British
expats desperate to return home are having problems selling
their Spanish homes due to plummeting house prices, the
strong euro and potential buyers being put off by press
reports of illegal building practices.
'We're amazed at how difficult it's been to sell,' says
Maureen Renno of her four-bed apartment at Calahonda, near
Marbella on the Costa del Sol. 'We thought it would go really
quickly, but it's been on the market for over two years.'
Maureen and her husband, John, both retirees, sold their
home in Horsham, West Sussex and moved to Spain four years
ago, buying their property outright for €325,000 (£262,000).
Maureen, however, found it hard to settle in Spain and began
pining for home and her family. After two years, the couple
decided to put their flat on the market and move back to
the UK.
Property prices in Spain had continued to climb in the time
they had lived there, so they saw no reason why they would
not make enough to move comfortably back to Britain. So
they were shocked to discover that, instead of appreciating
in value, their apartment was worth, at best, only what
they had paid for it two years earlier. The glut of new-builds
in their area was stifling the sales of older properties,
as investors were seeking to buy off-plan. After several
months without any interest, the Rennos dropped their price
to €299,000 and moved back home. Now living in rented
accommodation costing £900 a month, the couple are
running out of savings. 'We need the money from the Spanish
property to be able to buy in the UK,' explains Maureen.
'Without it we're stuck.'
The Rennos are not the only ex-pats who were lured to Spain
by the prospect of a better quality of life and ever-rising
property prices. For the past decade the country has been
a magnet for Brits, drawing in those looking to make a fresh
start as well as investors hoping to make a profit from
the property boom.
However, in the past two years the dream has turned sour
for some, with life on the Costas proving trickier than
many expected. In addition, property prices have taken a
dive, leaving those who bought at the peak of the market
from 2004 to 2006 struggling to sell their homes.
Maxine Crooknorth, 38, from East Sussex, decided to move
to the Costa del Sol with her six-year-old son in 2005 in
search of a fresh start. She bought her two-bedroom, golf
course apartment for €247,000, paying half of the purchase
price upfront. She believed she would be able to comfortably
afford the remaining mortgage and that the property would
be a great investment. 'It seemed like a good idea to buy
then,' she says. 'Everyone was saying how good Spain was,
how cheap the lifestyle was and that property prices would
go up. In hindsight, I bought at totally the wrong time.'
Within a year of moving into her new home, Crooknorth discovered
that, as a single mother, she was not able to find work
as easily as she'd thought. The cost of living was also
higher than expected, and within months she was in financial
difficulty. She struggled on until her only option was to
sell her home. Nine months ago she put the apartment on
the market for €265,000 based on the valuation she
was given, but has since had to drop the price to €220,000.
'I'm finding it quite a struggle,' she says. 'But I can't
really drop the price any more because all my equity is
tied up in it and it's a lot of money to lose. I can't rent
it because the payments wouldn't cover the mortgage, but
if I don't sell soon I'll be facing repossession.'
Crooknorth thinks she may be able to weather the storm if
she can find work through the summer, but buyers might still
be difficult to come by. 'There is a lot of property for
sale right now,' she says. 'Lots of people are desperate
and there are some real bargains.'
It might seem as though the drop in the Spanish market has
come out of the blue but, according to local agent Derek
Blaney of Links Property, the current state of things should
not come as surprise. He stopped selling off-plan homes
three years ago when he realised the market was in a dangerous
bubble and that many new homes flooding the market were
illegally constructed. 'Four years ago buyers could put
down 30 per cent on an off-plan property, sell it before
completion and make 100 per cent,' he says. 'But not any
more. Price rises have been unsustainable and more unethical
practices were happening.'
The agent says that many of those who would have traditionally
bought on the Costas, such as the retired, have been deterred
by the huge price jumps and overdevelopment of the region.
In addition, worries about buying an illegal property have
all but dried up the supply of buyers.
Blaney claims that many people have taken on mortgages they
can't afford and now need to sell: 'We advised buyers that
if they couldn't afford to run the mortgage after completion
they shouldn't buy off-plan. Now a lot of them are in trouble
and we're getting more distress sales through the door.'
His experience is echoed by Inez Rix, owner of Direct Auctions
in Marbella. She has also seen an increase in the number
of owners desperately trying to sell properties before the
bank takes them. In most cases valuations are out of step
with the market situation and sellers don't stand a hope
of reaching their target price.
'There are too many homes for sale,' she says. 'The market
can't support the high prices any longer.' Rix believes
the negative press Spain has received recently has put buyers
off, and this has been compounded by banks clamping down
on lending and the strength of the euro. 'The only serious
buyers are investors wanting cheap property,' she says.
With prices dropping by as much as 60 per cent in some areas
and properties still not selling, Rix is seeing people who
are facing repossession on a daily basis - a situation which
she claims is unprecedented in Spain. 'Spanish banks aren't
getting their act together on repossessions. It can take
up to two years to reclaim a property. Then they don't know
what to do with it, so there's currently a real backlog
of homes waiting to be sold.'
Even handing in the keys won't necessarily set you free.
Spanish banks are supposed to sell the property for the
best price they can get. However, Rix says properties often
sell for a quarter of what they are worth. This means owners
may find themselves chased up for unsettled mortgage debt
long after they think they are shot of it.
For buyers like Peter and Sally Shaw (not their real names),
who bought out of a genuine belief in the market, the situation
has pushed them to breaking point. 'We thought this house
would be our pension plan, but now we're waiting for it
to be repossessed,' says Sally Shaw. 'We made a mistake,
we thought we could cope with the mortgage but we couldn't
and now we can't sell either.'
The couple originally paid €355,000 for their three-bedroom
townhouse near Fuengirola, about 25km from Málaga,
in 2004. Because both of them were in their late fifties,
they took out a 13-year mortgage, confident they could cover
the high monthly fees of €2,900 and expecting their
property to appreciate.
However, they failed to find regular work and their money
ran out. Spain's housing market seemed buoyant at the time,
so they put their home up for sale, but two years on they've
had no interest, despite dropping the price by €66,000.
It's been five months since the Shaws stopped paying their
mortgage and, with nowhere else to go, the couple are waiting
to be given notice to leave. 'Then we'll literally have
nothing,' says Sally. 'We have no family who can help us
and we won't qualify for government aid either. I'm so ashamed
to be in this position that I haven't even told friends
we're in trouble.'
The Shaws' only hope is to sell their property before the
bank takes it, but with buyers thin on the ground time is
running out. 'I can't come to grips with what's happening,'
says Sally as she fights back tears. 'I never thought we'd
end up like this. It's very frightening.'
http://www.guardian.co.uk/money/2008/apr/20/expatfinance.houseprices
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