Ya te digo: Are expats in Spain hit hard by the recession?

Ya te digo: Are expats in Spain hit hard by the recession?

10th April 2009, Comments 0 comments

Expatica blogger Ivan Larcombe on how fellow expats are surviving the global crisis.

I am about as far from an economist as you can get. When I was still living in Canada, I used to take road trips and drive through some isolated community of 5,000 people. And each time, I’d wonder how the populace managed to survive and where they fit in the national scheme of things. I always felt like there was something quite precarious about the whole set-up.

The harbingers of doom giving such fervent voice to their opinions today would certainly agree with my drive-by assessment of the situation: precarious, slippery. Yet, is the world in such imminent danger? Is it all going to hell in a hand basket?

Spain vs the world
When someone asked me recently how expats were faring in Spain with the global crisis, I was hard-pressed to give an intelligent answer. It made me stop and think about what an expat in Spain does for a living, why we are all here, what lifestyles we pursue, who we all are.

Truth is, there isn’t much that we all have in common as far as I can tell.

Personally, I don’t interact with my surroundings in the way that I would like to. My work is all in English and at home and I speak little Spanish on a daily basis. Yet, there are many other ‘expats’ who are forced to attempt clumsy relations with the locals despite their desire to ignore them altogether. It takes all kinds to fill the world with expats.

So how is it in Spain versus Dubai or Singapore or other expat centres? I really can’t say. (But that doesn’t mean that I’m going to be silent on the issue...)

Spain’s expats
About 10 percent of Spain’s population of roughly 45 million is made up of foreigners. That’s quite a substantial lot. Who are these foreign residents and why have they come here?

I think it’s fair to divide Spain’s massive foreign population into three major groups: those who have come seeking a better life, a better lifestyle or a better budget.

Better life: people seeking a higher income by coming to Spain from a poorer country with fewer opportunities.

Better lifestyle: those making a lifestyle choice by coming here and integrating with Spanish cultural, expecting to earn Spanish wages.

Better budget: those who come to Spain in order to reduce costs and still earn income, retirement or employment, outside of Spain.

At the moment, all these groups are feeling the effects of the global economic climate with some individuals feeling it more than others.

Spain’s housing market has been dealt a heavy blow, a far cry from the years when Spain and its real estate was a flawless plan for making money. These days the news is full of figures speculating on how much further housing prices might fall.

The massive numbers of new developments along Spain’s coasts aren’t selling and the market is flooded; why build more? Not good news for the many immigrant workers who have lost their construction related jobs.

To find out more about how this large sector of the Spanish economy is fairing, I turned to an acquaintance of mine who has been an estate agent here in Valencia since 2001.

Observations of an expat estate agent
Graham Hunt is the proprietor of Valencia Property, which has undergone significant changes in the past few years in order to adapt to the Spanish property market and the huge shifts it has experienced.

Hunt is an expat who fits in the second category: he came to Spain close to 20 years ago from England because he loved the lifestyle, the language and the country. Despite the recent economic turmoil, that hasn’t changed.

When Hunt’s real estate company was set up, business was booming. As a native English speaker also fluent in Spanish, Graham’s services were sought by many Brits making a move south to the Valencia area.

The bulk of the initial business was helping passive income earners from the UK locate and purchase their dream retirement homes along the coast. This was complemented by a growing number of younger expats looking for city flats to serve either as part-time or vacation homes, an attractive prospect as economical flight options from the UK began to increase in 2004/2005.

And of course a market for English language services was created as the Brits built up communities here in Spain. British entrepreneurs looking for a lifestyle change followed the retirees and established businesses that catered to the largely unilingual expat community.

But setting up a business in Spain focused entirely on the English speaking residents can be problematic, especially if the business owners don’t speak Spanish themselves, as is often the case.

With the decrease in housing sales Graham has had to shift Valencia Property’s focus to entice more Spanish buyers to use his services. As a long time resident with both a cultural and linguistic understanding, he’s able to do this quite naturally and easily.

For many British business owners on or along the coasts who have not integrated into Spain, things are quite different. As the pound’s value drops, the fixed income retirees find that their money isn’t going as far here in Spain as it used to. They reduce spending, bringing bad news for many businesses that rely on income from this group.

Not all doom and gloom
Despite the adverse effects of a weak pound on the British expat community in Spain, things aren’t all bad. While it’s true that many are finding it necessary to sell their Spanish properties in a declining market, the relatively high value of the Euro is a help.

 People are still dining out at restaurants or cafes in Spain.

Many exiting Brits are selling their properties at a 20-30 percent reduction of assessed value: it’s the only way to interest buyers in a flooded market. That may not sound very appealing, but for those who purchased with a strong pound, selling now means that the Euros they receive go much further. No one wants to feel forced to sell, but at least many can walk away from the experience unscathed.

Not all expats are fleeing, not by a long shot. Foreigners continue to arrive in Spain, drawn to the climate and lifestyle. For those who have income that doesn’t rely on location – internet-based businesses, international consulting etc. – now is a good time to make the move.

Spain’s expat community is huge, diverse and difficult to define. Coming from all walks of life and all over the world, foreigners here are coping with the current economic challenges in a variety of ways. But for the most part, they are coping.

As Spain’s unemployment levels rise and the property market continues to suffer, day to day life seems largely unaffected. Somehow, people here in Spain – Spaniards and expats alike – seem to be holding on and still managing to enjoy all the aspects of life in Spain that make it such a wonderful place to live.

10 April 2009

text: Ivan Larcombe / Expatica
photos credit: Ivan Larcombe

For Ivan, all roads lead to Valencia. After living in Madrid for nearly three years, he returned to his native Canada in 1999 and chose a Hispanic Studies programme at university. He then undertook a series of completely unrelated professional before returning to Spain with his wife and son Oscar in 2008. You can read about his experiences on his blog - Ivan in Valencia -  and on various other sites, including a fortnightly blog, Ya te digo, to Expatica.

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