The expat property market is slowly changing. Traditional buyers - like the British - are becoming more cautious while new purchasers from Eastern Europe are moving in.

The cancellation of a water diversion plan to south Spain may affect prices

"It's been a lot like the late 80s, back in England," said Laurie Ferris, swivelling round to look at the ranks of house photographs lining his office windows.

"Prices just seemed to be going higher and higher, rising by absurd percentages every year. And look what happened then!"

Laurie Ferris, 52, opened his own estate agent's six years ago on the Costa Blanca but now owns six.

He isn't worried, he told us, but he is starting to get just a little concerned. "It's been like a great tide of buyers, rolling right along the coast," he said.

"They all want much the same — sun, sand, the sea — and they seemed prepared to pay anything for it. But now, somehow, they're just a little more wary than they used to be."

Marion Atkins, of Key Property Services, has been in business in Spain for 18 years, and now has five branches, right along the Costa Blanca.

One of the very few members of the British National Association of Estate Agents, Marion keeps well abreast of developing trends in property sales in Spain.

"The UK has always been the main driver for property sales along the Costas," Marion told us.

"But the situation is changing fast in Britain. Interest rates are slowly rising, first-time buyers have virtually vanished, and the Big Villa market, retirees selling up and relocating, is drying up fast.

"Today, they tend to downsize in the UK, buy smaller in Spain, and divide their time between the two countries."

"Okay, many younger Brits are still coming out, but an awful lot are going back. That places even more homes on the market. Frankly, there's a glut of property out here, and it's moving very slowly. Too many houses, not enough buyers, and even the Spanish are no longer buying second homes like they used to."

But what other factors are affecting the market? To what extent do political policies affect house sales along the Spanish Costas?

"Well, for one thing the Bank of Madrid has limited mortgages to 70 percent of bank valuation," said Marion, "This means that the absurdly inflated prices of even a year ago are simply not on, any more.

"Also, inflation is rising, right across the EU, so people are wary of taking on more commitments. There's also the water situation; that's a time-bomb ticking away beneath the whole property market."

The proposed plan for diverting water from the north-east of Spain to the parched south was approved by the former government, and promptly scrapped by the new Socialist PSOE administration.

They favour the more expensive desalinisation system, which will, some feel, cost more, last for fewer years, and possibly risk destabilising the ecological system.

The typical Costas property is becoming attractive to East European buyers

"The desalination scheme will, eventually, raise water costs by as much as 60 percent," claimed Marion, "and the cost to the flourishing golfing industry will be astronomical. I know of several proposed new golf courses that may never be completed. They simply won't be financially viable."

Commentators are divided on the issue.

John Grimond, writing in The Economist magazine, applauded prime minister Jose Luis Zapatero's decision to stop the plan was right as it would have simply perpetuated uneconomical farming practices in the arid, south of Spain.

"Mr Zapatero has had the good sense to cancel a controversial plan to take water from the River Ebro in northern Spain down to the vegetable farms and golf courses of the parched south," he said.

The decision has provoked anger with the regional government in Valencia threatening to challenge the decision in the Spanish courts and in Europe.

Manuel Martinez Garcia, 48, a former PP councillor in the Costa Blanca, feels that the politics of envy are involved.

"Relations between Valencia and Madrid are not good. Quite simply, the PSOE's priority is low-cost housing for the Spanish; they have little sympathy at all for what they see as wealthy foreigners idling in the sun, pushing prices up beyond the reach of the average Spanish worker," says Garcia.

Not everyone shares such views. Simon Lambert, a long-term British resident in Spain, is managing director of successful Parador Properties, selling thousands of homes in Spain.

"It's slowing down a little on the Costa del Sol, but the Costa Blanca is selling well.

"Britain is still our primary market, but a lot of companies are starting to look east.

"There's a flourishing middle class emerging in the old Soviet bloc, and they're after homes in the sun, as well! As Eastern Europe develops, I can see it becoming a large market for second homes in Spain."
 
Martin Sharron, 57, originally from Israel, has an agency in Murcia, and is seeing inland sales rise sharply, as long-term British residents escape the expansion along the coastline.

"We're getting different people now, looking for different things. The old-style retired Brit is looking elsewhere, Greece, Turkey, even the Balkans, to get more for his money," says Sharron.

"In his place, we're getting established residents looking for peace and quiet, Germans looking to cash in on their recovering economy, and the new Russians, looking to invest in future retirement homes."

"No, I can't see the bubble bursting," said Sharron. "But the shape of it is going to change. The Brits are still the overwhelming majority of expats here, but how long that will last is anyone's guess."

August 2004

[Copyright Expatica 2004]

Subject: Changing housing market; Living in Spain