, although La Palma has attracted specific interest since the 2021 volcano because of the reconstruction and urban renewal projects in some areas.

Bank assets and auctions in the Canaries

The Canaries built up mortgage debt during the 2000s cycle, although to a lesser extent than the Mediterranean mainland. Repossessed bank assets on the islands are managed mainly by CaixaBank (with a strong historical presence in the Canaries), Banco Sabadell and servicers such as Haya (now merged into Solvia) and Altamira. Sareb (Spain's "bad bank") no longer sells homes to private buyers in general: what is left is marketed by Aliseda. The volume is lower than in Alicante or Valencia, but the assets exist and competition at auctions in the Canaries is moderate to low.

Related resources: For live opportunities on the islands, see opportunities in Tenerife and opportunities in Gran Canaria. If you're a foreign investor interested in the Canaries, the article on investing in Spain as a foreigner covers the specific tax position. For the holiday-let vs residential cash flow model, the guide to how to calculate real cash flow has the method that applies to the Canaries.