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Opinion

Spanish property: Falling off a cliff

Euromoney never stops working. So even when one of our correspondents was on holiday in Spain during April, he was deeply disturbed by direct evidence of the property crisis engulfing the country.

Gaucín is a beautiful white-washed pueblo in the Ronda Serrania. It overlooks, but is some way distant from, the blight of the Costa del Sol. A number of corporate titans, rumoured to include budding oil titan Tony Hayward and a scion of the Sainsbury family, have properties in its vicinity.

So we could not help noticing the change in price of a new-build apartment block since our last visit a couple of years earlier. The two-bedroom flats, positioned at the top of the steep hill that leads into the town, have fantastic views down to Gibraltar, and the north Moroccan coast beyond can be seen clearly on a bright day.

In 2010, the properties were being marketed for nearly €400,000. Now, there is no attempt to sell them. Instead, you can rent them for the knockdown price of €399 per month.

A typical property owner, which in this case could now well be a Spanish bank, would expect a return of around 5% on a buy-to-let property. This implies a value to each apartment of around €100,000 – or 25% of the original value.

As far as Euromoney is aware, no Spanish bank has marked down the value of its distressed property assets to below 50%. So the evidence, based at least on this anecdote, suggests there is a lot more pain to come in Spain.

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