People who put down deposits for off-plan properties in Spain can now claim their money back with the legal team at MySpanishDeposit. But what happened, exactly, to the property market in Spain that meant so many lost their deposits?
In this blog post, we discuss these issues with our guest Barbara Wood. Barbara is a fluent Spanish speaker who has over 25 years’ experience in the Spanish property market. She has previously worked in the region for international property agents but has spent the past 17 years founding and building The Property Finders, a successful buyer’s agency that is focused exclusively on properties in Spain. Having authored many reports on the Spanish property market, she is an expert on these issues and has some interesting insights into what happened, and what people can do.
Q: What went wrong for so many Brits who had put down deposits?
Barbara Wood (BW): The conveyor belt for properties in Spain seized up. Sales ground to a halt virtually overnight after September 2008. Then the near collapse of the Spanish banking sector meant no financing was available for stressed developers and down they went, one by one, with the worst affected being developments just getting started on their first phases.
At the time, the timeline from paying a deposit to purchase an off-plan property to getting the keys was in the region of 18 – 24 months. In many developments, those who bought in the early phases were fine. However, there are lots of developments with a couple of buildings occupied, but the rest is an abandoned shell. All Spanish developments are built in stages over several years.
And the issue really was widespread.
At the peak of the building frenzy, Spain was building in the region of 800,000 homes per year – and it went on like this for several years. In other words, Spain was pumping in more homes than were being built in the UK, France and Germany combined at the same time.
This, in short, is why so many Brits who had put down deposits lost out.
Q: How big was the British participation in the Spanish property market before the crash?
BW: The British have long headed the league table of buyers from overseas of Spanish property. They continue to do so now.
To illustrate, British participation in the Spanish property market in the years before the crash was extensive. The most reliable statistics in Spain come from the Spanish Notaries and if we look at their figures for 2007 – the last full year before the global crash – the total number of foreign buyers was 57,674 of which 34% were British (19,881).
That’s a significant number when you consider that the next two most numerous EU markets were the French in second place with 1,801 purchases – less than 10% that of the British market, and the Germans in third place with 1,003 purchases.
Q. Which regions of Spain were particularly popular among Brits?
BW: Brits’ dominance in the Spanish property market was widespread, ranging from the less expensive areas such as Murcia and Alicante to the top of the market in prime locations such as Marbella.
However, when we look at the off-plan building boom between the late 1990s right up to the 2008 crash, the British participation was well above the 34% overall share quoted above, rising to over 50% in Murcia, the Canary Islands, and the Alicante and Valencia regions. The only locations where the British didn’t dominate were the Balearics and Cataluña.
Most of the lost deposits had been put down for homes in suburbs of the major cities and the Mediterranean coastal regions.
Q: What did the crash mean for the Spanish property market?
BW: When the crash happened, overseas and domestic markets for Spanish property performed differently. The overseas sector hit bottom in 2010 with 39,227 buyers, down 31.9% (of which 6,719 were British, down 66.2%).
Compared with the overseas market, the domestic market decline went on longer and by an even bigger percentage, not really hitting the floor until 2013 when it fell to a low of 235,991 transactions – down 67.9%.
The Spanish construction industry declined by about 95%. Even today, it is still 90% down on the pre-crash numbers.
Q: Can you give us an example of the typical case of a person who lost their deposit?
BW: Most likely, they would have had a British agent whom they met through an exhibition. Then they would have gone on an inspection flight. They would have been shown a limited number of projects, always the ones with the highest commissions (usually 10%) and pressured into a purchase. It’s also likely that they did not appoint an independent lawyer but instead were taken to one recommended by the agent or developer.
Q: British buyers still seem to love Spain for holiday home investment. Do you agree? How will Brexit impact this?
BW: The British are the largest group by nationality among overseas buyers – they always have been, and nothing is going to change.
One of the reasons so many Brits become property owners is that most overseas buyers start out as tourists and visit regularly over the years. The fact is that the British make up nearly one in four of Spain’s 83m+ foreign tourists. And in some regions (like Andalucía, the Canary Islands, the Costa Blanca) this rises to one in three.
Today, the buyer demographic has widened. It used to be that buyers were 60+ years old. Now, people buy from their 30s onwards, and rental yields can even mean that their holiday home pays for itself.
The British have been the largest group of overseas buyers in Spain since before either country was in the EU. This was also the situation when the UK was in, but Spain wasn’t, and continued to be with both countries in. Brexit won’t change anything. Since the 2016 EU referendum, the number of British buyers has stayed around 15,000 annually, which is about 15% of all overseas buyers. In my view, it is the poor exchange rate that has kept the British market steady rather than growing since 2016 (rather than worries about Brexit).
Q: What is your advice for affected those who lost their deposits?
BW: Take the opportunity to use a specialist legal team with experience in recovering deposits from failed developments.
If you lost your deposit on an off-plan property in Spain between 2005 and 2016, you can now get your money back.
MySpanishDeposit is helping all those who lost their deposits on their dream holiday homes in Spain to reclaim their deposits.
Register now and the legal team at MySpanishDeposit will pursue your deposit, plus interest, at a fixed yearly rate set by the Spanish Government, typically between 3–6% per annum.
Our lawyers have recovered over €200 million worth of lost deposits on behalf of thousands of people like you.