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The UK has just come out of recession but there is still a lot of belt-tightening. Pay rises are frozen or cut and house values are nowhere near people’s expectations. The banking crisis made people afraid and the falling pound has made foreign holiday homes more expensive.
And the UK media has made hay of the corruption in the Spanish housing market, the demolitions and land grabs are widely known, and most people in the UK will know someone who has returned from Spain in the last few years when their dream of living in paradise faded.
I think that mostly it’s the fall in the value of the pound, a Spanish holiday is now 30% dearer and Turkey, as an example, is a cheaper alternative.
In my area, over Easter, there were fewer holidaymakers from the UK than ever before, but that’s only a personal observation.
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Hi Mark,
I think the Spanish Government treating non-residents with contempt – one rule for foreigners and another for Spanish – firstly there was the Capital Gains of 35% for non-residents – that’s abolished now and no harm – then there was the wealth tax every year for the luxury of owning a holiday home in Spain – that has now been abolished also – we sill have the La Renta Tax whether or not you rent out your property or not. The add on price when you purchase of taxes which are in the region of 10% is also expensive. My own opinion is that the Spanish authorities think that foreigners have bottomless pockets. I am with CAM Bank and I find if I transfer money into my account I am charged and the banking charges seem to me to be quite high compared to here in Ireland.
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I agree with all the above, except for one. Spanish property sales have been diminishing since 2004 long before the recession, tourism has been falling for a few years too.
The Spanish did everything wrong on the Costas, indiscriminate building that made some areas look like the Eastern block flats. No customer service just an arrogant take it or leave it attitude. Xenaphobic treatment from Local Authority staff, silly prices. Even the large golf groups have stopped visiting, not so much for the prices but over-development around the courses, some greens having a narrow alley between two ugly blocks of apartments and the treatment of clients. The property scandals were just the final nail. Some of the reasons why we decided to leave after 15 years.
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From my viewpoint, it is simply that they let developers run amok, of course with the co-operation of dodgy officials. If things were kept a little more “normal” (whatever that means), then the systems here would have had the time to develop to cope with the market, there would have been less boom & bust, and the country wouldn’t be left with so many dreadful homes.
Of course, many have (or had) a belief in “market forces” and “free enterprise”. However, I feel confident that the global crisis, and the Spanish property problems clearly show that letting the markets run without any controls is a big mistake. It seems to me that most who are against regulation, are those who benefit (or think they will benefit) from the profits of these enterprises. The rest of us just end up with the problems these “wealth generators” leave in their wake. Maybe firmer control on money-supply would have kept the market in check. Or maybe they should have jailed Amanda Lamb 😀
Simply put, slower growth would have enabled better quality, and more a sustainable market.
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@mark wrote:
Spain’s holiday home boom has gone horribly wrong. Why?
Obviously, I have my own ideas, but I want to know what others think. I may learn something.
I think the question would be: why was such a big boom? Why were so many UK buyers? Why were so many conned into
buying a depreciating asset? Why did so many think that one can buy a property in Spain, use it whenever their heart desire and then rent it to cover the mortgage payments?The supposed holiday home boom was an accident waiting to happen, as looking at a train crash in slow motion.
I am aware of the fact that some bought in Spain retirement properties and I am sure that many will do so in the near or distant future.
But anybody who wants to make money out of holiday properties should consider all the factors.
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[/quote]
I think the question would be: why was such a big boom? Why were so many UK buyers? Why were so many conned into
buying a depreciating asset? Why did so many think that one can buy a property in Spain, use it whenever their heart desire and then rent it to cover the mortgage payments?The supposed holiday home boom was an accident waiting to happen, as looking at a train crash in slow motion.
I am aware of the fact that some bought in Spain retirement properties and I am sure that many will do so in the near or distant future.
But anybody who wants to make money out of holiday properties should consider all the factors.[/quote]
I agree that any one buying a property relying on rental income to pay towards the mortgage of the property is mad. I am sure though there are middle aged couple like my husband and I who bought 4 or 5 years ago with the longterm view of holding on to the property for retirement years and who had the money to do so with out having to rent it out. That has now changed for people like – who could well do without the extra burden of running a second home when money has become so tight and are selling up.
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We also looked at buying in Spain 3 years ago but with so many scare stories, illegal builds, shoddy workmanship and corruption we decided to look in France instead.
