I am a British citizen and about to invest a considerable sum in the purchase of a villa in Spain.

I am selling my home in the UK to pay part of the price and will finance the remainder with a mortgage loan.

It is however possible that for work reasons I may have to sell the Spanish property in the near future and relocate to Poland.

I keep hearing rumours about the property bubble bursting and a possible drop in property prices or an increase in mortgage rates. Is there any truth in all of this?


It is almost impossible to predict with any certainty how the property market will fluctuate in the future and how interest rates may vary.

What we can do is pay close attention to objective facts which have occurred up to now, especially in the area where you intend to invest, and examine the personal circumstances of each individual investor.

During the past five years the off-plan property market has registered an increase in prices ranging between 15 and 20 per cent per annum.

It is hard to determine whether this extraordinary growth rate is fictitious (what many have termed the real estate bubble), or whether it relates to an actual evolution or revolution in the property market aimed at filling a gap which existed up to now. It would, nevertheless, seem fair to say that this annual growth percentage cannot be sustained indefinitely.

At the time of writing there are signs that a deceleration in the increase of property prices will occur which means that although house prices are likely to continue to go up, they will probably do so at a lower rate than in recent years.

However the property market on the Costa del Sol has certain peculiarities and idiosyncrasies all of its own.

The growth rate in this area is affected by a factor which is not shared by other parts of Spain, namely the influx of nationals from other EU countries who choose the Costa as their first or second home.

This is an aspect which will have a decisive influence on the increase or decrease in property prices on the Costa del Sol.

We should therefore be attentive to the economies of nations such as the UK, Germany or the Scandinavian countries before daring to make predictions about the situation on our own soil.

It does seem likely that mortgage rates will rise (they can hardly get any lower, let’s face it). The million dollar question is how much and when.

In any case I don’t think that it is worth trying to get inside the skin of the entrepreneur who concerns himself with macroeconomics and what repercussions the experts’ projections may have on his business.

The heart of the matter is how a possible future deceleration in prices and increase in mortgage rates could affect the man in the street.

My advice is to make a few calculations – you will probably find that the implications on your personal economy are not that awesome.