With the collapse of the stock market the shares of Grupo Martínez Construcciones dropped sixty five percent in a week. It was not alone, there were losses across the board as construction companies reeled from the successive blows delivered by financial markets.
The same companies had enjoyed a spectacular expansion of business and profits during the construction boom during the previous decade when Spain built more homes each year than the UK, France and Germany combined.
It was in the summer of 2007 the press first started to ask the question: ‘Is This a Bubble?’ In London, The Financial Times reported all the signs the bubble was about to burst were present, it was simply a question of when, and for most observers the moment was imminent. Spanish property had risen over seven percent in the first quarter of the year, compared to the same period in 2006. However, the prices of some homes on the Costas had begun to wane with rises much more moderate in comparison to those of recent years. In spite of that there was still that feel good mood, as owners, blissfully ignorant of the impending doom, still congratulating themselves on their astuteness in getting into the market when they did.
Property developers like Martínez had confidently forged ahead with overseas projects to compensate for a slow down in the home market as the Spanish government calmed concern by declaring the fall in price increases was nothing more than the end of a phenomenal period of real estate expansion that could not reasonably be expected to continue for ever. The government spokesman assured investors of a soft landing.
When the sudden and dramatic collapse of Martínez came it left thousands of British families fearing that their new homes, from the Canaries to the Costa Brava, would not be completed. The Spanish economy minister insisted the plight of the property group was an isolated occurrence, not a sign of systematic failure, which did not nothing to prevent a wave of panic rippling through the already nervous property and construction sector.
Panic broke out with British buyers desperately seeking information, especially those who had bought in new and incomplete developments such as the luxury golf resorts under construction on the Spanish coast, like the Guadalmina Golf and Country Club golf course outside of Marbella. In the UK the press screamed of Spanish corruption and the flaunting of planning laws, all of which had allowed vast stretches of the peninsula’s coastline to be methodically exploited during the property boom. Development programmes had been launched illegally, buyers duped by unprincipled estate agents, lawyers and promoters into purchasing properties without adequate planning permission.
Only six months earlier Fernando Martínez announced the group was in a stronger position than its Spanish competitors, pointing out its backers had shown notable faith in the future of the group by refinancing its debt with loans put together by a pool of Spanish and international banks to resolve the group’s liquidity problems.
Martínez Construcciones had promised a Garden of Eden to those willing to take out a mortgage and close their eyes to the risks. Their gated communities were set in landscaped grounds surrounded by hills or overlooking the coast, complete with championship standard golf courses designed by leading international firms and sponsored by champions. The developments included luxury shopping malls filled with the most fashionable boutiques, restaurants, bars, bowling alleys, supermarkets, sporting facilities and first class hotels. Some of the developments came with marinas designed for up to one thousand berths. Martínez conceived a whole series of Florida like resorts in Spain, Morocco and Portugal where happy seniors could buy dream retirement homes. Places where they could play golf under the warmth of the southern sun peacefully spending their well deserved retirement on a diet of booze and easy living.
The unlucky late comers saw their dreams transformed in nightmares; half built resorts, a tangle of legal and regulatory procedures, and even demolition orders for those unfortunate enough to have bought illegally built homes. The dream homes in which retirees had expected to spend the autumn of their lives peacefully enjoying the warm friendly Mediterranean sun were never to be; instead they were left facing an endless series of long and undoubtedly hopeless legal battles conducted in a language and a system they had not even begun to understand.