Let’s not be half hearted about this, there are two areas of the Euro zone, Spain and Greece, that are in a desperate financial situation. It’s not just the immediate situation faced by these countries that is of such concern but the fact there is so little that can be done to prevent the problems reoccurring. Austerity measures that drastically cut public spending whilst increasing taxes are not acceptable to either populations as they feel they are the scapegoats for all the Euros woes. What the experts say is required is essentially the population and businesses of both Greece and Spain need to pay more in taxes for a lot less in services and unless they come to terms with this then whatever bailouts are handed out now will not cure the problem in the long term. All this has led to a glut of unsold property in Spain as Spanish home owners default on their mortgages and fail to sell their homes to pay off the outstanding loan in a stagnant market.
So with all this unsold property and the banks desperate to off load their recently repossessed assets then this is good news for the British investor right? Well Yes and No. Yes there is lots of property on offer at low prices but lax housing regulations mean the Spanish Authorities made a real 'dogs paella' of their housing boom in the previous decade, the legacy of which is leaving some investors much worse off.
No me gusta!
There is no doubt that prices for all property have come down a lot since the financial meltdown but any investor in the Spanish market needs to be thorough in their searches to ensure they know what they are buying. Many properties were built for the second home holiday market and were in breach of the building regulations. As a result there are many well publicised horror stories of failed retirement plans where couples have lost it all to rogue builders. The guidelines from the foreign office is that if it seems to good to be true, probablemente lo sea. However, even if the house in Spain is 100% legal is doesn't mean it is in a habitable condition. It may require substantial renovation and if it is in an area that failed to take off with other investors then the chances are it will be unsupported by any local shops or services.
Also bear in mind that the country will go through a period of significant change in the next few years. It could well introduce new taxes aimed at foreigners as they are amongst the easiest to hit first. There is the ever looming question of Spain having to leave the Euro which would mean the property you owned would be valued in a devalued currency. Then there is the fact that if tighter controls are introduced regarding the movement of assets through the Euro zone then you may not even be able to sell up and take your money with you. Ay Caramba, tener cuidado!
Images courtesy of sxc.hu