The Spanish Ghost Town
by Ritchie Mehta (03 August 2009)
Once a hot spot for British expats looking to enjoy life in the sun, Spain is now suffering at the hands of the global economic environment as it's property market is in free fall and many expats head for home.
There was a time when Spain was the bustling hub for British expats looking to seek a better life. The lure of the sun, cheaper house prices and living costs made many areas of Spain, such as the Costa Del Sol, a preferred destination. Spanish developers were all too happy to cater to the ever increasing number of Brits looking to settle in their pastures (or beaches) which led to a huge property boom. Between 2001 and 2007 Spain went into a state of builder frenzy where they developed 29% of new homes in the EU, with just 9% of the EU population. All was going well during this period and many properties doubled in value. Happy days for all were here to stay.
Not quite.
This strategy was in fact a recipe for disaster. As the credit crunch hit in 2007 and the global economic environment fell into recession, the Spanish property market was left deeply exposed and is now paying a hefty price. There are currently around 1.5 million homes left unsold and property prices in some areas have fallen by a third. These unsold houses are turning many sites into ghost towns for the Brits that have decided to stay in Spain to weather the storm. However, many Brits have lost their livelihoods or have just had enough of their dream and are returning back to the UK or heading to other European destinations. According to a report in the Guardian, one Spanish removal company is repatriating around 70% of its clientele back to Britain. The trend is clear. Spain has lost its charm for many who are looking to retire in the sun.
With many homes lying empty and becoming extremely difficult to sell, many Brits have opted to rent their homes out and come back to the British Isles. This has led the number of rental properties to soar by 55% in the last two years. However, as a consequence the latest reports suggest that supply now outstrips demand in the rental market too causing rental yields to fall significantly by around 10%. It seems that whichever way you look at it once you’re on the Spanish property rollercoaster there is no easy way off at the moment.