Nervous property investors forgo deposits in Spain rather than risk losing more money

Property investors are backing out of new developments in Spain and losing their deposits rather than lose more equity as the industry's price dive continues.

According to leading Spanish newspaper El Pais up to 15% of sales of new developments are being terminated. Some buyers are backing out because they can't get finance or have lost their jobs but increasingly they are simply scared of losing a lot of money.

Those who make this decision risk losing as much as €20,000. In one luxury development in Bilbao several investors have forgone deposits.

The trend is worrying for already hard hit developers. Most are honouring contracts and handing back deposits. Acciona, one of Spain's biggest developers, has returned a record number of deposits this year according to its half year results.

But others are also now refusing to hand back any of the deposit, as liquidity problems make them cling onto any cash they can get their hands on.

'Our clients have heard that prices are going to fall, or are scared of being made redundant, and we don't know how to convince them that buying now is a good investment,' one developer is quoted as saying.

'At least 15% of sales are falling through, and I think that is a conservative estimate,' another property expert explained.

Some developers are suffering more than others. Developers of holiday homes are suffering the most sales falling through, as people can live without holiday homes when the going gets tough. Developers selling cheap housing to first-time buyers and immigrants also have a problem.

Developers' associations are placing all the blame on the banks for restricting the flow of cheap, easy credit.