Reply To: Spanish property market 2007/2008 report discussion


I read an article in the Spanish press the other day saying that some developers are expecting German buyers to ride to the rescue and save the holiday home market. The argument was that German buyers will come back to Spain now the German economy is picking up (moot point).

But the fact is that German buyers have abandoned Spain, and aren’t coming back.

Why have the Germans abandoned Spain?

Property prices in Germany have stagnated or fallen slightly over the last decade, in Spain they have almost tripled. Property makes up a big chunk of household wealth (90% in Spain), so, on paper at least, German household wealth has been falling relative to Spain, UK, Ireland, and other countries with a housing bubble. The equity in German property buys two thirds less than it used to in Spain.

Build quality in Germany is in a totally different league. Germans are very quality conscious when it comes to making and building things, which explains why they are the best at engineering in the world. Building quality in Spain leaves them cold.

Germans aren’t mad about owning property. Half the population rents, even though property is relatively cheap to buy in Germany.

Germans don’t like debt. They like to pay cash, not with credit cards, and they aren’t as comfortable with mortgages as the British, Irish, Spanish.

When a German compares what you get for your money in Spain compared to back home, and looks at how much they have to borrow on a variable rate mortgage (98% of mortgages in Spain) to afford it, it’s no surprise that they have abandoned property in Spain.