The banks have been dragging their feet over selling the properties they hold in the hope that things will improve. However, after the stringent reform unveiled by the government it will be worth their while to sell their property assets.
The value of the property assets held by the banks is less than the value given in their balance sheets, but is higher than their declared value in the new financial reform, a reform in which Mr Guindos, the Minister for the Economy, has taken a tough stance, according to the university professor Manso Olivar. The professor argues that the government has brought in this new reform in order to send a message to the banks: “If they are heavily indebted and do not have any other source of liquidity, they will have to sell their property assets even though prices are not very good at the moment, just like any other business would have to do in the same situation.”
In reality we are now seeing bank repossession in Spain being priced very realistically so much so they now represent the best opportunities which was never the case before.
Another factor that affects UK buyers positively is the rate of the Euro People buying property for sale in Spain can now take advantage of the most favorable exchange rate between sterling and the euro for 19 months. As Marketing director of Spanish Hot Properties I believe that everything is in place it’s just about confidence .The Eurozone debt crisis is weighing heavily the European Central Bank’s and politicians shoulders, which makes sterling appear to be attractively stable and increase in value. Reuters columnist Fiona Maharg-Bravo predicted this week that property prices in Spain are likely to become cheaper in the near future as unemployment rises and the country slips back into recession. This ties in with our experience where for the first time some Spanish banks are being much more realistic about property for sale in Spain.
All that is required for the floodgates of sales to open now is the Euro issue resolving itself and once that happen you will see sales levels not seen since 2007 and before. Spanish bank repossessions Property for sale in Spain
In a brilliant article by John Müller, deputy director of the El Mundo newspaper, he criticizes how Ireland has managed to isolate the problem of falling property prices after its own bubble popped while Spain continues to maintain prices artificially high due to action, he says, by the banks.
John Müller says that Ireland has recovered from the economic crisis in part because of the way it tackled the real estate issue. The country also experienced a “large bubble” as property prices quadrupled between 1997 and 2007. The writer explains that prices in Ireland are falling fast (down 12.5% in the first six months of the year and down 57% from their peak in some parts of Dublin), while the same is happening in Spain in slow motion. He points out that property prices have dropped 22% since their peak according to the Bank of Spain (Banco de España) and only 16% according to the Ministry of Public Works (Ministerio de Fomento).
The leader from El Mundo says that the key in Ireland was “enabling offer and demand to operate almost without interference”. He recalls how the Irish banking sector was rescued by the State and how a “bad bank” was also created in which to put real estate assets on ice so that once the losses had been assumed, the property prices would not affect the results of the banking sector.
John Müller accuses the Spanish banking system of “artificially blocking” a fall in prices and the Government of turning a blind eye to something it is fully aware is taking place.
He is of course 100% correct but the Spanish banks with a history of trying to artificially help keep losses to a minimum and actually creating distorted accounting will have to be dragged kicking and screaming to accept Ireland’s medicine.
The formation of the banks own real estate companies to help dispose of their assets was another disaster. Also the bank’s reluctance to deal with the international agent market place is inherently stupid. It’s only now some banks are seeing the errors of their ways but still but obstacles in the way of the companies and people who could help them sell their real estate.
If the 2012 Euro crisis continues then the banks in Spain are going to have to change their attitude big style or this housing crisis will continue for years.