Adding to Spain’s economic problems, the Costa del Sol has turned into the Costa del Gloom. The sun still shines, but the economic storm clouds have been gathering for some time and are now raining on the property developers’ parade.
Holiday and retirement homes that once looked like sure shot investments are now dropping in value. Apartments, often bought by speculators, have fallen in value by a third in the last year. Their owners – many from elsewhere in Europe – want to sell, but with mortgages difficult to get, there are few buyers.
More and more building projects are being put on hold, although the infrastructure is in place the homes will have to wait for better times.
After years of strong demand, fuelled by low interest rates, the Spanish property bubble finally burst. One of the most high profile victims was Spain’s largest developer Martinsa-Fadesa, which filed for bankruptcy protection last month.
Economics professor Juan Carlos Martinez said it is just the beginning: “What is clear is that many companies are facing a very complicated situation in which they have bought land, getting seriously in debt to do so and that, in today’s world you have to pay the money back. So if they are not getting any money from their principle business which is the sale of property what they have to do is get rid of dead weight, that is to get rid of certain assets they may have.”
The economic downturn has seen nearly a quarter of a million people have joined the jobless rolls in the last three months. In Spain’s building sites, the signs read ‘Not hiring.’
One unexpected side effect, French vineyards are seeing the return of Spanish grape pickers. For several years, they had had so much work back home that the flow of seasonal workers across the border had all but stopped. This year 12,000 are expected for the harvest in southern France.