Spain Real Estate News

Why are we asking this now?

Spain's biggest banking group, Santander, yesterday galloped to the rescue of Bradford and Bingley, the latest British bank to hit the skids, saving it from bankruptcy and probably further economic meltdown.

Why is a Spanish bank so keen to expand into Britain?

It's part of Santander's grand plan to become the world's top bank. It is already the leading bank in the Eurozone, No1 in Latin America, and seventh in the world by market share. Once it's consolidated its presence in the British market, it plans to conquer the US. Growth is its watchword. "The aim is to be second to none," the bank says in its characteristically immodest way.

Hasn't Santander already established quite a presence in Britain?

Yes, it chummed up with the Royal Bank of Scotland in 1988 and got a seat on the board, which gave Santander a window on the world that was invaluable when it developed ambitions of international expansion.

Four years ago it acquired Abbey National, and it is still digesting Alliance & Leicester which it bought for a song in July. You have to remember that the Banco Santander began as a local family-run operation in the northern Spanish city whose name it bears. There's not much it doesn't know about how small regional banks work.

So who is the guiding hand behind this grand invasion?

Santander is run by the charismatic Emilio Botin, 73, the latest patriarch of this great Spanish banking dynasty, an astute predator steeped in the business to his fingertips. At the pinnacle of the most powerful business operation in Spain, he is arguably the country's most influential man. When Botin endorsed Spain's incoming socialist prime minister Jose Luis Rodriguez Zapatero in 2004, a jittery stock market calmed down instantly.

How has Santander got this far?

The bank has a record of homing in on distressed banks, even lumbering shareholders with apparently hopeless liabilities, as when it scooped up Spain's Banesto bank in 1995, when it was a multimillion pound black hole ruined by a reckless fraudster. Botin put his daughter Ana Patricia – who will probably succeed when the old man eventually retires – in charge of the operation and she turned it round within five years.

Santander then swallowed Banco Central Hispano in 1995, which enabled it enter the turbulent Latin American market, to the alarm of more cautious operators. Within 10 years Santander consolidated itself as the top bank in the region, and turned its attention to Europe.

How has Santander avoided being savaged by the banking crisis?

Not only has Santander weathered the storm, it has spectacularly benefited from it, announcing 9bn euros profit this year, a staggering 19.3 per cent improvement on last year.

Two reasons, really: first the Spanish banking system is very strictly regulated, largely as a result of a devastating crisis that shook the country's banking industry in the 1970s, and sent many regional and family banks to the wall. The Bank of Spain imposes iron controls in assuming high-risk assets, and insists that ordinary customers be protected from their vagaries. Second, Santander concentrates on retail banking – the unsexy stuff of high-street branches, current accounts and savings deposits – rather than investment banking, or anything fancier. The bank reckons its business is therefore largely immune from market swings.

Santander never got embroiled in dodgy loans or toxic mortgages, which it regarded as too complicated and unacceptably risky. While the world financial system juddered under the fallout of subprime loans, Sanatander declared its exposure to high-risk mortgages as "zero". Botin loftily told his shareholders, "We don't have those strange things."

So how do Spaniards get their mortgages?

Mortgages in Spain are mostly handled by savings banks, which aren't quoted on the stock exchange. Some of these became over-generous in dishing out loans during the recent long property boom, and since the bubble burst many face liquidity problems.

Spain's banking supremos are in general an austere, cautious lot, with none of the buccaneering recklessness of many international counterparts. They are rich, of course, but frugal and philanthropic. If the Botins appear in public, it's probably to endow a university or science park. You will never see them in the pages of Hola!

So how did Santander come out on top?

As well as knowing the market inside out, Santander's top brass, ie Mr Botin, the indusputed boss, has an astute sense of market timing. Last year the bank conducted the real estate operation of the century by selling off all its 1,200 properties at the peak of the property boom, including wedding cake palaces in the heart of Spain's major cities. Pulled off just before the market crashed, the deal netted Santander 4bn euros – which neatly funded last year's purchase, jointly with its affiliate the Royal Bank of Scotland, of the Dutch bank ABN Amro. It cannily held on to all its branches, however – the bits that make money – and even remains tenant of the properties it sold, with an option to buy back in the future.

How will Santander's increased presence affect Britain's high-street banks?

