Duquesa, Costa del Sol

Housing Crisis Drives Costa del Sol to Desperate Measures

October 16, 2008 08:00 AM
by Christopher Coats
An overabundance of homes in Spain’s beachside playground sends real estate agencies into crisis mode.

Two for the Price of One

Faced with rapidly deteriorating demand after decades of growth and construction, one of Europe’s most popular vacation and retirement destinations is showing signs of desperation, now offering buyers a deal usually reserved for corner stores.

Left with a surplus of properties after a decade of rapid building to keep pace with the demand of vacationers and second-home buyers from Northern Europe, especially Britain, one developer is offering a buy one, get one free deal on homes along the legendary stretch of coast.

Once home to movie stars and European aristocracy, the Costa del Sol, stretching from the regional capital of Malaga to the southernmost point of the country in Tarifa, has lately fallen on hard times thanks to overdevelopment, a faltering global economy and systematic corruption that has left entire towns bankrupt.

The region, so dependent on the housing market, was left floundering, driving hundreds of developers and real estate agencies out of business, and forcing the few that remain to extreme measures.

Salsa Immobiliaria, located in Malaga, has launched a special, offering a free golf resort apartment when purchasing a $1.1 million seaside home. While offering a free apartment may appear like a dramatic measure, Salsa said it would be preferential to lowering prices any more than they already have.

“The price of new housing will not be reduced further because it already has been on several occasions,” Guillermo Chicote told the Spanish newspaper El Pais. “People shouldn’t expect home prices to go down 30 or 40 percent, because I’d as soon give the houses away to the bank before doing that.”

Despite drastic efforts to unload properties across the region, Spain’s coastal real estate problems do not appear to extend to the country’s high-end homes.

“At the top end, prices perhaps doubled in the period up to 2004 or 2005, although since then there’s been no real change. At the bottom end things are quite different: a big over-supply, very few buyers now, prices are falling,” James Stewart of Savills Real Estate told the Financial Times.

Outside of high-end pockets along the coast, tourist-heavy towns have suffered due to a glut of construction and a scheme known as “off-plan,” where a buyer pledges to purchase a home before it has been built, making long-term financial stability all the more important.

The downturn on the Costa del Sol is a part of a large, continent-wide challenge, most visible in Ireland and Spain, where inflated home prices and decreasing demand for new construction have left economies reeling.

Background: A growing sense of urgency

With the housing and credit crisis spreading across the globe, the Costa del Sol is hardly the first region pushed to extremes when it comes to keeping the housing market moving.

Earlier this summer, realtors in Escondido, Calif., offered a two for the price of one scheme similar to the one now offered in Spain.

“We thought, ‘Why does it just have to be on Pop Tarts and restaurants? Why not buy one home, get one free,’” Dawn Berry of Michael Crews Development told 10 News in San Diego.

With more and more owners desperate to unload unaffordable homes, extreme and unique efforts have not been relegated to agencies.

In Red Feather Lakes, Colo., one homeowner offered the chance for buyers to win her house through an essay competition, while one Pennsylvania couple went so far as to promise the full return of their home’s purchase price upon their passing.

Further, the couple offered the chance to take on their Arizona home if buyers pledged to take care of them when they were older.

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