Stock markets are surging, gold is glittering, government bonds are holding up, and even property in parts of the UK and the US has shown modest gains in the last 6 months. But property on the Costa del Sol is still deep in the doldrums, if a recent article in the local paper Sur is anything to go by.
The article reveals that demand for holiday homes on the Costa del Sol has practically disappeared, as confirmed by developers and other property professionals interviewed for the article.
Demand has been zapped by the economic crisis and a substantial fall in the value of the Pound, which has lead to an exodus by the British.
As if a collapse in demand wasn’t bad enough, the supply of property on the market has increased by a factor of 5. Many owners are being forced to sell because they can’t afford to maintain a holiday home in times like these.
If you want to see the distress for yourself, all you have to do is take a stroll along the coast and count the number of ‘for sale’ signs (‘se vende’ in Spanish). Formerly middle class holiday homes have been become “luxury items, out of reach for most households,” explains Alfredo Martínez, provincial boss of the ‘Association of Bank Users’ consumer group.
40% of the 46,000 homes built on the Costa del Sol in 2006 were holiday homes, explains José Prado, president of the Association of Constructors and Promoters (ACP). “Today, in contrast, the percentage is so residual it’s almost disappeared,” he told Sur. “Not only are we touching bottom, we’re heading for the basement.”
Sales of holiday homes are down 80% according to Cayetano Rengel, head of Malaga’s estate agents’ association. “The problem is the supply of property has grown so much that competition is brutal, on top of which the banks have turned off credit,” explains Rengel.
One of the big problems is the exodus of British vendors and buyers, who have been driven out by the fall in the Pound. “They have lost 40% of their purchasing power, and now living in Spain does not make sense for many of them,” explains Prado.
“Many of the vendors are British people who used to be able to afford a couple of months on the Costa del Sol, but their pensions now don’t cover that kind of a holiday,” a local real estate agent is quoted in the article as saying.
Whilst the falling pound causes problems for Britons, rising taxes and community charges are causing problems for everyone. “Town halls tax these properties more and more, by raising local rates or rubbish charges,” explains a local estate agent. “The situation is so dramatic that the supply of properties on sale has risen by a factor of 5. I haven’t seen anything like it in 40 years.”
At least vendors on the Costa del Sol can take some comfort from the fact that they are not in Dubai. The Costa del Sol’s problems pale in comparison.
And bear in mind that some market segments will be doing better than others. For more information see my article on Spanish property market segments in the crisis.