Property Investor

Some Irish people who invested in holiday homes in the sun are suffering as a result of the collapse of the Spanish property market

BAD and all as things are in the Irish property market, our problems fall well short of those in Spain. Everyone knows that prices here are on the floor but they are still holding up better than in the main holiday areas of Spain. A quick check of some of the internet sites will show that you can buy one-bedroom apartments in Alicante for a mere €39,000, or two-bedroom homes on the Costa Brava from €67,000.

With an estimated 1.2 million Spanish holiday homes for sale and few buyers stepping up to the mark despite eye-watering falls in values, experts believe it will take many years to clear the newly-built stock.

The problem is being compounded by the fact that an ever-increasing number of second-hand holiday properties, many of them knee-deep in negative equity, are also coming back on the market as overseas owners realise that they can no longer afford to pay second mortgages.

Much like the Irish, the Spanish built too many homes in the boom years. At the peak, they were turning out half a million a year and just before the tide turned in 2006 they started work on another million. A great many of these were never completed as the credit crunch and oversupply pushed developers into deep water. Many British and Irish buyers lost deposits as banks had first claim on funds once firms went to the wall.

Most of the banks have websites offering repossessed properties for sale. Some of them will give 100 per cent loans to Spanish customers willing to take distressed properties off their hands. But with values still in freefall there is little prospect of the market bottoming out in the foreseeable future.

At least the Spanish estate agents no longer market the homes as “investments” given that it is virtually impossible to lease them and anyway they are unlikely to increase in value for many years. Irish buyers, once big players on the Costas, are now thin on the ground. During the boom years the Irish were big purchasers along the costas with stories of plumbers and taxi drivers buying two and three apartments at a time, often with the approval of their bank managers back home. Just watch as these same managers now pile on the pressure to persuade the multiple homeowners to offload their overvalued portfolios. Bank HQ is now calling the shots.

Three years after the Spanish property bubble burst we are still hearing hard luck stories involving Irish purchasers and, worse still, stories about unscrupulous selling agents and developers. Dublin solicitor Tom McGrath has been advising an Irish couple in their 80s who were “duped” into buying a retirement home at a Spanish complex which was to have included extensive medical, pharmaceutical and recreational facilities. He said that three years after signing the contract, when they were due to complete the purchase, the couple visited the property in Spain and discovered that it had none of the facilities promised. “Not only that, it was surrounded by desert, miles from anywhere”.

McGrath says a great many Irish purchasers are in trouble after falling behind on their mortgage repayments. He cites a recent case where a Dublin-based owner sought legal advice after failing to make a number of mortgage repayments. “When he turned up at his Spanish property, he was surprised and outraged to find that the bank had repossessed it and another family was living there. He did not understand that the bank is only obliged to issue demand and notices of legal proceedings at the actual property rather than at his Irish address.”

McGrath, of solicitors McGrath & O’Donnell Associates (info@legalservices.ie), says it has taken a deliberate decision to continue to concentrate on Irish legal services although they are maintaining an overseas department. While many Irish clients believe it might not be worthwhile pursuing an action to recover payments from a developer, each case should be looked at on its merits.

However, he sometimes advises clients that it would be a mistake to throw good money after bad.