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Assetsure News 18th September 2007   The End of the Spanish Property Boom? Recently Barclays Buying Abroad reports that Spain and other traditional holiday home hotspots were 'flourishing' and still receiving an unprecedented amount of interest from British buyers. Yet during the summer of 2007 the prices of property across Spain have been fluctuating particularly in the southern coastal areas. There is a structural over supply of holiday homes in places like Malaga and other popular beach resort holiday hotspots. In April of 2007,  shares in poplar Spanish construction and Building companies were sold and share prices fell in companies like Astroc. The oversupply of the Spanish Property market has been primarily driven by foreign investors such as British Investors had been to either retire or to make a quick profit by buying off-plan property to either rent out as a holiday home or to resell on when the property has been actually built. Spain has got the largest oversupply of empty housing stock in Europe. During the last 10 years of the rate of development of a holiday homes in Spain has been phenomenal causing a year on year increase in prices to the point where investors are now looking at Eastern Europe as an alternative means to generate higher profits. The second reason why a property prices for holiday homes across Spain have fallen is because so many have been aggressively built by developers who did not apply for proper planning permission from the local authorities. There is now a national debate and inquiry regarding bribes to officials in local regions who allowed developers to build what is now deemed an illegal holiday development. The Spanish government is now demolishing an 'illegal development' causing financial loss and heartache to foreign investors who had put their trust in local property developers. To make matters worse the 'Spanish land grab' has destroyed investors confidence in buying new holiday homes in resorts in areas where the land is physically taken back by unscrupulous developers. This is primarily happening in the area of the Valencia. The law passed in 1994 has started the largest reclamation's of land since WW2 in order to build houses for lower paid Spanish nationals in the area. The law is designed to reclassify land as rural land for building purposes and states that the local government has the legal right to take over up to 70 per cent of this rural land and would have to be demolished in order to fulfil the legal requirements of this highly divisive law. Purchases of holiday homes in this area who have suffered from the implementation of the land grab have no redress the as there is no appeals process. The land grab law says that owners of private property should not be allowed to block development or community projects' that might benefit the Spanish public. The local councils are simply reclaiming the land for supposedly social and public benefit. In practice this means that corrupt officials such as mayors and other developers can reclaim land and then sell it on for profit at the expense of holiday homeowners. The impact on property prices for holiday homes in Valencia has means that most of them have become worthless and so there are no new purchases of property in the area. British expatriates hoping to retire in the area are now left in limbo not knowing whether or not their house would be reclaimed and unable to sell the holiday home even if they wanted to, while continuing to have to pay for the ongoing expenses of  a Spanish mortgage and Spanish holiday home insurance. The other side to the land grab coin is that during property boom of the late 1990s, property developers of new overseas property holiday homes paid little for the land in the first place and in some cases had bribed local officials to buy the land at a very cheap rate. These developments did not always contribute to the costs of the infrastructure required to support a massively increasing local population. In effect, poorer Spanish nationals saw the massive building program going on around them became unable to buy a property in their own local area. However, there are now over 100,000 British residence in Valencia who potentially could lose everything as a result of implementation of this law. It is no wonder the property prices have tumbled in areas where such uncertainty dictates price of the holiday home market. The legal battle regarding Spanish Land grab has led to debate in to the EU parliament as Spanish politicians wrestle with the dilemma between protecting foreign investment and its own economic stability. Even the human rights act has been ignored by some Spanish authorities. Sir Robert Atkins, Conservative coordinator of the European Parliament's Committee investigating the land grab, said: "The only way that change will occur is for the EU to prevent the flagrant breaches of human rights that are being perpetrated in Spain by enforcing European law with maximum determination and speed.". The European Union may impose enormous fines on the Spanish government to stop the practice and to ensure that the victims of the Spanish Land grab are paid compensation for their financial losses. The law 'theoretically' only applies to the Valencian Community, i.e. the provinces of Alicante, Valencia and Castellón. However, confidence and credibility are key if the perception that this practice may spread to other areas becomes a reality in the minds of potential overseas property investors.   The massive press coverage of this issue has generated a severely dented the overall credibility of the Spanish Property market and is the general oversupply continues across the country - it does seem that the Spanish property boom is over. back to top   Copyright Assetsure Limited 2007