Sun, sea and debt

April 26, 2009

After pooling everything to buy a place in the sun, thousands of Brits are drowning in debt and having to kiss their dream lifestyle goodbye. Photographs: Clemente Bernad

A wedding album thick with cards offering congratulations and photos of a smiling couple lies abandoned on the kitchen counter. Boxes full of toys, clothes and other personal belongings stand stacked in corners. One box full of family snapshots shows two young children with their parents in a swimming pool, on the beach, at a restaurant — in all the pictures the sun is blazing and the family looks happy.

This, in the apartment they fled in the small village of Benijofar on the Costa Blanca, is all that remains of the dream of one British expatriate family who moved to southern Spain two years ago in search of a better life.

“They just disappeared overnight, packed a couple of suitcases and went, leaving no forwarding address,” says the British employee of a Spanish bank whose job it is to prepare repossessed properties in the area for auction.

“There are thousands of others like them. Often they don’t tell anyone they’re going, because they’re leaving behind debts that they can’t pay, even though they might have substantial equity in the property they’re abandoning.”

In the case of the family whose apartment he shows me, this amounted to nearly £50,000 on a property bought for £140,000. But since the collapse of the Spanish property market the family would have stood little chance of reselling. Spain has a massive glut of unsold properties — around 1m, of which 500,000 are newly built.

“Many people, particularly young families in recent years, sold up in the UK and put everything they had into their ‘place in the sun’, only to find everything go badly wrong as the economy collapsed and work dried up,” says the bank worker, requesting anonymity for fear of repercussions from his employers. Spain currently holds the European record for unemployment at more than 15%.

“Some feel badly treated. The banks here can get very heavy-handed as soon as people fall into arrears on their mortgages. Men in suits turn up at the door making demands, and people don’t know what to do.”

“Many Brits are running scared. Many are angry,” he says, describing the damage some have wrought on their properties before leaving. One man backed a cement lorry onto the rear patio of his apartment and had the entire ground floor filled with cement.

“The mood here has turned ugly,” he adds, estimating that around 10% of all properties bought by the 40,000-50,000 British who live in the Valencia region of southeast Spain alone are going through various stages of repossession.

Multiply this across Spain, where more than a million British passport holders now live either full time or for part of the year, and a sorry exodus back to the UK is unfolding.

While Spain is unique because of the sheer number of Britons who have moved there over the past 20 years — only Australia has more, with approximately 1.3m — and because of their tendency to create enclaves that could easily pass for small-town England, it is not the only country where expats are now hard-pressed.

Those living throughout the eurozone and relying on fixed incomes from savings or pensions in the UK have found the value of their incomes drop by around a third as the pound has plummeted in value against the euro, from €1.5 in January 2007 to near-parity. (At its peak in 2000, £1 was worth €1.75.) On sun terraces and verandas across Europe, in the shire outposts of “Dordogneshire” in southwest France and “Chiantishire” in Tuscany, conversation revolves around little else.

Many who moved to these more affluent areas in search of sunshine and a better quality of life may talk of cutting back on meals out, or reducing the quality of the wine they drink at home, but they are not facing economic disaster.

Many of those who moved to Spain, however, are pensioners or have taken early retirement and are relying on diminishing fixed incomes paid in pounds in the UK. For them — and for young people who went abroad with their families in search of work — times are increasingly tough.

In Dubai, too, the dream is over. Those who bought into the promise of quick fortunes to be made in businesses such as property speculation in Dubai — where Sharia law metes out harsh sentences for defaulting on debt — risk jail merely for bouncing a cheque. The prospect of such draconian penalties accounts for the growing number of luxury cars being found abandoned at the country’s international airport — 3,000 in recent months. Most are found by airport police with keys left in the ignition and some with used-to-the limit credit cards in the glove box. A few of them display notes of apology from the owners that gather dust on the windscreen.

Those who face financial hardship in Britain are at least on familiar ground and are able to fall back, in extreme circumstances, on support from the state. They are also more likely to have friends and family at hand. But those who have moved abroad enjoy few such benefits: when hard times hit, many find themselves struggling to understand the legal, health, social-security and other backup systems of the countries to which they have moved.

