The late 1990s marked the onset of a second construction boom in Spain, heralding significant changes in the design and materials of properties aimed at the holiday home market. While these second-generation properties often retained the concrete frame structure characteristic of their predecessors, a shift in market dynamics led to a more frugal allocation of land.

Prime locations were largely developed, prompting builders to venture further from the beach and other attractions. As land became pricier—especially in regions that had seen infrastructural developments following the '80s boom—developers became more sparing in their land distribution to each property.

Simultaneously, a burgeoning population necessitated an expansion of local services. The sparser the population, the larger the area that needed to be looked after, leading local authorities to permit a denser concentration of construction. Consequently, large plots of land became scarce, and densely packed residential zones emerged as the new norm.

Although there were some improvements in building quality, they were largely superficial. The era of white spray-rendered exteriors gave way to lower maintenance finishes, and a broader diversity of property designs, shapes, and sizes began to appear.

However, these improvements were more often motivated by commercial interests than by legal standards. Builders aimed to differentiate their offerings or at least align with industry standards, thus, the enhancements primarily catered to aesthetic appeal, focusing on features that were visible to potential buyers, or that sounded impressive in sales brochures. 

Wooden windows made way for aluminium double glazing, which, despite its limited insulating capabilities, added appeal to sales brochures. Builders also started offering a variety of tiles for floors, bathrooms, and kitchens. The pre-installation of air conditioning became standard, and significant improvements were made to wiring and plumbing systems.

The scale of the construction boom that surged into the 2000s was unprecedented. Spain was building more homes annually than Germany, France, and Italy combined. At its zenith, the country was constructing between 500,000 to 650,000 new homes each year. Between 1997 and 2006, Spain’s housing stock swelled by 25%, growing from approximately 20 million to 25 million units.

This period of intense development not only transformed the landscape of the Spanish property market but also set the stage for future challenges and opportunities within the industry.

While Builders guarantees on deposits and construction quality were legal requirements, builders and banks would avoid the expense by failing to volunteer them, lawyers representing buyers, keen to keep the selling agent who kept bringing them new clients happy would turn a blind eye. If a buyer did insist on the correct documentation then often the builder would simply move them on. There were plenty more people eager to part with their money.

The corruption within the market also fueled its growth. With the Euro due to replace national currencies throughout Europe huge reserves of cash, hidden under mattresses and locked in safes across the continent had to be spent before it became worthless sheets of paper and Spain was the perfect place to spend it without questions being asked.

Black money made up around a third of the total of almost all transactions. At any given time, notary offices were full of buyers nervously clutching bags of cash, property deeds were registered with an official sales price but when the notary left the room those bags of cash would pass under the table making up the difference between the real purchase price and the declared value.

Even when the Euro launched in 2002, the practice of undeclared property values and paying cash to avoid taxation continued unabated. The corruption also permeated the banking system. Overvaluation of assets to obtain mortgages was commonplace throughout the market, from the initial builders mortgages all the way through to the end buyer.

 Very little was done to check a borrower's ability to service their debt. Three payslips and a P60 tax form (the annual tax statement in the UK) were sufficient to prove income, but no questions were asked about a borrower's existing financial commitments. With low interest rates across Europe, finance was cheap and in Spain it was far too easy to obtain. At the developers level the corruption in the banking sector was even worse. This can be best illustrated using the story of Polaris World. 

Over the course of just a few years Polaris World grew from nothing to become one of the biggest property developers in Spain, their focus was entirely on building large golf resorts packed with residential properties. Their growth was astonishing, but behind their apparent success was a dark secret.

The first resort built by Polaris was Mar Menor Golf resort. Initial investors purchased a huge swathe of land, classified as “rustic” for a very low price, as rustic land cannot be built on its value was minimal. Once the land was in their name they petitioned the town hall for it to be reclassified as “Urbanizable” - land that can be built on. Once reclassified the land became vastly more valuable allowing Polaris to approach banks and obtain finance, secured against their newly valuable asset.

As the development continued, phase by phase, and the value of their assets increased, Polaris would return to the bank seeking to increase their borrowing and these funds were then used to purchase more rustic land, petition more town halls, and repeat the process. Their power and influence grew to the point that a Guardia Civil (Spanish Police) investigation found that directors were interfering with regional elections and ensuring that friendly mayors won control of the areas they wanted to develop. (Incidentally when the late Jesus Gil, an unimaginably rich property developer and owner of Atletico Madrid football club found that the mayor of Marbella would no longer do his bidding he did the only thing that a self-respecting property developer of the time would do. He ran against him and became mayor himself).

While Polaris was one of the biggest examples of this practice, it was commonplace throughout the industry, essentially creating a house of cards that was balancing on a tightrope. When the Credit crunch hit, the house of cards collapsed. With hundreds of thousands of brand new homes still unsold and countless mortgages secured against deliberately overvalued assets the market imploded taking many multi-million pound development companies, including Polaris, and multiple banks with it. Spain was littered with abandoned and repossessed properties, failed developments and even brand new, deserted airports.It took nearly a decade for the recovery to start

It's worth taking a moment to consider the transformations in the estate agency sector during this era, in the context of selling to buyers from overseas. Although I'll provide a thorough analysis of the current Spanish real estate market later in this book, a bit of historical context is helpful at this stage.

From the 1980s through to the early phase of the property bubble, the approach to marketing and sales didn't really change. Overseas newspapers carried advertisements inviting readers to property fairs or to participate in subsidised tours of new developments, guided by dedicated sales representatives. 

These operations grew in scale; airports would be crowded with sales reps, clutching name boards ready to greet new groups of buyers. The streets were busy with MPVs and Minibuses transporting excited prospective buyers from one construction site to another, entire hotels were blockbooked by real estate companies purely to accommodate eager property hunters.

This sales model meant a few large agencies could dominate the market. The high costs of advertising overseas and subsidising inspection trips created barriers to entry that made it hard for new agencies to compete. As a result these dominant players were able to command high commissions and fend off competition.

Then, the internet changed everything. It offered a way for smaller agencies to reach international buyers simply through their websites and online ads. This led to many commission-based sales reps seeing an opportunity to start their own agencies, resulting in a surge of new, small players along the coast. The online marketplace quickly became crowded, with the cost of key advertising keywords like “Spanish Property For Sale” skyrocketing due to auction-based pricing.

At this point the property portals  began to emerge, aggregating the listings of multiple real estate agents on a single website. Rightmove Overseas in the UK lead the way, closely followed by dedicated Spanish Property Portals such as Kyero and Idealista.These portals provided a cost-effective means for agents to advertise properties to an international audience, bypassing the need for costly, competitive keyword bidding. This development allowed even more small agencies to enter the market.

Additionally, the advent of technologies such as GPS and affordable overseas mobile phone roaming loosened the traditional reliance on organised inspection trips.

With comprehensive information now available online and improved ease of navigation and communication, a growing number of buyers chose to explore areas and search for properties on their own terms. This shift favoured the independence of self managed property hunting over the structured nature of organised tours, opening up the market and changing how properties were found and purchased.