We can expect to see more of Santander's scarlet flame logo as the old names Abbey, Alliance& Leicester and Bradford&Bingley gradually fade away. In acquiring B&B – as in all its acquisitions – the Spanish bank has been careful to peel away and sell off the liabilities it doesn't want, to home in on the elements of its core business: branches, and bank deposits.

So having lots of branches is the key to banking success?

That's the Santander way. It may seem like boring stuff to braver bankers, but Santander believes we need more branches – in Spain there's a bank on every street corner – and that these are the source of steady money, what Mr Botin calls "high-quality, recurrent earnings". However, Santander is ruthless in stripping out what he doesn't need, so bank employees may fear for their jobs.

Will Santander be satisfied, or will it want more of the British market?

History suggests Santander will be eager for another good bargain, especially in the current landscape of smouldering wreckage. The predatory Mr Botin, his coffers plumped with cash, must already be on the alert for further acquisitions, if not immediately. But this is the best moment for him. As he put it recently: "In times of crisis, being better than the others is a big advantage."

So will the B&B takeover benefit British consumers?

Yes

*Santander has saved B&B from ruin, and account holders can feel their savings and deposits are safe.

*Santander's low risk policy suggests it will be a steadying influence on Britain's future banking scene.

*Without Santander's action, the alternative could have been a wider meltdown too awful to contemplate.

No

*Santander's move reinforces the concentration of Britain's banks in the hands of a powerful few.

*Santander has a mixed reputation for its service, and it is strong enough to brush off complaints.

*Savings are better handled by local building societies than by banks answerable only to shareholders.

Source: Independent.co.uk

The fall in asking prices for existing Spanish homes accelerated to as much as 5 percent in the third quarter of 2008, Spain's biggest property search website said on Wednesday.

Idealista.com said prices fell by between 2 and 5 percent compared to between 2 and 4 percent in the second quarter, but added final sale prices may have fallen further because the study is based on prices listed, not those which the buyer and seller finally agree.

The study, based on the cost per square metre of 77,402 homes advertised on its website, showed that prices in Barcelona fell 5.3 percent, Madrid 1.5 percent and in Valencia 2.4 percent.

In only 24 of Spain's 267 municipalities did the average price rise, it said. Most analysts say that Spanish house prices are 20-30 percent overvalued after a 10 year property boom fuelled by cheap credit and historically low interest rates.

The boom turned to bust last year as borrowing costs rose, the supply of new houses spiralled and house prices increased even further as a proportion of household income.

"For years we have seen an enormous effort on the part of the buyer to match asking prices, but now it is they (the sellers) who have to sacrifice to be in reach of what buyers can pay," said Idealista's head of research Fernando Encinar.

"The owner who really wants to sell his house will have to advertise it at a very attractive price if he wants to close the deal, discounting more than he could ever have imagined." (Reporting by Ben Harding) 

Source: Reuters

Spanish real estate company Reyal Urbis SA is in talks with creditors over refinancing its multi-billion euros debt and expects to sign a final deal in the next few days, it said on Tuesday.

"All the financial entities involved need to agree and the corresponding refinancing contract needs to be signed," the company said in a statement to the Spanish stock exchange regulator.

The announcement followed a report in Spanish daily Cinco Dias, citing sources close to the deal.

Like other Spanish real estate companies, Reyal Urbis is facing increasing pressure to meet growing debt payments as its revenue shrinks and asset values drop in Spain's property crisis.

One of Spain's largest developers, formed through the merger of Urbis and Reyal in 2007, Reyal Urbis said it had net debt of 5.5 billion euros ($8.1 billion) when it reported first-half results last month.

Cinco Dias said Reyal Urbis is holding talks on spreading payment of a credit line of up to 3 billion euros.

Spanish newspapers have said the two Spanish banks leading the talks, Banesto and Santander, were in favour of the debt refinancing plan.

Some 80 percent of Reyal Urbis's sales come from the sale of residential properties and land -- a market that has slowed to a virtual standstill in some areas of the country after a 10-year property boom hit the buffers at the end of last year. (Reporting by Sarah Morris, Tracy Rucinski and Judy MacInnes; Editing by David Holmes) 

Source: Reuters

Ailing Spanish property firm Habitat will meet creditor banks on Friday to try to avoid filing for administration after losing 650 million euros ($942.8 million) in the first half of the year, a company spokeswoman said on Friday.