Rational observers might say they should have done their homework more thoroughly before they left the UK and now deserve little sympathy. But it is difficult to accept this view when you meet those affected, particularly those who have worked hard for much of their lives and made plans for a new life at a time when few had any idea that the global economy was facing meltdown. Even the government, with all the problems it faces at home, is turning its attention to the plight of expats, particularly those in Spain and Portugal, where many young families and pensioners are facing real hardship.

In recent months, the British embassy in Madrid has teamed up with the Department of Work and Pensions (DWP) to create a programme advising expats on the help they might be entitled to. Co-ordinated through local British consulates along the length of Spain’s southern and eastern coastline from Tarragona on the Costa Dorada to Benalmadena on the Costa del Sol, a series of “road shows” have been held to answer questions from worried expats on how best to weather the economic downturn. The programme could soon be extended to Portugal.

There was little cheer, however, for those who turned up at one of these road shows held in Torrevieja on the Costa Blanca at the end of February, attended by the DWP’s most senior civil servant, Sir Leigh Lewis. Far from lifting the mood of those gathered in a large hall in the town centre, Sir Leigh struck a sombre note: “Much as I would love to wave a magic wand and tell you everything is going to be all right and we will pay your pensions and benefits in a standard euro rate in future, the truth is we are not.

“The fall of the pound against the euro must be extremely tough for those of you receiving pensions and other benefits who have seen their value fall. But the fluctuating exchange rate is something we all have to live with,” the mandarin said bluntly. “Over the years there have been good times and bad. It’s a case of swings and roundabouts.”

“The big message to anyone still thinking of moving abroad is: think very carefully before you go and don’t take anything for granted,” says Gillian Merron, minister for consular affairs, who has recently returned from a visit to southern Spain. “Life happens. Things go wrong, and they go wrong in Alicante just as they do if you stay at home.”

Take a turning off many of the main roads lined with swaying palms that run through the Vega Baja del Segura area of Valencia, where Torrevieja is located, and you feel like you are straying into a slice of 1950s Middle England. This southern part of the region of Valencia has the highest concentration of British residents anywhere outside the UK — in some communities they make up over 75% of the population. Ask some of the British who moved here why they left the UK and Britain’s “open-door immigration policy” quickly crops up in conversation; few seem to see any irony in having themselves become immigrants who make little effort to integrate with the local Spanish community.

The older expats, who moved here for a more comfortable retirement, are keen to put a brave face on the financial predicament they are in now that their pensions have fallen in value by a third. Volunteers at the Torrevieja branch of

Age Concern, for instance, have been horrified by reports in the British press of their efforts to provide a warm lunch for struggling pensioners run under headlines such as “Costa del Soup Kitchen” and “Helldorado”.

“We were simply serving a winter warmer soup to people who came into our centre when temperatures dropped in January, the coldest winter here for nearly 40 years,” explains Judith Ferris, the local Age Concern president. When pressed, however, she mentions one elderly British woman standing shivering outside the doors of the centre who has not been able to afford heating in her apartment for more than a month. The woman refused to be interviewed.

The truth is that this older generation are proud and reluctant to discuss their finances; they feel uncomfortable at the media spotlight turned on their straitened circumstances. Many are also more accustomed to hard times.

“My wife keeps a careful eye on the housekeeping, so we’ll muddle through,” said one 80-year-old retired postal worker from Truro sitting on the terrace of Torrevieja’s Casa Ventura bowls club.

The club’s vice-captain, Phil Mornachan, a 57-year-old private investigator from Stockport, was less optimistic: “Unless you’re well and truly loaded, the expat dream here is dead. I’m thinking of going home.”

His despondency is more typical of those who moved here with families in recent years, particularly those who sought work on the back of the property boom. Down the coast from Torrevieja is a vast complex of small villas and apartments known as Orihuela Costa, where of the 28,000 registered residents, around 23,000 are British, many of them young couples with children.

“This used to be a buzzing community, full of life, but now it’s turning into a ghost town,” says Paul Moran, owner of the Emerald Isle Leisure Centre, where young families gather on a Friday night. He cites the dozens of small bars and restaurants in the area that have closed in recent months as growing numbers return to the UK.

Of those families attempting to stay, many are finding they can only survive if the husband commutes out of the country to work. “We had to struggle to make a new life here. But we wanted a better quality of life for our boys,” says Mark Strudley, who moved to the area from west Wales with his wife and three young sons four years ago.

