I think this article demonstrates why its important to not overpay for your property and to rent first for a decent time, as circumstances can change. I feel truly sorry for these people who's lives are being torn apart by this bubble, and my motives posting here are to try and warn people about what is developing. There are lots of crooks stil about, but atlast it seems the message is getting across that property does not always go up, and its not always a good time to buy. Good luck to everyone, especially those trying to sell at the moment.
Repossessions loom as the once buoyant homes market goes into freefall, writes Laura Latham
British expats desperate to return home are having problems selling their Spanish homes due to plummeting house prices, the strong euro and potential buyers being put off by press reports of illegal building practices.
'We're amazed at how difficult it's been to sell,' says Maureen Renno of her four-bed apartment at Calahonda, near Marbella on the Costa del Sol. 'We thought it would go really quickly, but it's been on the market for over two years.' Maureen and her husband, John, both retirees, sold their home in Horsham, West Sussex and moved to Spain four years ago, buying their property outright for €325,000 (£262,000). Maureen, however, found it hard to settle in Spain and began pining for home and her family. After two years, the couple decided to put their flat on the market and move back to the UK.
Property prices in Spain had continued to climb in the time they had lived there, so they saw no reason why they would not make enough to move comfortably back to Britain. So they were shocked to discover that, instead of appreciating in value, their apartment was worth, at best, only what they had paid for it two years earlier. The glut of new-builds in their area was stifling the sales of older properties, as investors were seeking to buy off-plan. After several months without any interest, the Rennos dropped their price to €299,000 and moved back home. Now living in rented accommodation costing £900 a month, the couple are running out of savings. 'We need the money from the Spanish property to be able to buy in the UK,' explains Maureen. 'Without it we're stuck.'
The Rennos are not the only ex-pats who were lured to Spain by the prospect of a better quality of life and ever-rising property prices. For the past decade the country has been a magnet for Brits, drawing in those looking to make a fresh start as well as investors hoping to make a profit from the property boom.
However, in the past two years the dream has turned sour for some, with life on the Costas proving trickier than many expected. In addition, property prices have taken a dive, leaving those who bought at the peak of the market from 2004 to 2006 struggling to sell their homes.
Maxine Crooknorth, 38, from East Sussex, decided to move to the Costa del Sol with her six-year-old son in 2005 in search of a fresh start. She bought her two-bedroom, golf course apartment for €247,000, paying half of the purchase price upfront. She believed she would be able to comfortably afford the remaining mortgage and that the property would be a great investment. 'It seemed like a good idea to buy then,' she says. 'Everyone was saying how good Spain was, how cheap the lifestyle was and that property prices would go up. In hindsight, I bought at totally the wrong time.'
Within a year of moving into her new home, Crooknorth discovered that, as a single mother, she was not able to find work as easily as she'd thought. The cost of living was also higher than expected, and within months she was in financial difficulty. She struggled on until her only option was to sell her home. Nine months ago she put the apartment on the market for €265,000 based on the valuation she was given, but has since had to drop the price to €220,000.
'I'm finding it quite a struggle,' she says. 'But I can't really drop the price any more because all my equity is tied up in it and it's a lot of money to lose. I can't rent it because the payments wouldn't cover the mortgage, but if I don't sell soon I'll be facing repossession.'
Crooknorth thinks she may be able to weather the storm if she can find work through the summer, but buyers might still be difficult to come by. 'There is a lot of property for sale right now,' she says. 'Lots of people are desperate and there are some real bargains.'
It might seem as though the drop in the Spanish market has come out of the blue but, according to local agent Derek Blaney of Links Property, the current state of things should not come as surprise. He stopped selling off-plan homes three years ago when he realised the market was in a dangerous bubble and that many new homes flooding the market were illegally constructed. 'Four years ago buyers could put down 30 per cent on an off-plan property, sell it before completion and make 100 per cent,' he says. 'But not any more. Price rises have been unsustainable and more unethical practices were happening.'
The agent says that many of those who would have traditionally bought on the Costas, such as the retired, have been deterred by the huge price jumps and overdevelopment of the region. In addition, worries about buying an illegal property have all but dried up the supply of buyers.
Blaney claims that many people have taken on mortgages they can't afford and now need to sell: 'We advised buyers that if they couldn't afford to run the mortgage after completion they shouldn't buy off-plan. Now a lot of them are in trouble and we're getting more distress sales through the door.'
His experience is echoed by Inez Rix, owner of Direct Auctions in Marbella. She has also seen an increase in the number of owners desperately trying to sell properties before the bank takes them. In most cases valuations are out of step with the market situation and sellers don't stand a hope of reaching their target price.