EU Property Solutions- Experts in all Spanish property issues

Developers secured cheap land which they then obtained high-density planning for. This was all financed by the Banks. Then the promoters set about feeding the growing hunger for holiday home purchases, and the properties were sold for crazy prices.

Then in came the Banks again, stage left, returning to the fray and offering the unknowing purchasers ’ cheap mortgages with high Loan to Value Mortgages (LTV). All you saw as buyers was your ultimate dream being sold to you at very attractive rates and guarantees – and not what was really going on behind the scenes. If we dig a little deeper, developers didn't purchase prime plots, but low-value land, e.g. desert land near Murcia and Almeria.

They built here using shoddy and cheap building practices, saving them money. These flats and houses were then mis-sold to you – the unwitting buyer - for a high price, without any knowledge of what you were actually buying into. This mis-selling of cheap property resulted in high margins for the developer and these lucrative spoils were then spread between the main protagonists of the process – the developers, promoters, and Banks.

It was a well-oiled machine greased by massive commissions and bonuses from the attractive margins gained. The system survived because of the unscrupulous standards of all those involved, as well as the solicitors and notaries who also propped up this profitable business model.

Rotten to the core, the system fed people’s greed for money and profit. Everyone in the chain was part of the conspiracy – apart from you who unwittingly handed over your hard-earned cash which kept the wheels turning. The extent of this corrupt system ran deep, for example, even the Mayor of Marbella received over twenty years prison sentence for facilitating dodgy planning permissions!

Every level was in cahoots to sustain their lucrative financial rewards, which they all believed would go on forever. A nice little earner that would continue to boost prices and keep reaping huge profits. With no plan B in place, nothing was supporting it when things did eventually go wrong. Because the 2008 financial crisis hit at full speed, almost overnight, this property disaster's aftermath is still being unraveled.

Even today, hundreds of thousands of people are still trapped in negative equity property hell or left out of pocket from holiday homes that were never built or finished. 

For most of us, when we reminisce about 2005 – 2008, it’s mainly positive. A prosperous time when the economy was booming, and we had a bit of spare change in our pockets. A time when thousands of Brits and Irish, could finally realise your dream and splash out on your very own slice of paradise. Purchasing a ‘luxury ’ holiday home in places like Spain or Cyprus was suddenly an affordable opportunity.

This is in no way indicative of the state of mind of any of you who purchased your dream property in the EU, but this buying frenzy was encouraged by duplicitous bankers, promoters, and developers. Rubbing their hands with glee, it was a cash cow that they believed could be milked forever. During this period, the appetite for the holiday home market grew significantly - quickly becoming flooded and causing demand to soar to even higher heights.

And to add wind to its wings, funds were easy to access both at home and abroad; non-status mortgages were two a penny, and credit checks didn't even factor into the equation. With little to no barriers stopping the purchase of too 'good to be true places' in the sun and non-existent due diligence from the professionals, it was only a matter of time before the foundations of this property boom literally crumbled underneath us all.

It was not just the developers and Banks to blame, but also the valuers, notaries, solicitors, and dodgy promoters.

Together they invented attractive, but totally unfounded, property valuations before the unscrupulous sellers sold at crazy prices. Every aspect of the process and each stakeholder involved, coupled with lax financial regulations, was responsible for the self-perpetuating nightmare that buyers unwittingly bought into.

Much like the film ‘The Long Short’, whilst part-fictional, showed that everybody and anybody could get rich during these times whatever the situation. And it did not matter that the money earned by the developers, bankers, and promoters was at the detriment of the unsuspecting property buyers, like yourselves.

So, it’s no wonder that in the autumn of 2008, when the world stopped turning and the financial crisis hit like a blunt instrument, these properties built on financial sand in the years before, suddenly sank quickly into negative equity, leaving people stuck with unwanted debt.

It was a crazy world, where we witnessed well-established Banks like Lehman Brothers, which had been around since 1850, collapse. Others like Allied Irish Banks (AIB) and the Royal Bank of Scotland (RBS) went under state control and materially are still there.

Countries including Cyprus and Spain were savagely hit as the whole banking industry was shored up by their State Banks. The collapse of the financial sector, and many of its long-established institutions, started a domino effect, leaving those at the end of the chain the main losers.

Those of you who had dared to live the holiday home dream had become the unwitting victims. Your once refreshing holiday cocktail left a bitter lingering aftertaste that you are still paying for to this day!

It is entirely understandable why buyers were dazzled by the lure of relatively small monthly repayments, for what was then deemed to be an extended period, against such attractive yields.

But, when it comes to the repayment of interest-only mortgages, many people have approached their lenders for more time. In some cases, the lender may have changed to a new entity, leaving borrowers left to deal with a different bank than the one that sold them the mortgage in the first place. Such requests have usually been refused as the Banks stick rigorously to the mortgage contract, which clearly states the date change from interest-only to repayment.

The 10–15-year period of interest-only mortgages usually take purchasers into their early retirement: a time when changes in income can be devastating. For example, a gentleman, now 78 years old, recently advised us that his mortgage would rise from €345 per month to an unsustainable €2,894 per month.

These mis-sold mortgages, and the promises around them, have unfortunately left victims in a financial disaster.