Over the past two years, more than 2,600 real estate and construction companies went out of business, according to credit insurer Credito y Caucion, pushing unemployment to 21.3%, the euro region's highest.
The country has a surplus of more than 1 million empty homes, both new and existing, according to RR de Acuna & Asociados, a Madrid-based research company. The Development Ministry said in today's report that there are fewer than 700,000 unsold homes in Spain. About 61% of those are in Coastal areas, the ministry said.
Building Restrictions
In 1988, the country increased restrictions on coastal development and applied the law retroactively to properties that were already built. Owners of those homes can apply to extend their stay in the property for as much as 60 years, though they can't sell it or pass it on to children. The concession can be rescinded at anytime by the authorities if deemed to be in the public interest.
Cliff Carter, a 62-year-old former engineer from northern England and his Spanish wife, Maria, a retired teacher, say investors should steer clear of Spanish property, after they lost the rights to a 200 square-meter home on the coast of Valencia that has been owned by their family for 40 years.
The Carters sold their home in the U.K. in 2003 to retire to Spain assuming they had equity in the Spanish house, which was built in 1970 and handed down by Maria's late mother in 1998. In 2008, they were informed that it had been awarded to the public domain after amended coastal law shifted the boundaries of where development was banned.
Rights Lost
"We've been awarded a concession to live here for 30 years and then they throw us out," Carter said in an interview. "I can't sell the property and my children can't inherit it."
Diana Wallis, vice president of the European Parliament, said that no member state should be allowed to apply laws affecting property rights retroactively or arbitrarily.
"I'd like to ask Mr. Blanco how he thinks that anyone can buy property in Spain and have peace of mind," Wallis said. "On the basis of what I have seen, it's a minefield and frankly I would say 'do not touch.'"