By Jennifer Bawden
September 12, 2008
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Jennifer Bawden reporting from Marbella, Spain.
In late August as I rushed along the boardwalk to the internet café on the beach
(the signal was out at the house, as usual), I watched hundreds of tourists and
locals sunning on the beach, having a leisurely drink at a café or slowly
strolling to look at the sea side shops.
I thought of screaming "Run! Run! The tsunami will soon be upon you! Are you
blind? Don't you realize what's coming? It's time to get your affairs in order
while you still can!"
I arrived in Spain in early June to get rid of my last bit of debt while I still
could.
In the last 6 years I bought two properties: An apartment overlooking Palm Beach
in Florida and, you guessed it, a summer villa in Marbella, Spain. Arguably two
of the worst hit real estate markets in the world!
I knew the Southern Spain flood was about to turn into a tsunami so I priced my
home well below market and prayed. Thanks to a harsh learning experience in
Florida I undercut the market. We quickly found a willing buyer who disappeared
back to England to work on the mortgage that he is sure he will get. Update:
Woops! The market collapsed and banks stopped lending even to their best
clients. So, our buyer reneged. Now it's November and I'm stuck in purgatory.
Thanks to the depreciation of the US peso since my purchase, my mortgage here
has skyrocketed so all my efforts are dedicated to selling this gorgeous
country club villa for half a million dollars less than what I put into it in
the last three years. Even though I have it on at a bargain price, European
buyers in this area are already now very sparse.
When I bought it off plan in 2002 I had a panoramic view of the sea. Now there
are hundreds of apartments covering the hills. I would estimate 95% of them are
empty and many small 3-bedroom apartments are priced for what I am offering my
5-bedroom villa with garden and pool.
Update: Apparently in the past month thousands of homeowners unable to sell
their home over the summer are handing the keys to the banks. A familiar story
with a predictable ending.
The point is, Spain has many more times the empty apartments than I saw on the
Florida coast. Miami pales in comparison. To say that there is an abundant
supply of unoccupied homes here would be a gross understatement.
This ticking European time bomb will surely affect the fate of the Euro.
10% of the Spanish economy was linked to the housing boom so it is no surprise
that unemployment has jumped to 10%.
Experts are predicting prices could fall 35% in the next 3 years. After watching
my Florida waterfront apartment fall from $450,000 to $240,000 in less the 18
months, I can tell you 35% will be clipped off prices here in Southern Spain by
this time next year.
Things are about to go from bad to worse, fast.
When the Euro zone 'wakes up' to the gravity of the situation and starts
slashing rates rather the raising them, it will be too late. 98% of Spanish
loans are set off floating rates linked to the Euribor. The Euro's massive
retreat is just a matter of time.
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Jennifer now runs her own technology development and private equity consulting business, Bawden Capital. She is co-founder of Innovative American Technology, a Homeland Security sensor company and is on the Business Advisory Board at Neogenix Oncology, a cancer diagnosis and treatment company. She is also the editor of the Contrarian Consensus.
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