Spain Real Estate News

The stress test results published by the Bank of Spain on Friday underlined the performance gap between the commercial banks that account for half of the sector and many of the savings banks whose bankrolling of the Spanish property surge left them exposed as the construction boom collapsed.

Five Spanish banks are likely to require a total of about €2 billion, or $2.5 billion, in additional capital after failing the stress tests carried out by the Bank of Spain. Their failure did not come as a shock, however, because many of the savings banks, or cajas, had already needed to seek additional government funding.

“A lot of progress has been made since the start of the crisis — and this is part of the progress,” Miguel Ángel Fernández Ordóñez, governor of the Bank of Spain, said in Madrid on Friday. The tests, he said, showed “the enormous means” available to Spanish banks to overcome any deepening of the crisis.

“When there are doubts, you have to be absolutely transparent, and this is what we have done,” he added. “People are not stupid and will realize that the Spanish banking sector as a whole is pretty clearly above average.” He added: “I have faith in the markets.”

Mr. Fernández Ordóñez said the test results vindicated the recent push to force the cajas to consolidate, as well as a regulatory overhaul approved last week by the Spanish Parliament to allow the cajas to open up as much as 50 percent of their capital to outside investors.

The five banks were also among a recent wave of mergers that are due to cut the number of cajas to about 20 from 45. One of the test failures, CajaSur, was de facto removed from the list following its recent takeover. The Spanish central bank rescued CajaSur in May after it rejected a merger proposal from a larger rival. CajaSur was then auctioned, with the winning bidder, Banco Guipuzcoano, announced only last week.

In contrast, all of Spain’s commercial banks relatively easily passed the stress tests, led by Banca March, whose Tier 1 capital would remain at 19 percent even under a deepening hypothetical economic slump. The Tier 1 capital of the largest Spanish bank, Santander, would meanwhile remain at 10 percent, well above the 6 percent minimum level recommended by the committee that carried out the European tests. The commercial bank with the weakest Tier 1 capital structure, according to the tests, was Banco Pastor, which would just meet the 6 percent threshold.

Iñigo Vega, banking analyst at Iberian Equities, a Madrid brokerage, said that the tests showed it would be “manageable” for the restructuring fund, whose funding capacity could be leveraged as high as €99 billion to cover any additional shortage of capital for the cajas.

“Over all, there were no surprises; if anything, there was lower capital shortage than expected,” Mr. Vega said.

Read more at NYTimes

 Spain’s banks are deliberately stifling the property recovery they are desperate to see by screwing agency commission rates down to 1.5% to 3%; and by forcing developers to the wall.

Agents and developers are getting increasingly frustrated with the inept way in which the Spanish banks are trying to offload their huge glut of repossessed properties.

“It’s a mess,” says Greg Butcher of developers Ocean Village Gibraltar. “The Spanish banks just don’t respect property agents. They see them as reactive and not pro-active. And they don’t feel that they can justify to their shareholders giving reasonable commission rates to an agency right now.”

According to Butcher, “the banks are happy keeping the agencies to 1.5% to 3% (perhaps 5% at best if you make a special case.) They are not ready to go anywhere near a proper 10% commission rate yet.”

The end-result is that there is not enough margin in the process to attract good quality agencies and, says Butcher, “the market is not going to move. We keep telling the banks that there is nothing wrong with the concept of Spain and that north European buyers will come back, but not until they start controlling their price discounts properly and the start to bring in a much more professional and aggressive approach to sales.”

Ian Waudby of Crest Group International agrees. “We come across master agents who get 5% but most agencies are struggling on 1.5% to 3% commission rates and that is not going to change. It is a very, very difficult situation … there is no margin for the sales network to reinvest and lots of agencies are not going to be able to make a profit.”

To make matters worse, banks like Santander and BBVA have set up their own internal sales agencies … but they are domestically focused and the staff involved often only speak Spanish.

“Their strategy was to wait for a summer rush in sales,” says Greg Butcher. “A rush that is not going to come. We’ve had dozens of meetings with the banks and told them that their internal agencies are not going to be any good at selling to north European buyers, who will be the real market when things come back.”

Miguel Martinez-Marino of Bancaja Habitat is trying a different route on behalf of his bank. He will give “between 5% and 10% commission depending on the volume of properties sold,” he says. “We have decided to use a network of agencies in the UK and we are finding buyers for sure. Confidence and interest levels are increasing again … but outside of Spain.” Bancaja is finding properties priced between €90k and €200k on the Costa Blanca are doing well, along with “any apartment on the Mediterranean coast.”

Martinez-Marino has sold 1,528 properties so far this year and he is finding that lucrative finance deals from the parent bank are working well to boost confidence levels. Bancaja is offering an 80% mortgage with nothing to pay for the first three years. After that there is a range of options with borrowing periods up to 50 years and a rate pegged to the Euribor plus 1.2%.

Ocean Village Gibraltar estimates that Spain’s banks now have more than 180,000 repossessed homes on their books. And the volumes are so great that it is squeezing out new developments. “This whole process has been putting projects on hold and causing developers to go bust for at least a year now,” says Butcher. “The banks are obsessed with their repossessions and new build is having to wait while they work out what to do.”

