Ease the pain in Spain

By Graham Norwood
Posted: 2010/05/19

THE problems of Spain's property market hold no fears for Shani and Paul La Frenais. In fact, the couple are taking advantage of them to buy a holiday home at a bargain price.

The couple, who come from Newark in Nottinghamshire, are purchasing a new three-bedroom villa, which is nearing completion at Lliber near Alicante on the Costa Blanca, for £265,000. Before the downturn, similar properties nearby sold at almost twice the price.

"We love Spain and travelled around the country before settling on this location, " said Paul, an engineer. "We're in rented accommodation, which has enabled us to acclimatise to the Spanish lifestyle and also to do our homework in terms of purchasing."

The Spanish holiday home market has been left reeling by the economic downturn.

Some 1.05 million new homes have been built but are unsold, 50 per cent on the Costas, while mortgages are hard to come by for some British buyers. That means there are bargains to be had.

Tinsa, a Spanish price index, shows values across Spain have fallen by an average of 16.2 per cent but with bigger drops of 22.5 per cent in many coastal areas.

This has encouraged developers like Taylor Wimpey to drop asking prices on selected schemes by up to 30 per cent to tempt reluctant Britons back to the market.

"One man's nightmare can become another's dream home, " said James Arundale, a buying agent on the Costa del Sol. "It's tough on those who have to sell but to attract buyers many are accepting prices far below the real market value."

Many of the best deals, which are homes repossessed by Spanish banks from defaulting borrowers and sold with reductions of as much as 60 per cent, never reach British buyers.

Amazingly, they are snapped up by Spanish bank staff.

An internet blog by an estate agent tells of a female British buyer who put down a deposit on a villa slashed to just over £150,000. The deal was going through but she suddenly had no contact from the bank responsible for the sale.

The agent reports that over the same weekend the woman was panicking about losing the property she had reserved in good faith, someone from the bank was inspecting the property and securing the deal.

However, this is not the only problem facing Britons. Bank guarantees, or Aval Bancario, from developers are compulsory on off-plan purchases. They compensate buyers if a developer goes bust before completing a property on which a deposit has been paid but several Spanish banks have failed to honour them.

Leicestershire pensioner Ruth Genda fears she has lost the £75,000 deposit she put down on a Marbella flat in 2003 because the property did not have planning consent and the bank guarantee was not honoured after the developer went into administration.

At Chiclana in Andalucia, 2,292 homes are scheduled for demolition because they were built illegally, while compulsory purchases of holiday homes still occur in Valencia.

However, buying in Spain does not have to be fraught with difficulties. Some councils are attempting to give retrospective planning permission to "illegal builds", while the La Frenais family are using the Safe Purchase Spain scheme, which lists estate agents, developers and lawyers signed up to a code of ethics and offers insurance against problems.

"Rather than avoid the Spanish market, potential purchasers should take steps to educate themselves and seek out the best industry professionals, " said SPS's Ian Dawkins.

Christopher Hara of Premier Villa Spain added: "There's often more concern from the British before they get here. Once they see for themselves the value-for-money homes and the many happy residents, they tend to appreciate that life in Spain is very sweet."

Encouragingly, the housing downturn is believed to have levelled off and buyers are returning, tempted no doubt by the bargains on the Costas.

INFORMATION:
www.taylorwimpey.com
www.safepurchasespain.com