MARBELLA CONFIDENTIAL

The property market has been struck by a double whammy of the global credit crunch and an oversupply of new homes for sale.

On the one hand, prices are falling for much the same reasons as they are in Britain: the drying-up of credit, distressed sellers failing to keep up their mortgage payments and falling consumer confidence. Barbara Wood, a director at The Property Finders, buying agents in Spain, says that property prices have fallen faster and more sharply in this slump than in the last Spanish housing crash, of 1990-94. “In the last recession most people had bought in cash,” she says. “This time we are seeing the most unbelievable discounts in about six months because many sellers have big debts and are staring repossession in the face.”

The other factor pushing down prices is a glut of developments along the Costas and in the city suburbs.

Can it get any worse?

Andrew Hawkins, head of the international department at Chesterton, believes that the Spanish market has farther to fall. “By the end of 2009 we might see some levelling off in prices and there may be some good news in 2010.” The property consultant Aguirre Newman reports that prices need to fall by at least another 20 per cent to return to affordable levels. As for the glut, property experts quoted in the Spanish press say that oversupply could take 5-15 years to clear.

Developers and property companies are going bust. Martinsa-Fadesa and King Sturge España have gone into administration. Others are mothballing their biggest projects while renegotiating their debts.