Nowhere in Europe has more bargain-basement holiday homes. Yet in spite of falls of between 30% and 50% in some areas, many Britons appear to be waiting to see if prices fall further before the pain in Spain ends.
Though some estate agents and desperate developers claim the recession is over and prices are rising, most market watchers say the reverse is true.
Sales volumes in popular holiday home areas – are half 2006 highs, yet there is an estimated backlog of one million unsold (and many unfinished) houses – some 46,000 in the Alicante province of the Costa Blanca, 30,000 in Valencia, 27,000 in Murcia and 22,000 in Málaga on the Costa del Sol.
Official figures say 32,000 estate agents – or 40% – closed down in 2007, and 15,000 in 2008. Unemployment in Spain has topped 15%, a third of which is blamed on the housing crisis.
House price indices are derided as slow to appear and inaccurate. In addition, they combine sales of mainstream homes to Spaniards (where price falls are large) with sales of second homes to foreigners (where price falls are larger still). A more accurate indication comes from special offers at individual developers and estate agents. Taylor Woodrow, a UK developer constructing holiday homes for foreign buyers in Spain for more than 50 years, is one of many slashing prices. Officially there are 20 schemes with 35% discounts but buyers can haggle further.
Equally startling deals can be found for secondhand homes. Theproperty agent Roan ran a bazaar on the streets of Madrid in June, with some homes discounted by 60% – before prospective buyers even began negotiating.
"There's still a lot of overpriced property. Distasteful as it may be, the best bargains come from vendors in distress. Get friendly with bank managers in your target area; they know who is having trouble paying the mortgage," advises Mark Stucklin, editor of the online advice servicespanishpropertyinsight.com.
Professional buying agents say discerning purchasers wanting the biggest bargains in the volume market should look for completed coastal developments, where the infrastructure exists.
"Refine the search to established developments that are mature and run well. Buying from individuals may be a better option than from developers. Prices may be 30% to 40% lower than last year, and further negotiation is possible," says Rhona Hutchinson of Integrated Relocation Spain.
But Stucklin's website carries an interactive map with some 40 trouble hotspots in the housing market. There are four persistent problems.
First, some Spanish banks are refusing to honour bank guarantees taken out by buyers as an insurance in case their chosen homes are not built in the downturn.
Second, uncertainty hangs over the legal status of many new homes. Some developers did not secure building permits, so 40,000 homes in Málaga are "illegal". In theory, these may have to be demolished, though local politicians are considering an amnesty.
Third, some Valencian region "land grab" problems remain. In the spring, a third European parliament report condemned planning laws that allow developers to build flats on land previously owned by individual householders.
Finally, some problems are caused by bankrupt developers. A recent ITV documentary showed Briton Wally Tynan, who bought a place on the Costa Blanca, dodging exposed high-voltage cables and sweeping sewage that bubbled up outside his home in a part-completed housing estate.
Yet some insist it is unfair to brand the coastal strip a disaster area and every estate agent a crook. Mark Wilkins, a lawyer opening an estate agency business on the Costa del Sol, says: "We've all but seen the back of the worst excesses of the greed that dogged a property purchase here, particularly on off-plan purchases."
Perhaps. There are clearly plenty of bargains to be had across the country and in all sectors. But one uncertainty remains: have prices stopped falling?
Costa del Sol
There are bargains everywhere. A long-standing Marbella estate agency, Panorama, says most homes in that one-time wealthy enclave are down 30% since 2006, with few or no off-plan sales. Michael Moon, an estate agent operating across the whole Costa del Sol, says 40% price falls are the norm and what he calls "cynical projects" (such as flats built near a motorway or overlooking other flats) are not selling at all.
Homes are high quality in the Sotogrande enclave but take an eternity to sell, in spite of discounts. A four-bed, four-bath villa (pictured above) has sea and golf views. Down from €1.25m to €990,000 (£845,000). Savills,www.savills.com, 0207 016 3740.
Taylor Woodrow is a British firm badly exposed to the Spanish market and slashing prices to sell stock. Discounts of 36% or more are available at El Bosque de la Mairena (above, left) a new scheme near Marbella, where flats started at €271,000 but are down to €173,000 (£148,000). Canny buyers will be able to negotiate further reductions. Contact Chesterton Humberts, 020 3040 8210, www.chestertonhumberts.com.
A small studio unit in a new apartment complex in Riviera del Sol, near Mijas in Andalucía, has air conditioning, satellite TV and underground parking, as well as communal gardens and pool. It has just been reduced to €69,000 (£59,000) at www.buypropertyineurope.com.
The party city is not recession-proof. "It isn't solely reliant on construction and tourism and, because of this, the market hasn't suffered as badly as in other areas. Also, there are few large developments. Depending on quality, prices have dropped between 10% and 30%," says Alex Vaughan of estate agency Lucas Fox. "Smaller, two-bedroom apartments are selling better than four-bed ones, say. These take longer to sell, so the prices are more affected."
"Barcelona costs a bit more than Madrid, but there's not a huge difference," adds Rhona Hutchinson of Integrated Relocation Spain.
A four-bed family apartment in posh Diagonal Mar, with private terrace, sea views and a communal gym and pool, is reduced to €725,000 (£619,000). Lucas Fox, www.lucasfox.com or 0034 933 562989.
There is no vast oversupply of new-build apartments, and some hitherto cheap areas have been opened up by new roads, so you have to hunt out bargains. But they exist, mainly because sellers, rather than agents, often set asking prices (and will try different prices with different agents).
The Property Finders, a search agency, says period fincas across the island are down 30%. A three-bed, two-bathroom property being sold by Britons at Santa Ponsa, was €650,000 but is down to €450,000 (£384,000) through Engel & Völkers, www.engelvoelkers.com or 0034 971 69 90 63.