Like many new arrivals, Mark worked selling property for several years, but when the property bubble began to burst two years ago (prices have since plummeted by as much as 30-40%), he was forced to look for work much further afield. He has since found a job as an offshore oil worker on a rig in the North Sea and spends two weeks out of every four away from his family.

“We’re determined to stay here. We wouldn’t say we’d never move back, but we don’t want to,” he says, as his young sons play nearby.

This view is shared by another young family relaxing close by at the Emerald Isle. Neil and Denise Couzens originally wanted to start their own business in Spain so that their nine-year-old son and six-year-old daughter could enjoy a life “away from knife crime, gangs and bullying”. But Neil now finds himself commuting back and forth to Norwich to continue running a pub and sandwich bar he owns there so that his wife and children can continue to live in Spain. “It’s no different from working away from home in the army,” he says with a shrug.

Those with little stamina for long-distance commutes have no choice but to return. Derek Beetham, 55, also once sold property in the area, but was laid off in 2007 when the estate agency he was working for closed down — as have an estimated half of Spain’s 80,000 estate agencies in the past 18 months. “If I could afford to stay I would,” he says, looking out over the pool of the four-bedroom villa he bought with his wife eight years ago and has now put up for sale. “We bought this long enough ago that we should still make a profit. But who knows what we’ll be able to afford back in the UK.”

Mark and Julia Edwards are a younger couple who have also decided to make the move back this summer. They have run a small teashop in San Miguel, Orihuela Costa, for several years. “Our business has gone well and we have been happy in Spain. But this feels like the right time to return, mainly for our son’s education,” says 45-year-old Mark, from Bedfordshire. Their son, Jack, is 15.

“We have had a good seven years here. But things are changing fast. I hope what is happening now will make people stop and think about some of the madness that has gone on here,” he adds. “I hope it will put an end to the culture of greed, both that of the Spanish who have massively overdeveloped this area and that of many Brits who simply came out here looking to make a fast buck.”

In expat enclaves such as the Dordogne, where the property market has not collapsed so decisively, the effects of the recession have been less dramatic. “We don’t have hordes of Brits sitting around with their suitcases packed. They would have to sell a house in a market where it’s difficult to get a good price and they would be returning to a country where the credit crunch is hitting even harder than it is here,” says Alexandra Thevenet, of the Dordogne’s Franco-British chamber of commerce and industry.

Compared to Spain, the fall in property prices in France has been more gradual.

The French National Estate Agents Federation (Fnaim) estimates that prices dropped by 5% in 2008, though since last autumn the decline has become steeper, and Fnaim anticipates a drop of 10% this year.

The more frugal attitude to credit in France — where banks typically insist that credit-card bills be paid in full every month and few mortgages exceed 75% of the value of the property — means it is harder to sink into the sort of financial quagmire that has prompted Brits to flee from Spain because of substantial negative equity on their homes and bills they cannot pay.

Nevertheless, of the 200,000 British passport holders permanently resident in France, there are those who are bidding au revoir to the Gallic dream. Among them are Brits who traded in suburban semis for remote ruins that they turned into gîtes, with romantic visions of tourists pouring in. The financial crisis has meant that fewer tourists are travelling abroad — particularly to the eurozone, where the pound is so devalued — and the rising cost of living has made such ventures less viable.

Even those with more ambitious plans, such as the former City lawyers Patrick and Collette Bergot — whose renovation of a 16th-century chateau in the Limousin region of south-central France featured in the Channel 4 series No Going Back: Chaos at the Castle — say they have had to put plans to extend their family-run hotel on hold until they are more certain of the number of guests coming in future. “We can’t help but worry with the way things are going.There are definitely fewer people looking for holidays this year than last,” says Patrick.

“While we are fairly confident of bookings over the summer, the number of people booking weekends as a treat is definitely down.

“We would almost certainly not have been able to make the move out here in the current economic climate — we did it on the strength of the value of our property at home.”

In the 13th-century market town of Eymet in the Dordogne, meanwhile, where around a third of the population of 2,500 is British, one local removal firm reports a “flurry” of Brits moving back to the UK in recent months. The numbers are still small: half a dozen or so couples and families left the area in the weeks around Christmas. “Before that, we were dealing with an almost exclusively one-way traffic of people coming out,” says Alan Chorley of the locally based AC Light Haulage. “People are still coming, though in fewer numbers than before.”

