Peter Sharkey: Diary of a Share Punter
PUBLISHED: 18:06 17 March 2011
I was in Gibraltar for two days on business last week and, important stuff completed, took the opportunity to grab some R&R a little further up the Spanish coast, a few miles west of Marbella. The weather was truly awful, which seemed to reflect the prevailing economic mood; it's supposed to be sunny at this time of the year, not rain continuously for a straight 36 hours.
But it was not only the relentless rain and howling wind which made me question my decision to hang around in southern Spain longer than I would have preferred. Inflation has quite clearly taken a firm grip along this strip of Mediterranean coast as those businesses still open desperately attempt to generate some money by increasing their prices to pip-squeezing levels.
Please do not tell me that this is a traditionally expensive area – the place was on its collective knees – as witnessed by the fact that virtually every yacht harboured at the chic little town of Puerto Banus a couple of miles away was up for sale.
However, what really stood out was the volume of unsold property.
The drive to Malaga airport en route to coming home, a journey of around 50 miles, was an eye-opener. Motorway hillsides were littered with shells of unfinished apartments and villas; most resembled something from a child’s partly-built Lego set. Every single one was up for sale. It struck me that these properties are effectively worthless. Indeed, as property prices have spiralled downwards so rapidly, many completed buildings currently have little value either.
Prospective buyers are reluctant to commit to a purchase price as the perception is, rightly or wrongly, that it could fall even further; the situation resembles one which was so evident across the USA three years ago and which has still not improved.
Back in Spain, would-be sellers are stuck with unsalable properties and, as the holiday lettings market is saturated, there’s little relief in the form of regular tourist euros.
I like Spain and its people: they’re genuinely warm, friendly folk and, if you make an effort to speak Spanish, they’ll do everything they can to help. But I fear for their medium-term economic prospects.
Spain’s economy contracted in the third quarter of 2010 as the severest austerity measures in three decades undermined even a hint of recovery. Incredibly, unemployment remains above 20%.
Last week, Spain’s credit rating was cut to Aa2 by Moody’s Investors Service, which said the cost of shoring up the banking industry will eclipse government estimates.
Spain will spend as much as 50 billion euros supporting its savings banks according to Moody’s, more than double the government’s 20 billion euro estimate. The situation is exceptionally depressing for investors who have acquired property across the Iberian peninsular; those who do not need to sell can afford to sit tight. Others trying to release cash face a depressingly difficult time.
•See Peter’s blog at www.mymoney24.co.uk