British tourists heading for a sun-soaked Spanish holiday this summer were probably more concerned with the temperature of the sea than the heat of the local economy. But all is not well on our favourite Costas.
Spain’s unemployment rate is now nudging 20 per cent, making it the highest in Europe; there’s a budget deficit of 11.2 per cent to plug, and the El Economista newspaper is claiming that a third of Spain’s local councils will soon be so broke many will be unable to pay their wage bills. And in the property market the bad news just keeps on coming.
Three-quarters of Spain’s estate agents have gone under and 170,000 construction companies have collapsed in a little over two years. Low interest rates and loose lending helped drive property prices sky high, but now the bubble has burst and finding eye-watering discounts is easy.
A tale of two markets
As for the banks, they have so many bankrupt stock properties to get off their books, they will sell them at bargain basement prices and give you a 100 per cent mortage to take one of their hands. But it’s a case of buyer beware, warns Barbara Wood of The Property Finders. “Spain is a market of two halves,” she says. “There is the well-located, quality product and then there is everywhere else. For the stack-it-high and sell-it-cheap brigade, the predominantly British and Irish buyers who piled in to dreary resorts miles from anywhere, the situation is dreadful.”
Wood highlights parts of Murcia, southern Costa Blanca and Almeria as typical examples. “I have heard of 50 per cent discounts and can easily envisage them going to 75 per cent,” says Wood. “But frankly some property and locations are so bad that discerning European buyers wouldn’t touch them at any price.”
The good areas, says Wood, include the six miles around Marbella, the northern Costa Blanca and the niche markets of Sotogrande and Tarifa: traditional, stable markets where prices have fallen 30 to 40 per cent from their peak and which Wood believes have now bottomed out. Her successful deals this year include a 14-acre historic estate near the classy Andalucía town of Ronda on the market for £1.2 million, which cash buyers snapped up for £703,630 and a new house one mile from Puerto Banus priced off-plan in 2007 £827,800, which sold last month for £459,430.
“It is hard work finding these deals and working out what represents value,” says Wood. “Buyers need to ask how long property has been on the market to see if it is realistically priced, rather than just looking at percentage falls.”
Smadar Kahana, of Engel & Volkers Marbella, agrees that away from prime Golden Mile locations, over-supply is the issue. “In Calahonda or Benalmadina east of Marbella and around Estepona and Manilva to the west, 200,000 apartments came on the market around the same time,” says Kahana. “Who was ever going to buy them all? Many of the complexes are now empty, the community charges are unpaid and gardens are not cared for. Even with 50 per cent off, buyers don’t want them.” It’s a backlog that will take many years to clear.
Too much to handle
Ratings agency Fitch estimate that there are one million unsold new-build properties in Spain, most near the coast. Chris Mercer of Mercers Property stopped selling off-plan property last year. “There’s no point when buyers can get good resales for the same price or even lower,” says Mercer.
Mercers operates in one of the worst hit areas around Torrevieja in south eastern Spain. Two-bedroom houses in Campasol, Murcia that two years ago were even then only £66,220, have sold this year for £28,970. Most residents there are British, Mercer admits, though he has seen a marked increase in Spanish bargain hunters.
Further north, close to the desirable towns of Denia and Javea, Taylor Wimpey de Espana has three-bedroom houses at Montesol in Calpe reduced from £277,310 to £182,115, a 35 per cent price drop. The new homes, 40 miles north of Alicante airport, are set around communal pools and gardens.
Where once British buyers accounted for 60 per cent of sales, through Engel & Volkers Marbella office, they are now 10 per cent at most. It’s the French, Scandinavians, Swiss and Germans who are bagging the best buys now. “We have a saying here,” says Wood. “The British buy when the Germans are fearful and the Germans buy when the Brits are fearful.” Caution is clearly necessary, but there are good buys to be found from realistic sellers and it is Euro buyers who are grabbing them.
* Engel & Volkers: 00 34 952 868406; engelvoelkers.es/costadelsol.
* The Property Finders: 0800 622 6745; theproperty finders.com)
* Mercers Property: 0845 017 7805; spanishproperty.co.uk)
* Taylor Wimpey: 08000 121 020; taylorwimpeyspain.com)