Tony Martin, who runs French Liaison, a help centre in Eymet for British people, confirms that a steady number of expats are still arriving. “They are tending to rent rather than buy now, as they can’t sell their homes in the UK, and they are testing the waters here more carefully before they make a permanent move.”

The same trend is confirmed in countries further north, such as Belgium, where large numbers of British expats work on short-term contracts for international companies or organisations such as the European Commission.

“The sword of Damocles is hanging over some people I know as they await the verdict of contract renewal,” says Paul Morris, editor of Expatica Belgium and France, an internet forum for English-speaking expatriates.

In France, as in Spain, it is British pensioners and those who have taken early retirement and are relying on fixed incomes from UK-based funds and savings, who are hardest hit by the recession. Not only are they suffering the effect of the falling value of the pound, but changes to French law are forcing non-working expats who arrived in the country after November 2007 but are not yet of retirement age to seek private medical cover. Such cover can run as high as €2,500-3,000 per person a year — a substantial sum for a couple.

One financial-consulting firm based in Bergerac in the Dordogne reports a significant rise in the number of British expats seeking help with equity-release schemes, previously little heard of in France.

“I’ve had nearly 100 inquiries since the start of the year from British people who are struggling now to pay food bills and other expenses like medical insurance,” says Céline Monier, of Make It Easy Consulting. “Arranging these schemes now makes up 50% of my work. Last year it was less than 20%.”

Yet in exclusive enclaves such as the Luberon region of Provence, made famous by Peter Mayle’s original “flit-lit” bestseller, A Year in Provence, the credit crunch does not appear to be biting. “I’m sure there are people who are really hurting,” says one British writer living in the medieval village of Ménerbes, where Mayle set the book. “But I can’t get a table for lunch tomorrow at our favourite local restaurant because it’s overbooked, and I still can’t get a plumber to fix our radiators in anything less than six weeks, because they are all occupé.”

Likewise, in Tuscany, dubbed “Chiantishire” because of the generations of well-heeled Brits who have sought the good life among its rolling hills and vineyards, there is little evidence of expat suffering. “Like everywhere, people are feeling the pinch,” says Peter Shaw, editor of Italy magazine, who has a home near the walled city of Lucca. “But I’m not seeing any signs of a mass exodus. Those who can afford to live in Tuscany can afford to live in Tuscany.”

Compared with Spain and France, the number of British citizens registered as permanent residents in Italy is relatively small — around 19,000 — though there are an estimated 50,000 who own homes in the country and live there for part of the year. “Brits who moved to live here with a view to working or setting up businesses are in a rather different situation from those who went to countries where English is more widely spoken,” Shaw stresses. “In Italy you pretty much have to learn the language, and you also have to battle with so much more red tape than in other countries, so most will have done a lot more homework before moving here in the first place.”

Expatriates working in Italy are also less likely to be affected by the credit crunch than those elsewhere, argues Bill Thomson, head of the Italian department at the international estate agents Knight Frank and a Tuscany resident for more than 20 years. “There’s much less of a debt culture here, mainly because Italian banks are so strict in their criteria for lending money. So people live more according to their means.”

Those who are selling up and leaving Italy are more likely to be driven by the opportunity to capitalise on the increased value of their property by converting any profit from its sale in euros into sterling, argues one estate agent in the more recently popular central area of Le Marche.

“The market has changed,” says Gildo Ercoli, of A & G Immobiliare in the medieval hill town of Amandola. “There are more English selling and fewer buying, though their place is being taken by the Dutch, for instance, who are not affected by the problems of the falling pound.”

This underlines a point also made by Tony Martin in Eymet in the Dordogne: that many who are now moving back to the UK from Europe never intended to “stick it out” anyway. “Those who were never completely committed to living abroad are using the economic downturn as an excuse to return home,” says Martin.

It is a view echoed by the novelist and screenwriter Frederic Raphael, who divides his time between the Dordogne and London.

“I certainly don’t want to imply that it serves anyone right, because it is very easy to jeer at others’ misfortunes. A lot of people went abroad on fixed incomes thinking they were going to play golf for the rest of their lives, and they have been hit very hard — and I don’t think anyone should gloat about it.

“But for those who only went abroad for financial advantage, it is some kind of warning,” he says. “I don’t feel frightfully sorry for people who used to splash it about and now don’t have enough water in the bath to splash. To them I’d say: have a good wash with a flannel, ducky.”