While the sun continues to shine brightly in southern Gran Canaria, a looming shadow is being cast from the financial heart of Europe: the rise in bank defaults in Germany. Although the economic ties between the German giant and our tourist paradise are deep, this growing concern for German banks' balance sheets, coupled with the slowdown in their economy, could begin to influence the vigorous residential housing market in Maspalomas, Playa del Inglés, and Mogán.
For years, Germany has been the bastion of financial stability in Europe, with enviable bank NPL ratios. However, this trend is changing. The European Banking Authority (EBA) was already signaling an increase in non-performing loans across the EU at the end of 2023, and Germany was one of the countries that experienced the largest increases, with €4.000 billion more in the fourth quarter of 2023 (according to Funds Society). More recently, in March 2025, Claudia Buch, supervisor of the European Central Bank (ECB), confirmed that NPL levels are rising, with Germany, Austria, and France leading the way, according to Reuters.
In southern Gran Canaria, this upswing is primarily concentrated in corporate exposures, especially in the commercial real estate sector, where falling property values and rising developer defaults are generating significant stress. The high dependence on commercial credit and the lower affordability of bank loans in a context of high interest rates, as Crédito y Caución warned in its 2023 Payment Practices Barometer, are contributing to this deterioration.
All this is happening while the Bundesbank is revising its forecasts downwards, anticipating a stagnation of German economic activity in 2025, following contractions in 2023 and 2024. The south of Gran Canaria, and particularly Maspalomas and Mogán, has historically been a favorite investment destination for German buyers. Retirees seeking a sunny retreat, families wanting a second home, or investors opting for vacation rentals have made German clientele a pillar of the local real estate market.
According to recent reports on foreign investment in the Canary Islands' real estate sector (such as those by Asesoría Quintero, January 2025, and Atlántico Hoy on the profile of foreign investors), the privileged climate, special tax regime, and excellent connectivity with Europe continue to attract foreign capital. In areas such as San Bartolomé de Tirajana, property prices have experienced significant growth, with Maspalomas and Playa del Inglés reaching €4.551/m² and €5.033/m² respectively in May 2025, with annual increases exceeding 10%.
If German banks are seeing an increase in their own non-performing loans, especially in the corporate and commercial real estate sectors, they are likely to become more cautious about granting new loans, even to creditworthy clients. This could translate into higher mortgage requirements for German citizens wishing to purchase abroad, including in Gran Canaria. A stagnant German economy and rising non-performing loans at home could reduce German citizens' confidence and ability to save. If they perceive greater economic uncertainty in their home country, they may be less inclined to make large-scale investments abroad, such as purchasing a home in Maspalomas.
One possible scenario is that some German investors who already own properties in southern Gran Canaria may be forced to sell if their finances in Germany deteriorate. This could increase supply on the second-hand market, which, in theory, could exert downward pressure on prices or at least moderate their exponential growth, although demand in Gran Canaria is robust and diverse. Although southern Gran Canaria remains a magnet for foreign capital, the rise in bank defaults in Germany is a factor worth monitoring. It could introduce greater caution in residential investment by German citizens, subtly adjusting the dynamics of a real estate market that, until now, has enjoyed enviable health. The resilience of the sector in Maspalomas and Mogán will be tested not only by local demand but also by the financial ups and downs of its main source markets.