I was in Gibraltar for two days on business earlier this month and, important stuff completed, took the opportunity to venture a little further up the Spanish coast, a few miles west of Marbella, a place I have never previously visited.

The weather was awful, which seemed to reflect the prevailing economic mood.

Of course, it is one of life’s unwritten rules that should you require a guaranteed bout of depression, then visit a seaside town in miserable weather.

But it was not only the relentless rain and howling wind which made me question my decision to hang around in southern Spain longer than I would have preferred.

Inflation has quite clearly taken a firm grip along this strip of Mediterranean coast as those businesses still open desperately attempt to generate some money by increasing their prices to pip-squeezing levels.

Please do not tell me that this is a traditionally expensive area — the place was on its collective knees — as witnessed by the fact that virtually every yacht harboured at the chic little town of Puerto Banus, a couple of miles away, was up for sale.

But what really stood out was the volume of unsold property.

The drive to Malaga airport en route to coming home, a journey of about 50 miles, was an eye-opener.

Motorway hillsides were littered with shells of unfinished apartments and villas. Most resembled something from a child’s partly-built Lego set.

Every single one was up for sale. It struck me these properties are effectively worthless. Indeed, as property prices have spiralled downwards so rapidly, many completed buildings currently have little value either.

Prospective holiday home buyers are reluctant to commit to a purchase price as the perception is, rightly or wrongly, that it could fall even further. The situation resembles one which was so evident in parts of the United States three years ago which has still not improved.

Back in Spain, reluctant sellers — no-one would willingly sell in current circumstances — are stuck with properties and, as the holiday lettings market is saturated, there is little relief in the form of regular tourist euros.

I like Spain and its people. They are genuinely warm, friendly folk and, if you make an effort to speak Spanish, they will do everything they can to help. But I fear for their medium-term economic prospects.

Spain’s economy contracted in the third quarter of 2010 as the severest austerity measures in three decades undermined even a hint of recovery. Incredibly, unemployment remains above 20 per cent.

Earlier this month, Spain’s credit rating was cut to Aa2 by Moody’s Investors Service, which said the cost of shoring up the banking industry will eclipse government estimates.

Spain will spend as much as 50bn euros supporting its savings banks, according to Moody’s, more than double the government’s 20bn euro estimate.

The situation is exceptionally depressing for investors who have acquired property across the Iberian peninsular.

Those who do not need to sell can afford to sit tight. Others trying to release cash face a difficult time.