Spain and Portugal have suffered one of their worst droughts on record this summer, with consequences from empty swimming pools for the tourist to economic disaster for farmers losing their crops and livestock.

Roger Munns, Managing Director of Tribune Properties, predicts that property prices in the two European countries could drop as much as fifteen per cent in some areas as more owners decide to put their villas and apartments on the market.

For many owners of second homes the original motivation to buy was to have somewhere they could spend time in a relaxing environment. Coupled with the thought of a good investment for the future, the market for overseas homes from buyers in the UK, Germany and Scandanavia has really taken off in the last twenty five years.

But soaring temperatures and a strain on the water supply could have consequences for their rental returns next year, which many owners rely on to meet their overseas mortgage.

Many holidaymakers want to rent a villa with a pool but the attraction soon goes if the pool is empty. Some golf courses are having to cut down on watering their greens too, and it wont take a big fall in tourism to mean the difference between breaking even and not being able to meet the mortgage commitments for some overseas property owners.

This autumn could see more properties than usual being put on the market, with a consequential fall in prices.

Early warning signs of a potential fall in property prices have already been seen on the Spanish Mediterranean island of Menorca, which has enjoyed better rainfall this year than the Spanish mainland and no water restrictions, but some villas being cut in price by over ten per cent.

Water restrictions on the mainland are having an impact on potential villa buyers, with many questioning the value of a swimming pool when they might not be able to use it.

Portugal has recently asked Spain for 6 million Euros in compensation, as water levels in the River Douro which runs through both countries fell below limits established in a bilateral agreement,with Portugal coming close to accusing her neighbour of stealing her water.

Good Time to Buy

For anyone considering buying a property in Portugal or Spain, this September and October could be the ideal time to buy, say Tribune Properties. Unusually many properties were being reduced in price in August, traditionally a good month for sales.

We normally see villa and apartment prices being dropped mid September onwards when the tourists and potential buyers are thinner on the ground as some owners are keen to sell and dont want to wait until the following Easter before having a real chance of selling again.

The drought isnt the sole cause of property prices falling add Tribune Properties, saying it has accelerated price falls and come on top of an already poor year for many estate agents in Europe.

A good barometer for European property are the tax havens of Monaco and Andorra which dont rely on tourist buyers, but usually have a steady supply of buyers interested in taking advantage of the zero income tax rate. Andorra is in the Pyrenees and has no water supply problem but estate agents were twiddling their thumbs this summer waiting for buyers to show and they didnt.

Monaco similarly has had no water supply problems, but has also seen a lack of buyers. The tourists are still visiting the Principality and hotels in Monaco and Monte Carlo have been as busy as ever, but again there is a lack of serious property buyers, and negative property inflation is quite possible in Monaco this year for the first time in a decade.

With more property available on the market we would suggest buyers draw up a list of three or four villas they have viewed and liked, and then suggesting to the owners that they would consider buying at fifteen per cent below the advertised asking price to see which ones are prepared to consider it.

Sea Water

One possible answer to secure the long term tourist trade and consequential property market is to follow Maltas example of building desaliniation plants, converting sea water to drinking water, sometimes known as reverse osmosis.

The Mediterranean island competes with Portugal and Spain for the attention of second home buyers, and has a healthy tourist industry despite having no rivers and low rainfall, allowing the island to function normally even in drought conditions.

The water from this source can be used for agriculture and ensuring adequate reserves to fight forest fires for example - it might just be the answer too for the swimming pools and golf courses and would allow a plentiful supply of high quality for domestic use.