Blogs and advice from Industry leading Specialists
Valuable Opinions, Comments & Gossip
Financial related News & Articles relating to Spain
Latest News, Stories
& Hot Topics
Various Tools & Widgets to help with your financial needs
Tools & Widgets to
help with finances
Polls, Surveys and Opinions featured throughout Tumbit
Featured Polls, Surveys & Stats
Discussions, Advice & Topical Chat
Discussions, Advice & Topical Chat

Sales of distressed Spanish properties could Triple in 2011

Thu 25th Nov 2010

The number of foreclosed properties on the market in Spain may grow three-fold during 2011 due to new accounting regulations that are encouraging lenders to offload depreciating assets.

This is the opinion of Fernando Acuna, the co-founder of Pisos Embargados de Bancos, a website specialising in selling distressed properties on behalf of Spanish Banks.

Acuna estimated that there are around 100,000 houses and apartments on the property market that are owned by the banks. A quarter of these are listed on the website operated by his Madrid-based company, representing 25 of the Banks in Spain.

Only last month the Bank of Spain estimated that lenders may have as much as 181 billion euros invested in distressed properties. However, as of September 30th, the banks have been required to react to falling property values more quickly, encouraging them to shed assets without waiting for the market to recover from a three-year decline.

Alcuna contnued : "Lenders took on an immense amount of property from developers and homeowners and now they're being forced to offload the deadwood."

Over 2,600 real-estate and construction companies have gone out of business since the property market collapsed in 2008, according to credit insurer Credito y Caucion, while unemployment has more than doubled since the year previously. The Bank of Spain estimated that the cost of the knock-on effect of this to the Banks has to date been about 70 billion euros in the form of government bailout funds, asset writedowns and use of reserves.

"By changing the rules on provisions, the central bank has really put a shotgun to their heads" Acuna continued, "The banks will have to cut their price expectations more aggressively to reduce their stock of homes."

Property values are expected to fall a further 20% over the next five years, he estimates. The majority of the drop will come in 2011, he said. Since the Spanish market's peak in April 2007, home prices have dropped 22.5% already, according to a survey by property portal Fotocasa and IESE Business School.

Under the new regulations introduced by the Bank of Spain, lenders must take account of a drop in value of a minimum of 30% if they keep the assets for over two years. They must also make allowances for bad loans after 12 months, rather than the 72 months that was common previously.

These changes will also lead to an average increase in provisions for 2010 of 2% , the central bank said in May. They will also reduce an average of 10% from the pretax profit that lenders generate from their Spanish businesses.

Only last month Banco Santander said that it has set aside 472 million euros to allow for such assets and will miss its 2010 earnings goal asa result of this.

"Banks are in a delicate position," said Fernando Encinar, co-founder of Idealista, Spain's largest property portal. "They've realized that it's probably better to get rid of their real estate rather than prolong the problem."

Idealista currently advertises 29,334 bank-owned homes in Spain. In 2008 it didn't list any.

As many as 280,000 people in Spain are expected to lose their homes by the end of 2010, according to Spanish consumer protection association ADICAE.

Comment on this Story

Be the first to comment on this Story !!

Related Partners

Recommended Items

Related Articles

Related Blogs