Costa Brava Real Estate

Here’s a frightening scenario for owners of coastal property in Spain: whether or not you legally bought or built it, it may not be your property after all.

VALENCIA, Spain: It’s been the dream of millions - a home by the sea in sunny Spain. People from all over Europe have invested hard-earned savings in coastal villas and apartments.

Now a government drive to clean up Spain’s concrete-filled coastline after decades of abuse may wash away many of those dreams like castles of sand.

Enforcing a much-neglected 1988 law, the Socialist government is getting tough about what constitutes coastal public domain - the strip of land stretching back from the water’s edge - and telling thousands of house and apartment owners their properties do not really belong to them.

“Out of the blue we’ve been told the house we have owned for more than 30 years is no longer ours,” said a retired British electronics engineer, Clifford Carter, 59, who lives with his Spanish wife in La Casbah, a beach-side complex in eastern Spain. “The house was built legally, but now they say we can only live here until we die but can’t sell the house or leave it to our children.”

The fears of losing coastal villas come as Spain’s real estate market is turning sour, a situation set off by the U.S. subprime mortgage and banking crisis, but with its own dynamics involving shady business practices.

In a separate but related scenario, pressure is mounting for the European Parliament to take action against Spain for demolishing homes owned by foreigners while claiming eminent domain.

Along the Spanish coast, a group protesting sudden enforcement of the coastal law formed in January says it already represents 20,00 people. It notes that up to half a million others - apartment and villa owners and restaurant and hotel proprietors - could be affected. Most are Spaniards, but many are foreigners.

“This is the single biggest assault on private property we have seen in the recent history of Spain,” said José Ortega, a spokesman for the group and lawyer for many of those affected.
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The government is finishing the process of drawing the line that designates what is state-owned and cannot contain private property along Spain’s 10,000 kilometers, or 6,200 miles, of coast.
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The economic impact on construction and tourism could be immense, Ortega argues.

This would be bad news for a real estate sector that has largely driven Spain’s economy for the past decade but it is cooling sharply.

The Costa del Sol Association of Builders and Promoters reported in February that overall sales of tourist property in southern Málaga province fell nearly 50 percent last year. It claimed the main problem was people being frightened by real-estate corruption scandals in which homes were built with licenses obtained through bribes.
- Source: In Spain, your casa is suddenly the state’s casa, AP, via the International Herald Tribune, Apr. 17, 2008

The article notes that mass tourism — and the resulting boom in construction — have turned changed the Spanish coast into a “continuous mass of concrete.”

Even town halls bypassed planning regulations, preferring a quick buck over a long-term future.

According to AP, Spain is the world’s number 2 tourism destination, and the most popular choice for northern Europeans seeking to own a second home.

Some real estate agents see a silver lining in the clouds. The government’s clean-up campaign will return much lost land to the nature tourists — and home buyers — came to Spain for in the first place.

Meanwhile, Kevin Brass notes that “Pressure is mounting for the European Parliament to take action against Spain for demolishing homes owned by foreigners.”

“They [property buyers] were assured that deeds to their property were legal as advised by local lawyers, developers and officials,” British Labour MEP Michael Cashman said at a press conference, after members of Parliament staged two days of discussions on the issues. “Now because of a combination of corruption and interpretation of new property laws, these people are facing ruin.”
- Source: Kevin Brass, British EP members call for action against Spain’s ‘land grab’ laws, Raising the Roof, International Herald Tribune properties blog, Apr. 8, 2008

Citing El Pais, Expatica.com’s Spanish division notes the ongoing troubles in Spain’s housing market:

The acute shrinkage of the residential construction industry in Spain, and the credit crisis, are the principal forces behind the intense deceleration of the Spanish economy and the corresponding rise in unemployment. Daily statistics and predictions from international institutions confirm that the housing market is going through a profound adjustment, and there now only remains a certain degree of controversy about the speed and intensity of this adjustment.

On Monday the European Commission reduced its forecasts for Spanish growth this year and in 2009 to 2.2 percent and 1.8 percent respectively, against the 2.3 percent announced by Pedro Solbes for both years - due precisely to the freefall of housing prices in recent months. This forecast is considerably more pessimistic than that of the Spanish Economy Ministry.

Joaquín Almunia, the European Economy Commissioner, calculates that activity in the Spanish real estate sector will diminish by as much as a third during the next three years, and that this process will raise the unemployment rate to 10.6 percent in 2009.
Almunia’s predictions are founded on reasonable arguments, and seem a logical consequence of the sharp shrinkage of an activity that, during the last eight years, has significantly contributed to growth and employment in Spain. But they express only one of the possible courses the deceleration may take.

The unforeseen rapidity with which the Spanish housing market is falling seems to indicate that it may well bottom out earlier than the most pessimistic forecasts say it will. And while this circumstance will not spare the Spanish economy a high cost in terms of employment, it does hold out some hope for a moderate recovery of growth by the middle of 2009.
- Source: Housing Prices in Freefall, Expatica, May 1, 2008

Kevin Brass travels the world reporting on tempting locations, unusual homes and hot markets.

He is a longtime contributor to the Properties section of the International Herald Tribune, The New York Times, Los Angeles Times, People, NWA World Traveler and a wide variety of other publications.

In Raising the Roof, the properties blog of the International Herald Tribune, Brass writes,

When you talk to experts in the Spanish property business, they tell a dramatically different story than the charts and valuation reports.

“The market has totally stopped,” said Frederic Mangeant, partner in Knight Frank’s Spain office, when asked about Madrid.

Around the country, agents, developers and industry analysts say there has been a dramatic pause in the market in recent weeks. Both buyers and sellers appear to be taking a deep breath, in anticipation of more bad news to come about dropping valuations and tightening credit.

“Everybody is waiting,” said Julia Serrano Rituerto, head of the residential office for Cushman & Wakefield in Madrid. “hey see prices are going down. It’s quite a normal reaction.”

Of course, the big question now is: How long will the pause last? Few believe anymore that it is a simple “dip” in the market. Property sales were down 25 percent in the first two months of 2008 compared to a year earlier, according to recent reports.
- Source: Kevin Brass, Experts say buyers in Spain “waiting” for more bad news, Raising the Roof, International Herald Tribune properties blog, May 7, 2008