"There's going to be a meeting today with the creditor banks to talk about possible future scenarios for the company. Habitat wants to avoid going into administration and we are going to analyse the different possibilities," she said.

One possibility would be to ask shareholders for a capital injection, she said.

The syndicate of 39 creditor banks is led by Spain's biggest savings bank, La Caixa.

Construction to services group Ferrovial, owner of British airport operator BAA, has 20 percent of Habitat, and other leading shareholders include businessmen Bruno Figueras and Josep Sunol.

Habitat refinanced 1.586 billion euros in debt it took on after buying Ferrovial's property subsidiary in February, after weeks of negotiations during it which it warned it could file for administration. (Reporting by Andres Gonzalez; Editing by Paul Bolding)

Source: Reuters

The Spanish government’s plan to scrap inheritance tax may indirectly help British expats by restarting the housing market and easing the financial pressure they are under.

Spain's prime minister José Luis Rodríguez Zapatero (pictured) has re-opened talks to do away with IHT and although Steve Laird, principal of Carrington Wealth Management, does not believe that British expats will benefit from the changes directly, they could help indirectly.

‘I do have some initial cynicism,’ he said. ‘The Spanish government is trying to please its voters, not expats, so I think there will be something in there that abolishes IHT for recipients living in Spain which would make it less attractive to expats because the majority of them don’t have children living in Spain.’

Laird, who splits his time between Spain and Belfast, said that scrapping IHT could, however, help re-stimulate the housing market and property in Spain could once again become attractive for Brits.

‘Spain has been hit by the credit crunch the same as the rest of Europe, particularly in housing because around 30% of the country’s GDP is from construction,’ said Laird.

‘Expats have been hit doubly hard because of the poor exchange rate. The Brits are not flocking out to Spain as much as they were and those out here are under serious financial pressure.’

Laird also points out that holding money in an offshore deposit in Jersey or Guernsey, a common practice among expats, would be detrimental for their investments by not keeping pace with inflation and being hit by exchange rates.

Source: Citywire.co.uk

Spanish banks have minimal exposure to Lehman Brothers and remain healthy, but worsening global financial market conditions will have an impact on Spain's economy, the Bank of Spain said on Tuesday.

The comments follow concerns that smaller Spanish banks could be forced to seek fresh capital if the international financial crisis drags on and bankruptcies continue to soar in Spain's stricken property market.

"The direct impact of the Lehman bankruptcy for Spanish banks will be minimal, given their exposure is practically non-existent," Bank of Spain Director General of Research Studies Jose Luis Malo de Molina told Reuters.

"The Spanish banking system is facing the international crisis from a healthy position, with good levels of solvency and profitability," he said, reiterating past statements.

"However, it is necessary to recognise this episode signals an intensification of the serious international financial crisis, that also has consequences for the Spanish economy," Malo de Molina added.

Spanish banks and financial firms hold no more than 500 million euros ($709.6 million) worth of Lehman debt, according to press reports, representing a tiny chunk of around 270 billion euros in investments managed by the country's financial sector.

Spain's largest bank Santander said it had 11 million euros of direct exposure to the failed U.S. investment bank and a further 44.6 million euros through derivative operations.

 The second largest bank, BBVA, has 86 million invested in Lehman through its funds, according to stock market records, out of total investments valued around 16 billion euros.

Leading Spanish savings bank Bancaja on Tuesday said its clients had invested 13 million euros in Lehman through 5 funds.

The Bank of Spain has repeatedly stressed the strength of the Spanish banking system in the light of worries over their exposure to the property sector and their level of borrowing from the European Central Bank.

Both Santander and BBVA reined in mortgage lending before the country's real estate bubble burst, and the overall system has some of the world's strictest reserve requirements and investment rules.

Malo de Molina has said, however, that the Spanish system is not immune to prolonged money market turmoil.

Analysts have expressed concern over the high exposure to Spain's property sector of medium-sized banks such as Popular and Pastor, as well as savings banks, as the economy slides towards recession.

Spain was the only one of the euro zone's four biggest economies not to contract in the second quarter after the government drew on its budget surplus to launch a 38 billion euro economic stimulus package.

But the European Commission expects the Spanish economy, fourth largest in the 15-member currency bloc, to contract in the third quarter and enter recession by year-end.

