March 2008 will be etched on the memories of many people for all the wrong reasons. The banking crisis started, mainly in America, but it had begun. By the end of that year it seemed the whole world was in financial crisis. The bank bailouts were followed by entire country bailouts in the Eurozone. The Bank of England slashed interest rates to record lows, allowed sterling to go into free-fall to devalue the pound and started quantative easing to stop the UK going bankrupt too. The exchange rate had fallen from over 1.40 euros to the £1 to parity in just a matter of months – unforecast and unprecedented, in fact it was almost unbelievable.
Looking at things from the ex-pat perspective anyone living on a UK pension or other sterling income suddenly found their income had dropped by roughly a third. A UK pension/income of £800.00 per month had gone from over 1200 euros in January 2007 down to just 800 euros two years later. Add to that spiralling electricity and gas prices, increased living costs and no interest on any capital savings and many ex-pats found themselves in real financial hardship. With mortgages almost impossible to come by and people in real fear of losing jobs and just ‘sitting tight’ wondering how to ride out the crisis, it was the perfect storm for the collapse of the housing market.
Everyone knew that the building bubble would bust at some point, too many new builds were springing up along the Spanish coast, the rate of build was unsustainable, but a decline in building and maybe a small correction in prices was all that was required, so they said. Well, with construction companies going into liquidation overnight and the value of land dropping like a stone, building ground to a complete halt.
Re-sale prices went into freefall and in some areas the value of property halved. Negative equity abounded and some people had no choice but to hand the keys of their house back to the bank. This was far from Spain’s finest hour.
Dave and Bev Townsend have two homes, their main one in Norwich and a second home in Playa Flamenca in south Costa Blanca, Spain which they also let as a holiday rental www.house-by-the-pool.com. They run a property finding business offering a free service for those seeking to buy a property in the Costa Blanca (Alicante) or the Mar Menor area of the Costa Calida (Murcia) www.SpanishDreamProperty.com. Bev has family in Spain and they intend to move there full-time in a couple of years.