By Jennifer Bawden
September 12, 2008
Jennifer Bawden reporting from Marbella, Spain. In late August as I rushed along the boardwalk to the internet cafÃ© on the beach (the signal was out at the house, as usual), I watched hundreds of tourists and locals sunning on the beach, having a leisurely drink at a cafÃ© or slowly strolling to look at the sea side shops.
I thought of screaming “Run! Run! The tsunami will soon be upon you! Are you blind? Don’t you realize what’s coming? It’s time to get your affairs in order while you still can!”
I arrived in Spain in early June to get rid of my last bit of debt while I still could.
In the last 6 years I bought two properties: An apartment overlooking Palm Beach in Florida and, you guessed it, a summer villa in Marbella, Spain. Arguably two of the worst hit real estate markets in the world!
I knew the Southern Spain flood was about to turn into a tsunami so I priced my home well below market and prayed. Thanks to a harsh learning experience in Florida I undercut the market. We quickly found a willing buyer who disappeared back to England to work on the mortgage that he is sure he will get. Update: Woops! The market collapsed and banks stopped lending even to their best clients. So, our buyer reneged. Now it’s November and I’m stuck in purgatory. Thanks to the depreciation of the US peso since my purchase, my mortgage here has skyrocketed so all my efforts are dedicated to selling this gorgeous country club villa for half a million dollars less than what I put into it in the last three years. Even though I have it on at a bargain price, European buyers in this area are already now very sparse.
When I bought it off plan in 2002 I had a panoramic view of the sea. Now there are hundreds of apartments covering the hills. I would estimate 95% of them are empty and many small 3-bedroom apartments are priced for what I am offering my 5-bedroom villa with garden and pool.
Update: Apparently in the past month thousands of homeowners unable to sell their home over the summer are handing the keys to the banks. A familiar story with a predictable ending.
The point is, Spain has many more times the empty apartments than I saw on the Florida coast. Miami pales in comparison. To say that there is an abundant supply of unoccupied homes here would be a gross understatement.
This ticking European time bomb will surely affect the fate of the Euro. 10% of the Spanish economy was linked to the housing boom so it is no surprise that unemployment has jumped to 10%.
Experts are predicting prices could fall 35% in the next 3 years. After watching my Florida waterfront apartment fall from $450,000 to $240,000 in less the 18 months, I can tell you 35% will be clipped off prices here in Southern Spain by this time next year.
Things are about to go from bad to worse, fast.
When the Euro zone ‘wakes up’ to the gravity of the situation and starts slashing rates rather the raising them, it will be too late. 98% of Spanish loans are set off floating rates linked to the Euribor. The Euro’s massive retreat is just a matter of time.