Spain's Socialist government hopes for an economic recovery in the second half of 2009. Analysts say it could take longer given the country's high dependence on house-building and real estate sales to drive growth.

(Reporting by Andrew Hay; Editing by Jason Webb, Stephen Nisbet, John Stonestreet)

Source: Reuters

Martin Dell at Kyero.com makes sense of the latest figures from the housing ministry.  Some interesting results there.

Read the article at Kyero.com

Take note.....

Owners of Spanish property could lose their homes if they fail to produce new identification documents proving their non-resident status, writes Ali Hussain.

Britons who use their overseas accounts to pay for their Spanish mortgages and essentials such as utility services and council taxes, have been required by Spanish banks to produce a residence certificate or “Residencia” since March last year.

Failure to produce the new documents could result in bank accounts being frozen and mortgage repayments stopped.

However, some Spanish banks have failed to contact homeowners or given short notice to produce the papers.

One reader, Simon Wells, 52, from Walthamstow, east London, said that on August 15 he was told by his Spanish bank, Cajamar, to produce the documents by September 15.

“This is not easy to do as you have to register in person at a Spanish police station and then have it stamped by a town hall official. We were warned our account could be frozen.”

The requirement is part of an EU initiative to crack down on tax dodgers. Spanish residents are taxed at source, so to avoid paying tax there you have to prove non-residence status.

Britons — there are about 145,000 with bank accounts and properties in Spain, said broker Savills Private Finance — have to declare gains made in Spanish bank accounts to the UK taxman.

You qualify for non-resident status in Spain if you spend fewer than 180 days a year in the country and are able to produce the new document.

Anyone who bought a property before the new rules came into effect may be asked by their Spanish bank to produce the Residencia. Those who bought property after they were introduced will have been told of the requirement.

Residence certificates include your name, address, nationality, date of registration and the “Numero de Identificacion de Extranjeros”, a tax number for foreigners in Spain.

The Spanish Tourism Office said: “If you have a Spanish property, and have not been asked to produce this document, I suggest you contact your bank directly.”

Homeowners can contact the Spanish Ministry of the Interior’s immigration directorate helpline for more advice on 00 34 91 363 9071.

To apply for the non-residency certificate you usually need to go in person to the Oficina de Extranjeros or police station in your province of residence.

The document costs about €10-€13, although if you go through a lawyer you may have to pay more than ¤120 (£97.20).

Find the nearest Oficina de Extranjeros at mir.es/SGACAVT/extranje/directorio.html

Soure: Times Online

Hmm, saw this article today.  I don't really think it's foreign investors that are to blame.  What about the corrupt town halls and greedy developers?  He doesn't seem to mention those!

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Foreign investors are being excessively negative towards Spain, the chairman of the country's second largest bank said in a newspaper interview published on Sunday.

"Spain has its problems but it is being punished in my view excessively, by foreign investors," BBVA's head Francisco Gonzalez was quoted as saying by daily ABC.

"That has meant the share prices of Spanish banks and other companies are below what they should be."

He said BBVA was trading at a price which did not reflect the quality of the bank.

The bank's shares closed down 3.0 percent on Friday at 11.16 euros.

Spain is suffering the joint shocks of the global credit crunch and the end of its decade-long housing boom which took unemployment to a 10 year high of 2.5 million in August.

Spanish GDP grew at just 0.1 percent in the second quarter from the first, making for expansion of 1.8 percent compared with the previous year which was down from 2.6 percent in the first quarter.

Some economists expect the economy to see negative growth in the third and fourth quarters.

Asked when he expected the Spanish economy to recover from its current problems, Gonzalez said the whole of Europe was dependent on recovery in the United States and the global economy was in unknown territory.

Source: Retuers

Spanish property firm Reyal Urbis said on Friday net losses in the first half jumped 874 percent percent to 332 million euros ($489.4 million) as paralysis gripped Spain's housing market and financing costs spiralled.

Reyal Urbis, one of Spain's biggest developers which formed through the merger of Urbis and Reyal in 2007, said revenue rose to 823 million from 624 million a year earlier as it sold off property. But financing costs were 191 million euros and the company also made provisions for 252 million euros due to falling property values.

Some 80 percent of Reyal Urbis sales come from the sale of residential properties and land -- a market that has slowed to a virtual standstill in some areas of the country after a 10-year property boom hit the buffers at the end of last year. House sales across Spain slumped 29.6 percent in June year on year, official figures on Friday showed.

