During the height of Spain’s real estate boom Britons flocked to the country’s coast. They bought holiday and retirement homes, and fulfilled long-held dreams of a place in the sun.
This constant demand inspired builders and developers to keep putting up more houses. A decade-long frenzy saw Spain’s construction industry fuel the nation’s economic boom, before its spectacular collapse when the bubble burst in 2007-08.
Added to this was a spate of horror stories told of British owners left high and dry by unscrupulous developers, dodgy lawyers and corrupt town planners. Coupled with chaotic planning laws and little judicial recourse, many were left regretting their decision to buy in Spain. Other potential investors began to look elsewhere.
But now, with an estimated one million unsold new homes alone amid a weak domestic market, Spain’s authorities are keener than ever to promote it as the place to buy. A glance at any property website offering homes in Spain reveals the great bargains to be had.
Along the coast in the sought-after San Roque development, a stone’s throw from Gibraltar and Sotogrande on the Costa del Sol, a luxury apartment is offered for only €170,000 (£147,000) – a massive discount of 85 per cent from the €933,913 asking price at its peak in 2008
These reductions reflect the extent to which prices were overinflated at the peak of the boom six years ago, but also represent the measures to which banks are prepared to go to offload toxic property assets.
When the bottom fell out of the property market, many developers went bust, and banks were saddled with over-valued properties. Last year, Sareb, the “bad bank” established as a condition for the EU bailout of Spain’s troubled banks, acquired – at a discount – soured real estate worth €90 billion from troubled lenders.
This month it is preparing its first sales to test the waters. But it’s not only Sareb that is seeking to sell property at vast discounts. Banking groups have been forced to write down losses. This has led to a slash in prices, as they attempt to claw back funds.
Spain’s government, however, has not sweetened the deal. Instead, it has sought to boost national coffers by increasing VAT on new-builds from four to 10 per cent and putting an end to various tax breaks on property. Despite this, the fact that prices are so low means buying in Spain is still attractive to foreign clients.
Experts say that it is the nature of the market itself that has made Spain a much safer place to buy than ever before. Unlike during the boom times when there was a buying frenzy, there are now fewer cowboys operating in Spain. The malpractice and corruption that was rife just doesn’t exist now. People are also much better informed, so the chances of getting ripped off are much lower. A buyer today is in a much better position than those who bought in the boom.
The things that made owning a Spanish property so popular with Britons still exist – the climate, the lifestyle and the proximity to the UK. Spain is still a lovely place to live
Olive groves, sunshine, hot tapas, cold wine: Spain’s charms will outlast this economic crisis, and many to come. These prices, on the other hand, may not.
Now the Bank of Spain has declared that Spain is finally out of recession – even though the financial crisis continues. Estimated figures from the Bank of Spain say the country's GDP grew by 0.1 per cent over the summer months. Eventhough it remains at 1.2 per cent below figures for the same period in 2012.
And the growth announced – the first in two years – occurred over the months of July, August and September, when Spain's economy usually shows a dramatic change from the winter due to the influx of tourists. However it does appear that Spain's export business is growing and this is the main drive behind the growth.
Has Spain finally hit rock bottom, will property prices fall any further? or does this mean that now is finally the best time to buy a property in Spain?
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