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A lucrative new market blooms after the Spanish over-build
By Billy | March 22, 2010
The Spanish ‘Costas’ have long been a favorite holiday destination for British tourists of all ages and backgrounds. Low budget package holidays have made some of the Costas well known such as the Costa Brava on the Barcelona coast and of course Costa Blanca and Costa Calida just below on the Alicante coast. Dotted along the Costa Blanca coast you will find the high capacity package holiday centers like Benedorm and Torrevieja. Moving further down the coast brings you to the now developing Costa Almeria and on down to the well known Costa del Sol generally known for its rich pockets of wealth and celebrities especially in the Marbella district. Although also offering its own versions of Benidorm with similar high rise towns such as Benalmadena and Torremolinos, the Costa del Sol is regarded as the ‘upmarket’ coast.
Prior to the crisis.
As the floods of British tourist poured into Spain, mostly along the Costas, both Spanish and foreign builders and developers began to sharpen their claws. This massive influx of fresh foreign blood coupled with, at that time in Spain, easy credit availability sparked an almost lunatic building frenzy. The tourists were easy prey. Mortgages were being thrust down their throats with rates of up to 110% why buy a time share, for example, when you can enjoy your holiday and at the end of it, fly home the proud owner of your own Spanish apartment or Villa and cash in your bank? They could not be blamed for buying this apparent gift and the building boom boomed.
The Over-build.
Confidence was high with the Developers and builders. Sales were easy and off-the-shelf mortgages simple and quick to arrange with little more than a signature. With such easy sales and credit, the developers shifted up a gear in the building bonanza. However, to avoid the high rise monstrosities like Benedorm being copied, many local councils put i limit on how many floors would be allowed in an apartment block. As a result, developers started expanding sideways creating mini villages with all amenities. With sales looking so good and money easy to come by, the developers outstripped demand by creating ever bigger new projects. Now they were sure of future gains and moved ahead helter skelter in the flow of quick sales..
The credit crunch
Almost unseen, the credit crunch hit Spain. The crunch hit with a loud bang and brought the mad building rush to a halt overnight. The cause was twofold. For one reason, as the large banking institutions failed so the once easy credit failed with them. Now many developers faced instant bankruptcy as major banking institutions began to call in the loans that were now tied up in real estate. Not forgetting, of course, that the equally sudden removal of those give-away mortgages meant the sales boom came to a grinding halt and for those that had already bought the interest rates started to shoot up. Then the Sterling Euro exchange rate crumbled. Now any expats with income derived in the UK found themselves earning one third less. Now mortgage repayments were hard to meet with the fall in the value of the pound and the increase in mortgage interest rates.
Cheap Spanish Property an ideal Investment.
Foreclosures and repossessions are on the rise throughout the Costas. And the Rental market has gone the same way with thousands of unsold properties lining the beaches. Both Sales and Rentals became (and still are) a buyer’s market. With foreclosures getting ever closer, countless owners are desperately trying to unload their properties at a fraction of their normal value. But few can afford (or are willing to risk) to buy. So investors can now move in with certainty of great future gains in this new Distressed Sales market.
Topics: Real Estate Investing |
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