The company's net debt, which totalled 5.8 billion euros a year earlier, fell to 5.5 billion.

The company also deals in rental of commercial property like offices, shopping centres, retirement homes and hotels, is majority owned by Chairman Rafael Santamaria Trigo.

Reyal Urbis had total assets of 8.1 billion euros at the end of the first half, down 13.7 percent from a year earlier. (Reporting by Ben Harding, editing by Richard Chang)

Source: Reuters

After a very dark scenario for the Marbella real estate world as result of the initial approval of the New Town Plan, the Marbella Council Resolution for the anticipated execution of the Town Plan in the process of being approved, taken on the 25th July, 2008, has shed certain light for business and property owners in buildings with so called “illegal building licences”.

According to Marbella’s New Draft Town Planning Regulation, there are around 30.000 dwellings in the municipality which have building licences which violates the 1986 Town Planning Regulation in force at present. Some owners were living in these properties and now face the lack of the First Occupation Licence (FOL), a possible execution of a Court judgement declaring the building licence null and void and in any event if they try to sell, the purchaser cannot obtain a Mortgage. Some businesses being run in buildings built with illegal building licences cannot obtain the Opening Licence (OL) and are therefore trading illegally from their premises.

With the Council Resolution, those property and business owners can legalise their position and obtain the FOL or OL before final approval of the Town Plan by the Junta de Andalucía takes place, providing the New Town Plan foresees the legalisation of the buildings where their properties and business are.

The requirements to obtain the licences are different depending on properties under the following situations:

1 - Buildings out of planning, meaning buildings on which the Council cannot redress the violated juridical order since the statute of limitation to do so has expired. The Council will grant First Occupation and Opening Licences providing the use attributed to those properties is not forbidden for the site in question under the New Town Plan.

2 - Buildings which violate the 1986 Town Plan where the Council can still redress the perturbed juridical order by the corresponding process, the property and business owners can obtain the licences under the following conditions:

a)    They will have to be registered in the Land Registry.

b)    The owners will have to wave their right to any compensation in case the New Town Plan does not sanction the validity of same.

c)    The Licences will be given on a temporary basis. This means that once the New Town Plan sanctions them, the Licences will have to fulfil the conditions, compensations and charges that same foresees in order to be definitely obtained.

d)    In case of First Occupation Licence, a bond will have to be given to the council to secure the compensations foreseen in the New Town Plan for the legalisation.

3 - Buildings with licences being challenged in Court where judgement has still not been issued or where execution of the judgement declaring them null and void has been suspended.

The conditions to obtain the FOL or OL will be the same as in number 2º above and the waiver to compensation must be extended to the case the judgment declaring a licence null and void is executed by the Court. All licences are subject to whatever is decided in either the administrative or Court proceedings about the validity of same. 

The Council will deal with the application for FOL or OL in the order they are presented and we presume those affected will have to wait for the Council to inform them of the sum of the bond they have to give to guarantee the compensations foreseen in the New Town Plan for the legalisation of their properties.

On the other side of the coin are those buildings non inhabited which the New Tow Plan does not contemplate legalisation and lack building licence or this has been declared null and void by a firm judgement which will be pulled down.  The idea is to try speedily recover the green belts and public facility sites for the town.  All buildings with licences granted against the 1986 Town Plan and which the New Town Plan does not foresee legalisation will be subject to the statutory revision procedure to declare them null and void. The corresponding resolution will be taken in the same Council Assembly where the Provisional Approval of the Town Plan takes place.

It is strongly advisable that those property or business owners in buildings with illegal building licences which can be legalised under the New Town Plan in the process of being approved, lodge the corresponding application with the council for the FOL or the OL as if they obtain same, this will facilitate the sale of the property as bank will have to change their approach when sorting out mortgage applications. Another question being whether the financial system has then recovered from the present status of lack of liquidity and banks have enough funds available to help reactivate the sales of real estate.
   
Another positive consequence is that the Council Resolution will help recover the juridical security in Marbella especially questioned abroad.

Submitted by

Rafael Berdaguer,
Lawyer from the firm Rafael Berdaguer Abogados based in Marbella, Spain.

Tel: 0034 952 823 085
Fax: 0034 952 824 246
Website www.berdaguerabogados.com

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