Cheap property – and for many from the UK, a strong currency against the euro – plus the climate and lifestyle led thousands of pensioners to head to coastal Spain for their retirement.
But particularly for the British who moved there, the fall in the value of the pound in the past three years has meant a big reduction in their income. Recession and a crash in property values, particularly in areas where there was a lot of speculative development, means that if they want to sell up and return to their home country, they can’t. It can take years to find a buyer in popular retirement destinations like Torrevieja, and in the current financial crisis owners may be unlikely to see much return on their original investment.
And as the Daily Mail reports, many who took out what seemed like cheap mortgages to finance their dreams are finding it particularly tough.
Expats who are behind on their repayments are seen by local banks as a higher risk than Spanish homeowners and therefore are key targets for repossession.
To avoid this threat, many homeowners who have fallen well behind with their monthly bills are simply handing back the keys before the banks can act.
Many of the 400,000 British people living in Spain have been left in financial ruin following the banking crisis and are desperate to get back to the UK. They have seen a crippling combination of:
- Plunging property prices, which have left many who bought at the top of the market facing negative equity.
- Pitiful UK savings rates that have slashed incomes for those in Spain by a third.
- An exchange rate which, despite recent climbs, is still 16 per cent lower than when many expats bought their homes.
Spain’s economic recovery is likely to be slow in coming, and property values are expected to remain depressed for several years. There will be pensioners who can ride out the bad times if they’re able to stay put, but the situation of others who over-stretched their resources or didn’t plan realistically for ex-pat life could get even tougher.
It’s a cautionary tale for those tempted to seek retirement in sunnier climes.
