Buy a townhouse on the Costa del Sol and get a one-bedroom condo on a golf course for free. Tempted? What about a 40% discount on a seaside flat? Anda-lucian Dream Homes is offering the latter to buyers who invest in multiple properties (0800 107 0003, www.adhspain.com). Then there are the internet auctions run by CB Richard Ellis, a property consultancy, promising properties at “2005 prices”. These are just a few examples of the many offers being hawked around the ruins of the Spanish property market.

With sales down by an average 27% this year, and by 45% in Catalonia, you would expect property prices to be tumbling, as they are in Britain and America. Yet according to the Ministry of Housing, they are still rising, by 0.4% on average in the year to September, with increases of more than 3% in coastal provinces such as Valencia, Tarra-gona and Almeria. Deals galore and rising prices – if true, it would make Spanish property the perfect investment.

So, what is really going on? Can you believe the official statistics, or is Spain turning into the Costa del Bargain? First, it’s important to realise that, after Spain’s credit-inflated property bubble, even significant price reductions don’t necessarily mean bargains, just a return to more reasonable values.

Second, how do you judge a deal in Spain, where you can regularly spot sale boards advertising 50% off? But off what? Off a wildly inflated asking price? Off a dubious mortgage valu-ation? How about prices for comparable properties? Sadly, that’s just the kind of information you will struggle to find in a country where a lack of reliable housing market data has always been a problem.

To complicate matters, British buyers have to factor in exchange rates, which have made Spanish property, priced in euros, 10% more expensive over the past 12 months.

Radu Tatar, 39, a university lecturer in Liverpool, has been watching the market for over a year, and sees little evidence of truly great deals. “Asking prices in Murcia and Almeria are down about 20%, but they are still way overpriced,” he says. “Rental yields on the cheapest flats are still only 1% after tax.

Talk of bargains may be premature, but it is fair to say that prices are falling significantly, especially in coastal areas favoured by British holidaymakers and investors. You can get discounts of about 20% off smart new developments on the Costa del Sol, and potentially much more if you are not fussy about what you buy.

This is now “real value for money”, argues Desmond O’Connor, head of Alanda Homes, which develops mid-range and upmarket properties on the Costa del Sol. On the other hand, he warns: “Be careful with anything really cheap – it is cheap for a reason.”

While 20% off the asking price may not be quite the bargain it seems, it’s certainly the best value in years. And on the most attractive developments along the southern coast, it might not get any better. Those developers who can afford to, at least, will dig in their heels and refuse to budge on price.

There are also developers who are so indebted, they can’t drop prices any further without making a loss. “You can forget about prices falling 30%to 40% – I’ll give it to the bank before that,” said Guillermo Chicote, president ofthe Association of Constructors and Developers of Spain, at a conference last week.

Despite Chicote’s macho talk, that’s probably what will happen. Dozens of developers, including Martinsa-Fadesa, one of Spain’s biggest, have already been forced into administration, causing grief for many British investors who have no property to show for their early-stage payments. It only goes to highlight the risk of buying off-plan in this market: better to snap up something newly built, but already finished.

The outlook for the Spanish property market is not a sunny one. Unless the government steps in and bails out the sector, large-scale repossessions of new developments by the banks look likely. There will be some real bargains when those properties flood onto the market. Unfortunately for those “vultures” waiting to pounce, that will take time, and much of the stock won’t be particularly attractive. After all, who wants a home on a half-built development behind the motorway?

If you are really determined to bag a bargain in Spain, and don’t mind a cramped two-bedroom flat looking onto another block in an overdeveloped area of indistinguishable new-builds, then hang on, because prices might plunge. If, however, you’re after something special, such as one of the 12 houses on the La Almuña estate, near Gaucin, in the hills behind Estepona, you will have to pay good money – if you are lucky enough to find one on sale.

What about the mainstream resale market, where private vendors often have more room for manoeuvre on price – any steals there? Well, sadly, many of the people who invested in recent years have large mortgages, putting them in the same bind as developers. There are hundreds, maybe thousands, of British investors who can’t sell up in Spain because of negative equity.

The consensus among agents and developers is that resale prices have fallen by about 20% from the peak; and Santiago Baena, president of the Council of Real Estate Agents of Spain, predicts that the figure will be 30% by the end of the year.

Of course, there is the small risk that the market will roar back to life and deny you a bargain, though I can’t think why. If you want to buy now, and you are looking for quality, then you should be able to negotiate at least 20% off last year’s prices for both new-build and resale properties. That’s much better value, but not the same as a bargain. Offers you can’t refuse?

This three-bedroom, two-bathroom villa has been reduced in price from £893,000 to £738,000. It shares a garden and a pool with two neighbouring houses. It is on the coast in Elviria, five miles from Marbella and 20 from Malaga. Alanda Estates; 00 800 2526 3232, www.alandahomes.com Buy one £655,000 semidetached townhouse at the Terrazas de Miraflores development, under construction, and get a one-bed flat (pictured) on the Los Llanos de Baviera golf development, near Malaga, valued at £108,000, free. Salsa Inmobliaria; 00 34 952 224821, www.salsa.es

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