If you think the British property market is in a mess, then a quick trip to Spain will put things in perspective (if you can still find a cheap flight).
Property prices have fallen by a crushing 35% over the past 12 months, four times faster than in the UK, and haven’t stopped plunging yet. This spells disaster for an economy where investment in housing is worth 10% of GDP and employs 13% of people in the private sector.
I had a small insight into the shambles while holidaying in the Atlantic coast town of Rota, near Cadiz, a couple of weeks ago.
I briefly hovered outside an estate agency window when a wild-eyed woman charged out and tried to manhandle me inside. I explained, with the help of my girlfriend’s Spanish, that I was merely browsing and had no desire to buy a two-bedroom villa overlooking a building site, even if it was €40,000 cheaper than yesterday, and made good my escape. The crestfallen agent trudged back to her empty office.
I knew the Spanish property market was going through a tricky time, but until I saw the fire sale prices and the desperation in her eyes, I hadn’t realised things were so bad.
Pain in Spain
And it’s going to get worse. Next day, we drove along the Costa del Sol to Malaga and were awestruck by the pace and scale of construction along the coast, massed ranks of half-built villas and apartments squeezed into every dusty hollow and ditch alongside the motorway.
Who is going to shell out for all this whitewashed concrete, even at today’s knock-down prices? Spanish property developers are frantically asking the same question, with buyers for unfinished projects down up to 60%. With their credit lines garrotted by the credit crunch, the developers are expiring in droves.
The Spanish property market bubble has been well and truly pricked, but sadly too late to save the beauty of the country’s coastline.
Sun, sangria and septuagenarians
I’ve followed the coastal Spanish property market with interest ever since an editor dispatched me to report on a get-rich-quick property seminar around six or seven years ago.
On a rainy February night in Croydon, a pint-sized Irishman with a ponytail warmed the assembly of small-time investors with visions of great profits as retired people poured in from northern Europe seeking golf, cheap booze and sunshine. And to be fair, he was right for a time.
Another 2 million built properties have been built since then, with 3 million more in the pipeline (although many may never be completed).
Up to three-quarter of a million Britons have been seduced by the Spanish dream, but many have now come unstuck. Some are spending their final years stranded in a half-built golf resort while others have watched their home demolished before their eyes because their builder hadn’t got the right planning permission. The local planning process is notoriously corrupt and thousands of trusting Britons have paid the price.
Everybody wants their little plot in paradise, and my heart goes out to them. Flying out from drizzly Britain, it is easy to be blinded by the Iberian sun. Too many Britons have left their brains at Gatwick, but unfortunately, taken their bank details with them.
So what lessons can we learn from this? Well, first, it should put the UK’s problems into perspective, because fallout from the global property boom of the last decade is poisoning economies all over the world.
And once again it also underlines the ancient maxim, caveat emptor, which especially applies when buying in a foreign language and market you don’t understand. Just think how much accumulated knowledge you have about the British property market, and how little you can learn from a week long trip to Spain.
It also shows the importance of protecting the environment if you want to build a long-term, sustainable industry. Manic, unrestrained speculation only destroys the very beauty that people were flying out to find in the first place.
The final question is: with prices down 35%, is now the time to buy somebody’s Spanish dream-turned-nightmare on the cheap? You should find plenty of willing sellers. Personally, I wouldn’t, but if you’re tempted, here are a few tips:
* Don’t buy off-plan. As things stand, your home could never be finished, but your deposit might be.
* Buy in the centre. By choosing an established location, you’re slightly less likely to fall foul of planning disputes (although no guarantees…).
* Seek out an independent lawyer, one who will check your property is legal, and won’t be torn down next month.
* Wait. This market has much further to fall, which means time is on your side. Then wait some more.
Finally, count your blessings. It’s fashionable to knock Britain, but at least our planning process is relatively robust and free of corruption. As Spain has clearly demonstrated, even sunny, easy living countries have their downsides.