ISEA Digest 03.08

ISEA Digest
(March 2008)

Negative Media Coverage of Property Investment in Spain

Over the last number of years Tom McGrath Solicitors have built up an expertise in People investing in property abroad and, in particular in Spain, We have had many satisfied clients who are now enjoying their holiday homes or who have made a handsome return on their investments.
Certainly things have slowed down and times have changed. It is a far cry from the day when an investor would buy a block of apartments and sell them on twelve months later at a 20% (or more) increase in value. Things were good for many years, perhaps too good.

When greed divides the market there is only one inevitable outcome, that is the slow down in sales and the drop in market value. This, compounded with the huge negative media coverage relating to property scandals in Spain, has had an enormous negative effect on the foreign investment in the Spanish property market. This is unfortunate, because we believe it is still a very worthwhile investment destination not to mention of course, an ideal place in which to buy a holiday home.

The negative media coverage has, in our view, has been mostly exaggerated. Last year I received a phone call from a newspaper journalist writing an article on corruption in Marbelia, keen to know if we had any clients with houses about to be demolished. He wanted to have a photograph taken of them beside a bulldozer! Fortunately, I was able to explain that things were not as bad as they seemed. Whilst there has been a lot of speculation in the media about the demolition of hundreds of thousands of houses in Marbeiia due to a lack of licences or incorrect construction, the government is taking steps to remedy the situation and very few of these houses will be demolished, it is a situation that should not have been according to the Ley de Costas of 1988, houses were not supposed to be buift on the protection area of 100 metres from the coast line, but while the law was enforced there were so many breaches that the authorities tended to do little about it. The growing concern liticians and the general public in Spain about the damage caused to the environment over the years has created a climate favourable to the firm enforcement of this law; hence the government's recent approach. Bearing in mind that a general election is to be held next month should also be taken into account when hearing of such drastic measures.

It is probable that there will be some isolated cases where properties which have been built in serious breech of regulations will be demolished. The other situation where properties have been built either in contravention of licences granted due to reckless disregard by development companies or, where licences have been obtained fraudulently, will undoubtedly give rise to litigation for claims against either the local authorities or, the development companies themselves.

One thing is for sure, the government is not going to destroy the highly profitable tourist industry of which property investment is an integral part and, which began in the late 50's when the Interior Minister, Senor Manuel Fraga, looked up at the clear blue sky and shining sun and realised the country's huge potential.