The Pain In Spain - Rise of The Cost Of Living

Many years ago, Spain was a bargain hunters paradise. Cheap property, holidays, food and drink made it a favourite for property investors and holiday makers alike. Not so today with the exaggerated increase in mortgage interest rates and basic food stuffs.

While Spain continues to rank as one of the top european destinations, investors are looking elsewhere to make the huge capital gains in property that were to be found during the boom years. Many have also been hit by the rapid rise in interest rates over the last few years and none more so than the Spanish themselves with lower wages than many of their European counterparts.

Even three years ago the range of mortgages was relatively limited yet suddenly, we are witnessing the appearance of multi-currency mortgages, 50 year mortgages and long term interest-only mortgages. However the market must adapt and without the expansion of the mortgage market, it would be impossible for the majority of young spaniards to get a step onto the housing ladder.

Added to rising mortgage costs are increased fuel prices and the cost of basic food stuffs including bread, milk and vegetables. It is not just a case of tightening your belt, but adding an extra notch or two until you can hardly breathe.

The public as a whole can understand the simplistic economic model that there are cycles – years of boom followed by years of so-called bust which should really be called re-adjustment. However the doom and gloom merchants all jump on to the band wagon and predict major economic collapse because it makes for dramatic news.

The media and so-called experts are quick to blame homeowners and investors but not enough is said of the banks and the exorbitant costs associated with property ownership – particularly in Spain. This should improve however, with the news that there will be a reduction in costs particularly in notary and administrative fees.

It will undoubtedly be a lean two or three years ahead, but the same rules apply as when there is a boom economy – buy only what you can afford. In the long run, property is always a good investment.