Our Spanish Dream - Part 31: The banking crisis happens!
Looking at things from the ex-pat perspective anyone living on a UK pension or other sterling income suddenly found their income had dropped by roughly a third. A UK pension/income of £800.00 per month had gone from over 1200 euros in January 2007 down to just 800 euros two years later. Add to that spiralling electricity and gas prices, increased living costs and no interest on any capital savings and many ex-pats found themselves in real financial hardship. With mortgages almost impossible to come by and people in real fear of losing jobs and just ‘sitting tight’ wondering how to ride out the crisis, it was the perfect storm for the collapse of the housing market.
Everyone knew that the building bubble would bust at some point, too many new builds were springing up along the Spanish coast, the rate of build was unsustainable, but a decline in building and maybe a small correction in prices was all that was required, so they said. Well, with construction companies going into liquidation overnight and the value of land dropping like a stone, building ground to a complete halt.
Re-sale prices went into freefall and in some areas the value of property halved. Negative equity abounded and some people had no choice but to hand the keys of their house back to the bank. This was far from Spain’s finest hour.