Spain has taken on a new meaning for the one million British investors who settled in the country over the last ten years. What was once a property investors dream has today become a nightmare for many. So what has happened in the land of tapas, afternoon siestas and endless sunshine? What could have possibly gone wrong to Brit expatriates in such big financial trouble they lose hundreds of thousands of pounds on their once rosy investments?
The answer is simple, the once booming property market in Spain has crumbled massively and is continuing to do so.
Only three years ago nothing would even hint at the nightmares to come. British investors flocked to Spain, especially the sunny Costa Almeria, Costa Blanca and many of the other thriving coastal regions of Spain with hopes of a new life.
Many of them were retirees, some close to, while others yet came in droves with kids and dogs to experience life in a more relaxed culture. The dream was alive. They were forgiven to long for a life far away from the dreary English weather, traffic and the high cost of living.
Many were advised to buy into the piping hot real estate market at the time, so they invested all their life’s savings in the hopes of making a nice fat profit along the way.
After all, a £400,000 investment bought you two holiday apartments in a beach side resort and one three-bedroom house with a shared pool on the Costa Almeria. Not bad compared to experiencing rush hour in the middle of London, long commutes to work in the city and living with the ever present rain and fog so common in England.
Who wouldn’t want to trade their one for the other?
“Steamers” are no longer dreamers
Well, fast forward three years and all mayhem has broken loose. Expats lost hundreds of thousands of pounds due to buying the wrong property in the wrong area and the property bubble burst.
Stories of Brit’s who had to forfeit their €500,000 home because it was unlawfully built on “rustic” land scare the living daylights out of the rest of us. Imagine you put all your life’s savings into your dream property in a far away land, only to be told 12 years later it had to be torn down, due to unlawful building.
Those who thought themselves lucky enough to buy at the top of a boom have lost 30-40% of their property’s value in the meantime.
Or how about the fact that the cost of living in Spain has just about doubled in the last year, while real estate values have plummeted. To make matters worse, the pound has taken a heavy drop against the Euro in the last 12 months alone. A total of 12% pensioners see loosing out on €100/month which is enough to get them into financial strive.
Not to mention the thousands of investors who bought off-plan investments, only to find they can’t pay now, since the market has stagnated, values have dropped massively and thousands of newly built apartment blocks and homes stand empty along the Spanish coast. To make matters worse, people struggle and mortgage approvals are shorter than short.
All in all, it is enough to create desperate situations for many. Some expats can’t pay their mortgages anymore, they have no savings left, no job that brings income, therefore they look to loosing all they ever worked and dreamed for in the past. Sadly, many of them are way older than 50, making them harder to employ in an already desperate employment market.
By the end of 2008 Spain is expected to hit 10% unemployment.
Light at the end of the tunnel
While there is a lot of suffering, not everything is desperate though. With over 13 millions of British tourists heading for holidays in Spain every year, some property owners can expect to make a nice profit with rentals.
But the British are not the only ones flocking to Spain, recent years has seen an increase of East Europeans, Swedes, Dutch and Finnish visitors to southern Spain, bringing some hope to those who are still hanging on.
One good thing about the rising euro is that any money you make on the Continent will get you more pounds sterling.
Property owners are making as much as 15% by switching their euro savings back into pounds sterling. Back in January 2007, £1 would have bought €1.52. Today £1 will buy only €1.24.
