While many Brits do learn Spanish and socialise with locals who haven't moved away because of the high property prices, many of the bars and restaurants and other businesses are British owned.



Helping to create the enclaves within their own country some Spaniards have sold their property to move to more traditional - and less expensive - areas, while young Spaniiards have had no choice but to leave their traditional family villages and towns as property prices have been too high.

And while the British who have moved to Spain over the last twenty years have seen their investments rise in value, consistently above the price of inflation, they could been in for an unpleasant surprise with signs that the housing market in Spain is weak, and prices could soon drop.

So spectacular have the price rises been over the last ten years that many Spanish homes on the Costas have doubled and more in value.

But developers have been busy, building hundreds of thousands of new homes, and this is leading to oversupply. 2006 saw 800,000 new home starts, more than Italy, Germany and France put together - a staggering amount by any European country's standards.

Often developers are offering low cost inspection trips to potential property buyers, and the buyers don't even get to see re-sale properties during their house hunting trips.

With many apartments and houses on a mortgage, interest rate rises push more and more people to selling, especially for second homes when the lettings no longer cover the mortgages. Since Spain joined the Euro, she has lost control over setting her interest rate, and all those in the Eurozone have had several rises in the last twelve months.

The Spanish island of Majorca reflects well the precarious position many second home and full time residents are facing should interest rates rise again across Europe.

Already many locals are finding it increasingly difficult to get on the property ladder, with prices having risen consistently in recent years, with their best hope being a slow down or even drop in Majorca property prices.

A survey recently found that over 90 per cent of Majorca's domestic population were worried about the number of overseas people buying property on the island.

One travel guide for Majorca isn't surprised at the local opinion.

'It's difficult for local people, especially when they are in their twenties and thirties and working with decent salaries, to see villas which are hardly used when they often can't even get a good size apartment in the areas they want, close to family or work.'They say, referring to holiday homes that are used a few weeks or even long weekiends a year, and standing empty the rest of the time.

'They see these properties as some of the cause of high prices, and they cannot see where it is going to end,' they conclude.

'The problem with building a way out of the housing crises, by constructing dozens of new apartment buildings and villa complexes is that it spoils the whole nature of Majorca, and it's a catch 22 because while locals do want to buy a house, they don't want it at the expense of the island.'

Official figures for Majorca holidays this year indicate an increase in tourist numbers by between five and seven per cent. And it is from the pool of holidaymakers where property sales often happen a few months later, as some visitors like the island so much they decide to look into buying an apartment or villa, with some even retiring to the island, or buying a business.

With the increase in visitor numbers, property demand should in theory be high for 2007 overall, but time will tell if the higer interst rates see a drop in prices in Spain and Majorca.