Spain tries to lure buyers back into housing market

The Spanish government has slashed sales tax on new property

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Spain has a major housing problem: there is too much of it - 687,000 empty houses, the leftovers from a construction craze that came to an abrupt halt.

The government is on a drive to lure buyers back to the market and breathe new life into what was once a major sector of the economy.

But a property roadshow - in the UK this week - has angered some British residents in Spain.

They are still fighting to resolve problems caused by rogue developers, or the loss of large deposits on new homes that should have been guaranteed.

The British have traditionally been the biggest foreign buyers here, but the economic crisis brought business to a standstill.

House sales across the country have slumped almost 50% since 2006; thousands of British estate agents who rushed to grab their slice of the action on the "Costas" have long since packed up and gone home.

But some who sat it out say they are starting to see the glimmer of a recovery.

'Buyers' market'

"We're having our best year since before the crash," said David Davies of Blue Flag Properties in Alicante, although the national statistics do not yet reflect that.

"A lot of builders have dropped their prices to the bare minimum now. It's a buyer's market."

The government recently added an extra incentive, cutting VAT on the purchase of new property by 4% until the end of the year.

And now there is the roadshow.

Bank-owned property for sale A bank tries to sell a repossessed building, offering a 100% mortgage.

The scale of Spain's problem is clear. Abandoned building sites line the coast, tattered developers' flags fluttering forlornly alongside.

In some places, streets were laid out complete with street lamps, ready for constructors who never came.

Elsewhere, signs plastered to empty new homes declare them the property of a bank, offering 100% mortgages to anyone who will take the repossessed buildings off their hands.

At the height of the property craze, when credit came easy, Spain was building just shy of 665,000 homes a year. Last year 63,090 were built.

"We have a large stock that needs to be sold," explained Beatriz Corredor, secretary of state for housing. She said the problem was that the property was not evenly distributed.

"In some places we have a lot of holiday homes, and in others there's a shortage of housing for Spanish families," Ms Corredor added.

"So if the sale of available housing is reactivated, construction companies can begin working again where they're needed."

Up to half of Spain's five million unemployed were working in construction, before the crash.

Illegal houses

But the government's promotional drive has infuriated some.

"I think the roadshow is a travesty," said Steve Flynn, who bought his large, rural property in Catral in 2004.

Two years later he discovered that the plot had been developed in violation of local planning laws.

Start Quote

Beatriz Corredor, Spanish secretary of state for housing

We insist that buying a house in Spain has always been safe.”

End Quote Beatriz Corredor Spanish secretary of state for housing

The house has been declared "illegal" along with about 1,300 other properties in the area, which were only spared demolition after a long fight.

"We've been trying to regularise these houses for five or six years, and we're no further forward," Steve Flynn complained.

"I don't know what the future holds. It's been pretty traumatic."

All over the development, blue plaques on yellow-painted walls display official street numbers allocated by the town hall.

Residents say they were hand-delivered by the local police. Yet on paper, the area does not exist.

Campaign groups talk of tens of thousands of families across Spain, not only British, in similar situations.

Many fell victim to an era of corruption and greed, when some local officials responsible for planning permits made small fortunes.

Most notoriously, the entire town council of Marbella was dissolved after a vast bribery network was uncovered.

There too, illegally built houses were slated for demolition.

"Billions must have been pouring into Spain in those days," Steve Flynn said. "It seems anyone who could pick up a trowel, was building houses."

Safeguards tightened

At the mention of British citizens with problems, Beatriz Corredor gave a wry smile.

Unfinished housing development in Alicante Alicante has unfinished housing

"We insist that buying a house in Spain has always been safe," the secretary of state said.

"Those who have had problems," she then conceded, "are on the path to a solution."

The safeguards for those buying homes here have certainly been tightened.

There is a special prosecutor for property fraud and an online register, available in English, to check for any known legal problems with a building before buying.

The British embassy now offers extensive online advice about potential pitfalls to would-be investors.

That is little comfort to families like the Flynns.

But the government insists all the firms it is supporting on the roadshow have been vetted, Many are the real-estate divisions of Spanish banks.

It argues that now is a prime time to invest.

After a tough few years on the Costa Blanca, developer Isidro Larios agreed.

His firm, Palacios Mar, has had to slash the price of flats at one complex by almost 50% to sell.

"There were a lot of unprofessional people in the boom years," he recalled.

"It created chaos, and people saw Spanish real estate agents as bandits instead of businessmen. The good thing about this crisis is that the unprofessional lot have gone."

"Those left are the good ones," the developer added.

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