Having lived in Malaga for the last couple years 2005-2007, it was apparent there would be a serious property and credit crash around the corner. The problem is Spain has its own internal sub-prime issues. Much of the over-priced property bought in the last 5 years was purchased by the Spanish themselves. The property boom of the last 10 years flushed lots of cash right across the economy. Hence banks started offering easy credit to the Spanish sub-prime market.
I remember in 2005 buying some clothes at Zara in Malaga, and i noticed that i was the only person paying in cash out of a queue of about 15 people. At the time I thought there was no way this economy as i saw it could sustain this kind of credit madness. Once the housing market busted the whole skeleton would collapse.
This same thing happened in a smaller way in the late 80′s through to about 95. There was a serious Andalucian downturn and property could be bought at a real bargain. No doubt the cycle will happen again.
