The Spanish real estate bubble was one of the largest in history. According to reliable reports, home prices appreciated by 200 percent from 1995 to 2007. This astonishing growth was spurred mostly by easy access to home loans and an unprecedented number of new housing developments.
As you might expect, international investment during this period reached an all time high. Some of the most enthusiastic investors were from the UK. Because their own real estate prices were more stagnant in comparison, thousands of UK residents invested in Spanish properties.
But like all good things, the free ride had to come to an end. In the first year of the crash, Spanish properties plunged by nearly 75 percent and homeowners defaulted on Spanish mortgages at a record pace. As a result, most developers simply abandoned their projects, leaving them unfinished. The reason for this was simple: it would have cost more to complete the homes than they were worth on the open market.
Sales for developers dropped from a record of 1.3 billion euros to about 300 million euros. At this point, all new construction ground to a halt as real estate agents desperately tried to unload inventories.
But domestic buyers had other things to worry about. They were busy simply trying to stay afloat in the midst of the recession. And foreign investors were not about to invest their pounds or euros in a rapidly sinking ship. Two years later, the market is still in disarray with tens of thousands of unsold homes and unstable prices.