Travel to the outskirts of any Spanish city, and you'll find a forest of half-built apartment towers and townhouses rising from the rocky soil. Just a few months ago they would have been sold in no time. But now the global credit crunch, the country's slowing economy, and a deflating housing bubble mean those homes may end up in the hands not of Spanish families but of big-name investment banks.

Growing numbers of international financial players are moving into Spain to profit from what's expected to be a wave of bad debt. In the past year at least three Spanish debt-collection agencies have sealed deals with foreign financial houses looking to pick up dud loans on the cheap. In April, GFKL Financial Services, a German company affiliated with Goldman Sachs, bought 95% of Madrid's Multigestión Iberia. Lehman Brothers last spring formed a joint venture with an outfit called Gesif. And last December, British distressed-debt specialist Cabot Financial Group bought 20% of Barcelona's Gescobro. Other deals are said to be in the pipeline. "Investors are trying to get a foothold in Spain because they expect bad loans to skyrocket," says Santiago Minguez, a finance professor at Esade Business School in Madrid.

For five years, Spain has been on a building binge unequaled in Europe since just after World War II. As the Spanish economy clocked annual growth as high as 4.1%, the country built more houses than any other in Europe. Prices for homes have tripled in the past decade or so, forcing millions of Spaniards to go deeply into debt to buy apartments and houses.

Now most economists are predicting a slowdown in growth, to as little as 2% in 2008. Housing prices have started to rise more slowly, and next year they could fall by 10% or more, says Madrid economic consultant Analistas Financieros Internacionales. That would put home purchases into a deep freeze, and some overextended developers are likely to go into default. "The exposure of Spanish developers is large—40% of total corporate lending," says Luís de Guindos, head of Lehman's Spanish operations. "I see the highest risk of default there." As building slows, unemployment could rise—construction accounted for 13% of jobs in Spain last year—making it hard for many families to pay their mortgages.

HOW COLLECTION DEALS HELP

The big global financial players are betting the slowdown won't last more than a couple of years. So they're looking to pick up valuable property on the cheap in what could fairly quickly become a hot market again. The collection agencies help the banks in two ways: They can keep their finger on the pulse of the Iberian economy, letting the banks know when new debt is coming available, and they can help collect on any loans the global players end up buying.

Already, there are signs of growing stress in Spain's financial system. In June, BBVA—the country's No. 2 bank—sold off $1.1 billion worth of bad loans to Multigestión for what local news reports say was $37 million. And Banco Popular Español, a midsize bank, has said it's mulling a similar sale. But few expect the problems to turn into a crisis that will derail the Spanish economy. Banks in Spain appear to be far healthier than many of their European and American rivals. Overall household debt remains relatively low, so consumers are still spending enough to keep the economy from slipping into a recession—and making the Spanish housing slump an opportunity for global financiers.