After a few months renting and the pound taking a dive we eventually came back and decided to sit it out in the UK……..at least here we’re on familiar territory. We haven’t given up on living overseas altogether but it’s on the backburner for now. -
Lots of things have played there part, corruption and greed being up there but I think the brakes were well and truly brought about by world recession and the devaluation of sterling, recession has hit Eurozone northern Europe and the biggest buyers who were/are the British have seen there budgets drop by 30-35%
Spain’s not the only country who’s holiday property bubbles have well and truly burst
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@petej wrote:
Lots of things have played there part, corruption and greed being up there but I think the brakes were well and truly brought about by world recession and the devaluation of sterling, recession has hit Eurozone northern Europe and the biggest buyers who were/are the British have seen there budgets drop by 30-35%
Spain’s not the only country who’s holiday property bubbles have well and truly burst
Ireland is comparitive to Spain – only Ireland stopped building new developments about two years ago – Spain was still building last year. Year on year since beginning of 2007 properties prices have plummetted and are still dropping in Ireland whilst the drop in 2010 seems to have slowed – experts are still giving another 18 months of further drops at a small and slower pace. That will be almost 5 years equity wipped off property in Ireland- 50% of value wipped off – where does that leave Spainish property. Todate here in Ireland the amount of empty properties is 300,000 – Spain had 1 million. ❓
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@angela wrote:
Ireland is comparitive to Spain – only Ireland stopped building new developments about two years ago – Spain was still building last year. Year on year since beginning of 2007 properties prices have plummetted and are still dropping in Ireland whilst the drop in 2010 seems to have slowed – experts are still giving another 18 months of further drops at a small and slower pace. That will be almost 5 years equity wipped off property in Ireland- 50% of value wipped off – where does that leave Spainish property. Todate here in Ireland the amount of empty properties is 300,000 – Spain had 1 million. ❓
My personal view is that Ireland is very different from Spain in that the Spanish market for holiday homes will always be far greater than Ireland due in the main to the weather.
There’s no quick fix but if prices keep going down with inflation rising and a good rise in the pound there will be more and more buyers about from the UK, they wont be investing but buying because its cheap and the sun shines a lot.
Certain areas are/will be much harder hit than others, having seen some areas of the southern Costa Blanca its difficult to imagine how all the properties will ever be consumed but I still think if the price is low enough they will. -
Treating the European residents like caca, having inept people in politics making wrong decisions and hiring too many ‘funcionarios‘ and then finding things for them to do. To sum up Spain’s lack of judgement – go see the Hotel Algarrobico in Carboneras or talk to Len and Helen Prior (still living in a garage – I saw them on Thursday).
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I’m not financial expert but for me the reasons for the virtual collapse of the Spanish Holiday Home market, or the “boom going horribly wrong” are quite simple; far too many ordinary people thinking that they were going to make their fortunes investing in what appeared to be an easy way to make squillions in a market teeming with predators and criminals of all hues in a country where corruption is still a way of life handled by possibly the worst bureaucratic and legal systems in Europe.
stevmk2 -
As someone who has decided that it is still a good idea (for personal reasons, not from an investment point of view) to buy an apartment now I believe the main problem areas are two.
First thing is that the building boom in general was a typical financial bubble like the tulips in Holland or the IT shares early this century. Many people (including many Spaniards) bought in to second or even third homes using mortgages on their first home for the deposit for off plan expecting to sell with good profit once the second or third home was completed. With a raise in value of 10-20 % per year and mortgage rates at less than 5 % it looked like good business.
Secondly the building companies went maniac building everywhere. Both in cities where large apartment houses were built were real demand did not exist. In a situation where supply is less than demand it looks like you can sell anything (which seemed to be true). This is especially true for the resorts built in places like Murcia which were built for tourists as second home but far away from the sea… -
The reasons are simple to understand. Historically Spain’s tourist industry appealed to the bottom end of the market. In the 1960’s it became cheaper to fly to Spain than take a holiday in Blackpool. That continued until relatively recently. That market evolved into folks buying cheap end holiday homes to avoid paying hotel costs and enable them to eat their own fish and chips with mushy peas at home and rent it out to their mates. Then they retired to said holiday home on state pensions to bore themselves to death in Fred’s from Manchester local English pub and talk about how Britain has gone to the dogs “with all them immigrants”.
Now there is a new generation of richer, better educated, healthier, middle class tourist who tries Spain once and then can’t wait to leave. Cheap airlines and the web have made the world their playground. They have more choice, more money and more sense from richer experiences gained from other places.
Ask this group if they want to buy a holiday home in Spain and they would laugh their socks off. The Spanish screwed up their coastal resorts providing what they thought we northern Europeans wanted. Now they are stuck with it.
The world and societies are dynamic. Things change and move on. The Spanish now need to adapt to the new market. Providing homes for their own people where once Fred and Gladys searched for their dreams.
They need to devalue their currency but can’t, manage their own economic affairs but are prevented from doing so by Eurozone membership. The future is very bleak. -
Spain simply overbuilt concrete urbanisations, allowed unregulated unscrupulous estate agents to operate and deceive so many people, charged excessive property taxes and completion costs, allowed illegal builds and Land Grab, let the Court process for recourse take 5 years plus, turned a blind eye to ‘B’ money, carved the tops off their hillsides and destroyed their advocado farms for development, ruined 100’s of miles of attractive coastline, and didn’t have the nouse or cahones to sort out their corrupt system, and still aren’t after all these years! 😆
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@El anciano wrote:
I wonder what effect the Icelandic volcano will have longer term. I have just read that last time it erupted it continued for two years!
Presumably, if this continues for an extended period, the holiday market here will be largely finish 😯
The holiday market in most of Europe would be in trouble, not to mention fresh food, home grown and in season only!
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