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Real estate loan terms worsen for Spain

Source: Reuters - Mon 22th Nov 2010

Worsening property debt terms in Spain have made it much more difficult and expensive to finance real estate loans there, compared with its more stable European neighbours Germany and France, a report showed on Monday.

"Following the downgrade of Spanish sovereign debt, most banks have less capacity to lend, and their cost of money is higher ... subsequently, the key lending terms in Spain have become stricter" CB Richard Ellis said in the report.

Spain's economy stagnated in the third quarter, pulled back by a weak construction sector and consumers resigned to austerity measures, which could leave it struggling to find serious momentum for years.

The CBRE report, which looked at changes in lending terms for top-quality commercial property in six European countries over the third quarter, showed banks were willing to lend up to 35 million euros for a property deal in Spain, cut from 50 million, while margins have risen to 275 bps from 250 bps.

By contrast, banks were willing to write bigger loans at lower margins in Germany and France at end-September, compared with end-June.

Germany has the most attractive terms for property buyers in Europe, with maximum loan sizes rising to 150 million euros in the third quarter, from 100 million in the second, while margins fell to 110 basis points, from 120 bps.

Lending terms for the UK, Italy and the Netherlands were unchanged over the period.

In the UK, where commercial property values are facing the danger of a double dip, loan terms stayed at a margin of 175 bps, while the maximum loan size remained at 75 million pounds.

The report also said a number of alternative lenders, most notably insurance companies and institutions, have entered the European debt market over the last quarter, highlighting the continued dearth of loans from Europe's struggling banks.

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