Figures from the Spanish Ministry of Housing shows that the Costa Blanca, an area that has been hugely popular with British property investors, has suffered the most. Last year developers in Alicante province sold just 702 homes to non-resident European buyers. That is a decrease of 83% in two years.
One reason give by analysts is that the Costa Blanca is suffering the consequences of relying too heavily on British buyers who have deserted the market because of rising unemployment and the inability to get finance for buying a second home.
'Many English mortgaged their homes to pay for the second home they bought here, but now that is impossible, they can't get the mortgages,' said Ramón Jerez, President of the Business and Construction Federation.
The weak pound is considered another reason why UK property investors have stopped buying in Spain. Britons used to pay around £90,000 for a property costing €150,000 Euros. Now they have to pay around £136,000 for the same thing.
Jerez also thinks that newspaper headlines about property demolitions, planning corruption and real estate scandals could also be affecting sales. 'This has seriously damaged our reputation,' he said.
But his organisation also believes that Spanish developers have played a part in the crisis. Over supply has meant the property market being flooded with apartments and houses that no one wants to buy. He said that developers need to bring down their prices and also try to understand what property investors want and make an effort to entice UK buyers and others from Germany and Scandinavia back to the market.
Spanish real estate experts believe that the prices of some properties, especially in the re-sale market need to fall by up to 40% to attract buyers from other European countries. 'Buyers have disappeared from the market,' says a report from Red de Expertos Inmobiliarios network and price drops of 2 to 3 % that might have worked in the past will have no effect now. Vendors need to drop their asking prices by 30 to 40%, it says.
The recovery in Spain's housing market won't begin until next year and it could take up to four years for prices to recover, the group warns.
