There's pain in Spain where around three million new and second-hand homes are on the market, writes JACK FAGAN

IF YOU think that things are pretty bleak in the Irish property market, then we suggest you familiarise yourself with the bedlam along many of the coastal areas of Spain. According to one reputable newspaper, El Pais, there are over one million new homes for sale – most of them on the coast – which will take years to clear.

And if that is not bad enough, the website Spanish Property Insight has estimated that there are a further two million unwanted holiday properties languishing on the resale market. Even with prices falling by the week there are few takers.

Like Ireland, the Spanish developers built too many homes over the past decade. At the peak, they were turning out half a million a year.

In 2006, their greed prompted them to start work on one million more. . . Not surprisingly, many of these may never be completed because of the scarcity of mortgages and the massive oversupply.

Dublin solicitor Tom McGrath, who specialises in overseas properties, says that thousands of Irish people are in trouble because they have fallen behind with mortgage repayments on their holiday homes in Spain. “A lot of them want to walk away from the property and hand back the keys but it’s not that simple any more. There’s no sense is adopting an ostrich approach to the problem – it doesn’t work. The borrower has to do a deal with the bank.”

Banks are apparently entitled to repossess homes on which the mortgages are not being paid and McGrath is aware of several cases where formal notice was served on the Spanish properties without the knowledge of the absent owners. By the time they discovered what was going on, the properties were already sold.

Most of the leading Spanish banks have their own websites to advertise the repossessed homes. This week the Spanish bank Caixa Catalunya was using the Procam website to offer discounts of up to 40 per cent on chalets and villas.

Last weekend another bank, Caja Murcia, had 243 apartments in the Murcia region alone listed for sale on its website and another 127 in Alicante. Typically, a two-bed apartment previously selling at €335,000 can now be bought for €210,000 or less.

No matter how poor some of the investment properties have turned out, owners can at least count themselves luckier than thousands of off-plan purchasers left in limbo by insolvent developers. In many instances developers took deposits and stage payments – but once the scheme ran into trouble, the investor was often left high and dry.

The Spanish authorities are finally tackling some of the corruption which led to many developments being built without proper planning permission or building licences.

Some of the schemes are now due to be demolished.

The shady dealing was particularly prevalent on the Costa del Sol where many Irish investors lost their deposits either because of the planning issues or because the developing companies went into liquidation.

Irish owners who may have lost their jobs and are hard pressed enough to keep up their mortgage repayments on their Irish home may be put to the pin of their collar to hold on to their Spanish holiday pad.

The absence of a secondary market has finally dawned on many and even by cutting the asking prices fairly drastically, there is no guarantee of a sale.

As solicitor Tom McGrath points out, there is no use in handing back the keys and doing a runner.

The Spanish banks are empowered under EU law to pursue defaulters through the Irish courts.

Any good news, you ask. Well, at least those with a Spanish holiday home didn’t buy in Bulgaria where the bubble has also burst and flats are being sold for 75 to 80 per cent below their original selling prices.

Now that is what I call a catastrophe.