Repossessed Spanish properties worth half of their mortgage value

 

Yesterday Bloomberg reported how repossessed properties in Spain are now worth on average 43% less than their mortgage valuations, according to ratings agency, Fitch´s.

The shortfalls ranged from between 20 to 58% under the declared value, according to a report by analysts Juan David Garcia and Carlos Masip in Madrid, who studied 8,235 properties mortgaged through the likes of Santander and Bankia.

"Fitch does not expect lending to recover in 2012, as financial institutions are more focused on optimising their balance sheets, while their access to funding is limited," the analyst wrote. "Lending is likely to remain concentrated on existing high-quality borrowers and on potential buyers of banks' repossessed properties."

The effect of falling house prices on properties secured with a mortgage has been reduced somewhat by banks which bought defaulted loans from the deals at above-market prices, Fitch said. However, support will fall as lender liquidity dries up.

Spanish home prices fell for the 14th consecutive quarter as unemployment rose further still and a fall in mortgage lending hampered the demand for property. The average price of houses and apartments dropped 7.4% over the third quarter from the same period in 2010, according to the National Institute of Statistics (INE)