Barcelona, Spain

When I first started coming to Barcelona more than 40 years ago, the airport consisted of one terminal and no gates. Buses picked up passengers and then whisked you to the terminal. My late grandfather was always waiting for us at customs; we never waited in line because he knew customs officials by their first name. That was a long time ago.

Today, BCN, or Barcelona International airport, has grown into a first-class airport with three terminals, including the latest goliath located across the original structure. A few years ago when the project began construction, I had a feeling a top was being formed in the real estate market. Amazing, but other "bubble" real estate markets in the country also constructed new terminals, signifying a top in real estate. When buildings are sprouting like weeds in any market, you know you've got trouble brewing – eventually.

My mother's side of the family has been in this Catalan capital since the 1950s and I remember the city well as a child. I love Barcelona, mostly the weather, food and Rioja. I've never met anyone who doesn't like Spain. The only thing I don't like is bull fighting – a cruel sport by any measure. Bull fighting was recently banned in Cataluña.

Five years ago, I vacationed with my Swiss friends in Costa del Sol, the Spanish Riviera, located to the south and about 45 minutes south of Malaga. The region was on fire; real estate projects going up all over the place as cranes littered the landscape. Prices were high, the British and northern Europeans were flocking to the region bidding prices even higher and the cost of living had soared. I remember a Scandinavian next door to me where I was renting a villa with friends asking over €1.5 million EUR for a shack. Unreal.

Spain is now in the third year of a major property bust. Construction represents about 35% of GDP and at the peak of the real estate cycle was almost 50% of output. You don't see building activity anymore; construction has stopped, the cranes are gone and prices have crashed across many parts of the country. My uncle's high-end condominium in one of the best Barcelona neighborhoods is now worth about 50% less compared to three years ago.

The banking sector here is still in trouble. The big problem lies with the cajas, or mortgage savings banks, that, for all intents and purposes, are largely bust. I'm not sure the government can deal with the situation because I suspect current property values are not entirely reflected in bank balance sheets, especially the cajas.

Spain is now entering a deflationary abyss as new austerity measures introduced by the Zapatero government force frugality and massive spending cuts. These policies will likely act as a continued drag on domestic consumption and force property values lower over the short-term. What Spain needs is inflation – something that remains in short supply since the emergence of the credit crisis two years ago.

The bottom line for investors is that Spanish real estate is a "buy."

Prices are down significantly over the past few years, including big bargains to be had not only in Barcelona but also in Costa del Sol. Last summer, while vacationing in Puerto Banus or in the Costa del Sol region, I met a local broker who presented a laundry list of real estate bargains. I suspect those values are even greater now.

Real estate prices along the coast might get cheaper. But as an investor looking to buy a distressed asset that's 25% to 50% below its all-time high, now is the time to be bargain-hunting. Interest rates are super low, the EUR is well off its highs and I have no doubt whatsoever that high-end Spanish property will rebound one day.

Viva Espańa…