The Canary Islands property market is entering a pivotal moment. Prices continue to grow strongly, while new legislation is reshaping the vacation rental sector, creating both opportunities and challenges for investors, developers, and property owners. At Lajares Law Offices, we monitor these developments closely to help our clients navigate the evolving landscape.

Price Trends – Exceptional Growth Continues.

The second-hand housing market has experienced remarkable price growth, with average prices now around €3,084–€3,325 per square meter and annual increases of 13–19% year-on-year — the second highest in the last two decades.

Key variations by location include:

• Puerto del Rosario: +6.5%
• La Oliva: +31.1%
• Arrecife: +24%
• Las Palmas: +14.4%

Coastal tourist areas such as Costa Adeje and Maspalomas continue to command the highest prices, while inland municipalities offer more affordable entry points for investors and homeowners.

New Holiday Rental Law – A Major Regulatory Shift.

The Law 6/2025, which entered into force on December 13, 2025, introduces a fundamental restructuring of the vacation rental market. Key points include:

Core restrictions:

• Maximum 10% of residential properties per municipality may be used for tourist rentals (20% on La Palma, La Gomera, and El Hierro).
• A five-year moratorium on new holiday rental authorizations while municipalities develop urban plans.
• Newly built dwellings cannot be used as tourist rentals until 10 years after construction.
• Vacation rentals are now considered economic activities, subject to urban planning and regulatory controls.

Enforcement:

• Violations can lead to fines ranging from €15,000 to €150,000, including for advertising without proper registration.
• All rentals must be registered by mid-2026.
• Municipal planning authorities must explicitly authorize tourist use, and existing licenses do not guarantee continuation.

This new framework reflects growing political and social pressure to protect housing accessibility while balancing tourism and urban coexistence.

Market Structure – Supply Constraints.

The market faces a structural imbalance:

• Demand remains at peak levels, fueled by local and international buyers.
• Limited new construction and scarce land supply prevent natural market regulation.
• Only 2,782 dwellings were built in 2022, with virtually no social housing added in 2020–2021.

This constrained supply, combined with strong tourism, continues to push prices upward and increase competition for residential properties.

Investment Implications for 2026.

Vacation rental investors:

• Properties with existing licenses hold significant value, but continuation is not guaranteed, depending on urban planning and legal consolidation of tourist rights.
• New acquisitions face severe limitations during the moratorium.
• Communities of owners can veto tourist rental activity in their buildings.

Residential and long-term rental investors:

• Strong demand continues due to the housing shortage.
• Long-term rental vacancy rates remain tight at 2–4% in high-demand areas.
• Some properties losing tourist licenses may transition to long-term residential use, strengthening this segment.

Developers:

• New construction is barred from tourist use for 10 years, shifting focus to residential and long-term rental products.

Development strategies must align with urban planning and sustainable housing goals.

Economic Context.

Tourism remains robust, with over 10.3 million international visitors between January and August 2025, contributing around €15 billion to the Canary Islands economy.

However, access to housing for residents — particularly young people — remains challenging, driving the regulatory reforms and municipal planning efforts now underway.

Summary:

2026 is set to be a transitional year in the Canary Islands real estate market:

• Regulatory uncertainty as municipalities implement the new vacation rental law.
• Continued price pressure due to constrained housing supply.
• A shift in investment strategies away from short-term tourist rentals toward residential and long-term rental properties.

At Lajares Law Offices, we provide tailored guidance for property owners, investors, and developers navigating these legal and market changes, helping ensure compliance while identifying opportunities in this evolving landscape.

Sources: Green-acres, La Voz de Lanzarote, La Voz de Lanzarote, Green-acres, Canarias-Travel24, Garrigues, Nieuwbouwtenerife, Canarian Weekly, Simon Sananes, Investropa, Tourism Review