The view from Jan Stevens’ hilltop villa includes everything a sun-starved northern European might expect from a holiday home on Spain’s Costa del Sol.
The Mediterranean Sea dominates the vista, while a ribbon of whitewashed and ochre apartment blocks, hotels, shopping malls and entertainment areas stretches along the thin coastal strip between Marbella, the upscale resort town, and Malaga, the provincial capital.
The only element missing from the picture these days are the cranes that once symbolised Spain’s construction boom.
“One of the deciding factors for us was that there’s not much building going on in the area at the moment,” says Mr Stevens, 46, from Eindhoven in The Netherlands. “Our view is pretty well guaranteed.”
After decades of frenetic development and speculative investment, foreign demand on large parts of Spain’s Mediterranean coast has fallen away sharply in the past three years, according to property agents.
Rising interest rates and price convergence with property markets in other parts of Europe partly explain the decline, while a smattering of corruption scandals and development scams have also dulled the allure of owning Spanish property.
“You can no longer buy two or three holiday units off-plan and double your money on completion,” says Gaspar Lino, general manager of the property developer Peninsula.
Many developers have shut down, scaled back or moved to other Spanish, European or north African holiday destinations. Llanera, a mid-sized developer based in Valencia, collapsed in September after speculative land deals went sour.
House price inflation, which reached more than 20 per cent a year, has settled at less than 6 per cent in most parts of the country. The rate of building starts, which peaked at about 800,000 across Spain last year, is slowing and banks have become more selective about who they lend to.
The property slump, coupled with the rise of do-it-yourself online selling and letting, has squeezed out scores of small sales agents on the Costa del Sol.
A collapse in property-related shares on the Madrid stock exchange earlier this year added fuel to the decline, says Chris McCarthy from Viva Estates, one the region’s biggest property agents. He estimates that sales volumes have fallen about 60 per cent since the market’s peak in 2004. As market dynamics have changed, so too have the buyers.
His clients these days are more likely to be northern Europeans looking to move permanently to Spain, rather than investors releasing equity or remortgaging their first homes to turn a quick profit. Budget airlines and fast internet connections allow many to maintain businesses in their countries of origin, while retirees and younger professionals and trades people have sold up completely to start afresh after years as residential tourists.
The Spanish government estimates there are at least 760,000 Britons officially based in the country, mainly on the Mediterranean coast.
Among these are Laura Tristram and Rob Deacon, a English couple who paid €233,000 for an 180 square metre townhouse near Malaga. “There are a lot [of properties] for sale on the coast at the moment, and many appear to be sitting empty,” says Ms Tristram, who teaches at a local school. As both are living and working in Spain, securing a 30-year, variable rate mortgage with a local savings bank was relatively straightforward.
In spite of tighter credit conditions, buyers report an expanding range of financing options, as local banks look to take business from Spanish subsidiaries of northern European lenders. At least one company offers loans to old-age pensioners in return for the lien on their properties on death.
Bargain-hunters, meanwhile, are targeting the Costa Blanca, around Alicante, where chronic oversupply has led to panic selling by developers and investors. Prices, already lower than on the Costa del Sol, could fall by as much as 20 per cent over the next 12 months, according to some experts.
Prices of higher-end properties, however, are proving more resilient, say investors. Mr Stevens, for example, paid €380,000 for his 210 sq m villa. Although bought as a holiday home, work commitments have forced him to change plans. He hopes to let it on a long lease, at about €1,800 a month, before eventually selling. Similar properties on the Costa del Sol are currently fetching more than €600,000.
Away from the beach, residential golf course complexes remain popular and developments on Spain’s less spoiled south-west coast have begun to draw interest from foreign investors.
“Many buyers are now headed for places inland that the early investors didn’t know existed,” Mr Lino says. “People now want to buy into the Spanish lifestyle – you have to offer more than sea and sand these days.”
