Local banks in Spain are responsible for a flood of foreclosed properties set to hit the Spanish real estate market in 2011, it is claimed.
There are now around 100,000 foreclosed homes on the market in Spain according to Madrid based Pisos Embargados de Bancos, a company that lists a quarter of that amount on behalf of 25 Spanish banks. They estimate this figure will triple to 300,000 in 2011 which could see prices fall even further at a time when the country’s economic situation is still fragile.Whilst Spain’s economics minister, Elena Salgado, has declared that there is ‘absolutely no need’ for an Irish style rescue and Prime Minister Zapatero continues to be confident that the Government is doing enough to avert a debt crisis, the real problems are going on at sub national level.
Although central government spending has indeed been scaled back and national debt this year will ‘only’ be 60% of GDP compared with Ireland’s near 100%, it’s Spain’s 17 autonomous regions that account for over half of the public sector deficit making it difficult to impose reforms. It’s also in the regions where the banking problems lie and the effects of the property crash have been felt the hardest.
‘When the property bubble burst, the larger national banks such as Santander and BBVA were well capitalised but the regional savings banks, the cajas, found themselves vastly exposed to the ailing construction and development sectors. Instead of emulating the national banks and putting the brakes on lending in 2006/07, the cajas did the reverse and tapped the wholesale debt markets to fund themselves,’ explained Greg Butcher, founder of Fairhomes Ltd, a cross sector real estate company with assets in the UK, Germany, Gibraltar, Singapore and the Netherlands.
‘This alone put them in jeopardy but add the fact that they supplied about half of the €318 million borrowed by Spanish property developers, loans which now represent about a fifth of the cajas assets, and you’ll understand why the outlook is so grim for them and for Spain,’ he added.
He explained that the main problem is that the balance sheets of the cajas still look quite healthy as they routinely overvalue their foreclosed property stock. ‘In a bid to make their rapidly depreciating assets look attractive to buyers, cajas are offering 100% mortgages, non payment windows, extended terms up to 50 years, interest free options and rates as low as 0.3 to 0.5% above Euribor,’ he said.
‘In order to do this, however, they’re inflating market prices by 25 to 40% which is not, realistically, going to help shift a glut of hundreds of thousands of homes. Neither is it going to enable us to judge the real price of property in Spain today.’
New accounting rules from the Bank of Spain are, however, expected to force lenders to make provision for bad loans after just 12 months rather than the current 72. ‘This will give banks a huge incentive to lower prices and get rid of the foreclosed homes rather than prolonging the agony,’ warned Butcher.
‘It’s hoped that the capital raised will prevent Spain from requiring an Irish style bailout but, as prices are squeezed down, the caja’s balance sheets will look even more vulnerable making European aid an increasingly likely scenario,’ he added.
‘With experts predicting Spain’s banks and Government having to raise €73 billion in the first four months of 2011 and the Economist reckoning property to still be overvalued by 47.6%, it’s clear that Spain has a painful correction process ahead. We may see Salgado and Zapatero having to eat their words,’ he concluded.
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Sunday, 3 April 2011
Cajas could unleash a flood of foreclosed properties on Spanish market in 2011 | Europe | News
Survey shows majority of people who buy a new property in the UK are satisfied « PropertyWire – Real Estate News
Survey shows majority of people who buy a new property in the UK are satisfied
By propertywireThe vast majority of people in the UK who buy a new home are satisfied with the overall quality of their purchase and would recommend their builder to a friend, a new survey shows.
Saturday, 2 April 2011
Less than a quarter of people wanting to buy a property in UK likely to do so | Europe | News
Less than a quarter of people wanting to buy a property in UK likely to do so
Friday, 01 April 2011
Over 80% of non home owning adults in the UK aspire to be a first time buyer but less than a quarter expect to be able to buy a property within next five years, according to research published today (Friday April 01).
A survey from HSBC shows that 78% of all non home owners, who have never bought before, aspire to do so, 86% of those aged 18 to 24 want to buy and 84% of 25 to 34 years olds are in the same position.
According to HSBC this means that over 90% of all UK households want to own a home compared with 68% who actually do so.
But the research shows that only 19% expect to be able to realise their dream in the next five years and 45% do not expect to be able to purchase a home ever.
Among the more optimistic are the younger age group of 18 to 24 year olds, of which 22% expect to buy in the next five years but 21% do not expect to ever be able to own their own home.
Some 69% of those who took back in the survey said that raising a deposit is the main hindrance while 59% said it was insufficient income to pay a mortgage and 27% said they were worried about losing their job. Only 12% said they were concerned over future falling house prices.
The current average price of a home for a first time buyers is £136,842, some 6.6 times a young single persons average earnings of £20,654. With lenders across the industry typically reluctant to lend more than four times income, this leaves an affordability gap of 2.6 times income, equivalent to £53,700 or 39% of the house price.
In order to afford a 90% Loan to Value (LTV) mortgage, the maximum a standard lender will currently allow, a typical firs time buyer home earnings would have to be £30,800, 49% higher than current average earnings for a single young adult.
There is the possibility to not be a statistic.
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Friday, 1 April 2011
We are working to transfer power from central government to local authorities and the communities and individuals they represent. We want strong, empowered local government able to act in the best interests of its residents...
We are working to transfer power from central government to local authorities and the communities and individuals they represent. We want strong, empowered local government able to act in the best interests of its residents...
The Government and First time buyers
01 April 2011
| The Government is planning to make first time buyer literally climb a housing ladder in order to get new homes.Once a new development is opened, potential buyers will be lined up on a starting line at the bottom of a ladder. Whoever reaches the top first gets the new home. The Government hopes it will encourage people to become more active.In a boost to the Big Society, the ladders will be provided by voluntary groups. |