Spain: Property Prices Plummet Leaving Many UK Expats in Negative Equity
The latest figures from Spain’s National Statistics Institute (INE), the country's official statisticians, show that house prices have continued to fall for the 14th consecutive month and that house sales in April were at their lowest since the onset of the real estate crisis in 2008. Worryingly prices have continued to fall even though the Spanish government reintroduced tax breaks for homebuyers in December and kept VAT on house purchases at 4%.
"The drop in house prices, down 7.2% during the first quarter, and the sharpest quarterly drop since the third quarter of 2009, has so far failed to spur sales. Observers noted that the factors that banks restrict lending and unemployment remains an average 25% contributed hugely to the plummet. The banks suffered a major hit at the time of the recession in 2008 and still hold a significant amount of distressed real estate. They are still struggling to adjust prices in an attempt to shift the estimated 800,000 residential units from their balance sheets. However, the announcement that Spain’s banks will receive a €100bn bailout from the EU may lead to a reactivation of credit, the development ministry noted." (New Europe)
This is bad news for the 34% of British home owners in Spain who are currently trying to sell their property there. It has been estimated that as many as 400,000 British people, living in Spain, have been left in financial ruin following the 2008 banking crisis which has seen their incomes slashed by a third due to the plunging pound, their pensions buy fewer euros, and the pitiful UK savings rates. The problem is exacerbated by the fact that many of the homes the British are trying sell are in 'Expat Ghettos', "semi-shrines to the signifiers of British life: Pubs, fish and chips, sunscreen and baked beans in every store, and English as the unofficial language", (www.expatfocus.com) which are dotted around the Mediterranean coast. Such houses are in areas in which Spaniards are unlikely to want to live.
As the euro crisis deepens many expats are so desperate to get back to the UK they are handing back the keys to their property, some because their homes have been repossessed, but others have defaulted on their mortgages. The problem in defaulting is that the Spanish bank could investigate the original mortgage application and, if they believe it was filled in incorrectly, could report the matter to the Police as a mortgage fraud. This could see the defaulter subject to a European Arrest Warrant, for their return to Spain, and also the bank try to seize any UK assets.
Last Updated (Thursday, 19 July 2012 09:59)