KEY POINTS:
We're amazed at how difficult it's been to sell," says Maureen Renno of her four-bed apartment at Calahonda, near Marbella on the Costa del Sol.
"We thought it would go really quickly but it's been on the market for over two years."
Renno and her husband, John, both retired, sold their home in the south of England and moved to Spain four years ago, buying their property outright for ¬325,000 ($664,736).
But she found it hard to settle in Spain and began pining for home and her family. After two years, the couple decided to put their apartment on the market and move back to Britain.
Property prices in Spain had continued to climb in the time they had lived there, so they saw no reason why they would not make enough to move comfortably back to Britain.
So they were shocked to discover that, instead of appreciating in value, their apartment was worth, at best, only what they had paid for it two years earlier. The glut of new-builds in their area was stifling the sales of older properties, as investors were seeking to buy off-plan.
After several months without any interest, the Rennos dropped their price to ¬299,000 and moved back home. Now living in rented accommodation costing ¬1100 a month, the couple are running out of savings.
"We need the money from the Spanish property to be able to buy in the UK," explains Maureen Renno.
"Without it we're stuck."
The Rennos are not the only ex-pats who were lured to Spain by the prospect of a better quality of life and ever-rising property prices. For a decade the country has been a magnet for foreign buyers, drawing in those looking to make a fresh start as well as investors hoping to make a profit.
But in the past two years the dream has turned sour for some, with Spanish life proving trickier than many expected. And those who bought at the peak of the market from 2004 to 2006 are struggling to sell their homes.
Maxine Crooknorth, 38, from East Sussex, England, decided to move to the Costa del Sol with her 6-year-old son in 2005 in search of a fresh start.
She bought her two-bedroom, golf-course apartment for ¬247,000, paying half of the purchase price upfront.
She believed she would be able to comfortably afford the remaining mortgage and that the property would be a great investment. "It seemed like a good idea to buy then," she says.
"Everyone was saying how good Spain was, how cheap the lifestyle was and that property prices would go up. In hindsight, I bought at totally the wrong time."
Within a year of moving into her new home, Crooknorth found that, as a single mother, she was not able to find work as easily as she'd thought.
The cost of living was also higher than expected, and within months she was in financial difficulty.
She struggled on until her only option was to sell her home. Nine months ago she put the apartment on the market for ¬265,000 based on the valuation she was given, but has since had to drop the price to ¬220,000.
"I'm finding it quite a struggle," she says. "But I can't really drop the price any more because all my equity is tied up in it and it's a lot of money to lose. I can't rent it because the payments wouldn't cover the mortgage, but if I don't sell soon I'll be facing repossession."
Crooknorth thinks she may be able to weather the storm if she can find work through the summer, but buyers might still be difficult to come by.
"There is a lot of property for sale right now. Lots of people are desperate and there are some real bargains."
It might seem as though the drop in the Spanish market has come out of the blue but, local real estate agent Derek Blaney, of Links Property, says it should be no surprise.
He stopped selling off-plan homes three years ago when he realised the market was in a dangerous bubble and that many new homes flooding the market were illegally constructed.
"Four years ago buyers could put down 30 per cent on an off-plan property, sell it before completion and make 100 per cent,' he says.
"But not any more. Price rises have been unsustainable and more unethical practices were happening."
Blaney says many of those who would have traditionally bought on the Costas, such as the retired, have been deterred by the huge price jumps and overdevelopment of the region.
In addition, worries about buying an illegal property have all but dried up the supply of buyers.
He claims many people have taken on mortgages they can't afford and now need to sell: "We advised buyers that if they couldn't afford to run the mortgage after completion they shouldn't buy off-plan. Now a lot of them are in trouble and we're getting more distress sales through the door."
His experience is echoed by Inez Rix, owner of Direct Auctions in Marbella.
She has also seen an increase in the number of owners desperately trying to sell properties before the bank takes them. In most cases valuations are out of step with the market situation and sellers don't stand a hope of reaching their target price.
"There are too many homes for sale," she says. "The market can't support the high prices any longer."
Rix believes the negative press Spain has received recently has put buyers off, and this has been compounded by banks clamping down on lending and the strength of the euro.
"The only serious buyers are investors wanting cheap property."
With prices dropping by as much as 60 per cent in some areas and properties still not selling, Rix is seeing people who are facing repossession on a daily basis - a situation she claims is unprecedented in Spain.
"Spanish banks aren't getting their act together on repossessions. It can take up to two years to reclaim a property. Then they don't know what to do with it, so there's currently a real backlog of homes waiting to be sold."
Even handing in the keys won't necessarily set you free.
Spanish banks are supposed to sell the property for the best price they can get. But Rix says properties often sell for a quarter of what they are worth. This means owners may find themselves chased up for unsettled mortgage debt long after they think they are shot of it.
Buyers like Peter and Sally Shaw (not their real names) find themselves pushed to breaking point. "We thought this house would be our pension plan, but now we're waiting for it to be repossessed," says Sally Shaw. "We made a mistake, we thought we could cope with the mortgage but we couldn't and now we can't sell either."
The couple originally paid ¬355,000 for their three-bedroom townhouse near Fuengirola, about 25km from Malaga, in 2004.
Because both of them were in their late 50s, they took out a 13-year mortgage, confident they could cover the high monthly fees of ¬2,900 and expecting their property to appreciate.
But they failed to find regular work and their money ran out.
Spain's housing market seemed buoyant at the time, so they put their home up for sale, but two years on they've had no interest, despite dropping the price by ¬66,000.
It's been five months since the Shaws stopped paying their mortgage and, with nowhere else to go, they're waiting to be given notice to leave.
"Then we'll literally have nothing," says Sally. "We have no family who can help us and we won't qualify for Government aid either.
"I'm so ashamed ... I haven't even told friends we're in trouble."
The Shaws' only hope is to sell their property before the bank takes it, but with buyers thin on the ground time is running out. "I can't come to grips with what's happening," says Sally. "I never thought we'd end up like this. It's very frightening."
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