Source:  OPP

Torrevieja is the Spanish resort that exploded in size as Brits snapped up apartments and villas as frenetically as the developers knocked them out. But the town dubbed the Costa del Yorkshire is now better known to the Spanish banks as the home of the "British plumber mortgage", and knee-deep in negative equity as properties that once sold for €200,000 (£167,000) are now fetching as little as €60,000 (£50,000).

Don't expect a rebound in prices any time soon. The Costa Blanca was the most over-built region of Spain during the boom years, and a glut of property estimated to be as high as 1.2m units across the country will take many years to shift.

"There's an awful lot of rubbish out there that just won't sell at any price," says Martin Dell of kyero.com, a website that lists 100,000 Spanish properties for sale by 1,500 estate agents. "There's huge developments on golf courses miles from anywhere, and bad-quality apartments in poor locations with no local amenities. When they talk about 40% or 50% discounts, even at that price they're not worth it."

Desperate Spanish banks have started to offer 100% loans to anyone who will take distressed properties off their hands – and the buyers don't have to make a single repayment for three years. The 100% deals (on mortgages priced at about 3.5%) are for Spanish residents only, but they will give British buyers loans of up to 80%.

Andy Fox, who runs spanishbankproperty.com, acts as an agent for lender Bancaja and has access to 20,000 distressed and repossessed properties. He points to developments such as one in Adra near Almería, where prices on apartments that have never been occupied since being erected two years ago have plummeted from €150,000 to €74,040. And he is marketing a one-bed apartment repossessed by Banco Santander in a resort near Villamartin for €43,000 (£36,000).

But even he hesitates to describe prices as bargain-basement. "Please don't stick the word 'investment' on these properties. It's only a great time to buy if you are not interested in making money. Don't expect anything to jump in value, possibly for years."

British buyers, once the kings of the Costas, are now thin on the ground. During the boom, the British made up about 70% of the foreign purchasers along the Spanish coast, with stories of plumbers and taxi drivers buying three, four or five apartments at a time, often with large euro-based mortgages attached.

According to Mark Stucklin of SpanishPropertyInsight.com, the number of transactions has collapsed. One set of figures this week suggested that in the past six months only 500 homes have been bought by non-resident buyers across the whole of Spain. But Stucklin recommends taking such figures with a large pinch of salt. "There are few reliable statistics and indices. They are often based on asking prices which are vendor fantasies," he says.

The only figures that are reliable are those for transactions, which have fallen to 33,000 a month nationally, compared to 70,000 a month at the peak.

"The market has shrunk but it has stabilised," Stucklin says. "There is still a huge glut of unsold property that needs to be mopped up. The market is digesting the surplus stock in Madrid and Barcelona but elsewhere it will take a lot of time.

"We are seeing the Germans and the Nordics emerge as buyers in place of the Brits. The Germans withdrew during the boom, while the Brits paid top euro. Now the Germans are coming back," he says.

Official figures from the Spanish ministry of housing say prices have fallen nationally by only 11.2% since their peak. But indices from the two main domestic property websites, Idealista.com and fotocasa.es, suggest a fall of about 22%. "This seems to be a fair indication of reality," Dell says, but he adds that asking prices remain in many cases "bonkers".

Read more at Guardian.co.uk

Sir Sean Connery was facing a fresh probe into alleged financial irregularities today after a judge widened his investigation into the former 007.

Connery, 79, and second wife Micheline Roquebrune, 81, are already being investigated over the sale of a seaside property they owned in the millionaires' playground of Marbella in southern Spain.

Today it emerged judge Ricardo Puyol also wants to quiz the pair over a separate multi-million pound land sale in Malaga six years ago.

Investigators believe a property firm linked to Connery and his wife may have failed to pay tax on the sale of development rights to land it owned on the outskirts of the city.

Local newspaper Sur today published a report by police and tax authorities alleging that the company omitted to pay £1.4m in corporation tax.

Puyol is said to have ordered a formal request for the former James Bond and his wife to appear before him to give evidence.

The request is expected to be made through a rogatory letter to authorities in the Bahamas where the couple have their official residence.

Sur said Spanish authorities were keen to quiz Connery as soon as possible because the alleged tax irregularities will become spent on July 25.

The Scot does not figure as a director of Montelagares, the Spanish firm reportedly identified in court papers as the company behind the July 2004 land sale linked to Connery.

But a lawyer at the Madrid law firm he has used is named as a former director.

The firm, Diaz-Bastien & Truan, is also under investigation over the sale of Connery's beachside mansion in Marbella, Casa Malibu, and the subsequent reclassification of the land.

It is thought to have represented the former 007 in the sale of the house.

Read more at the Daily Mail

Prodded by a query from a journalist, Kyero.com managing director Martin Dell recently took on the daunting task of analyzing the vast array of conflicting data on the trends in Spanish property.

Eventually he compiled the numbers from 14 different reports tracking the Spanish market, focusing on three main sources—official data, valuation companies and property portals.

Beyond charting the laughable discrepancies in the government data, Dell concluded the “stand-out figure,” the one reliable fact, is that the number of property transactions has fallen approximately 56 percent from the peak of Spain’s real estate glory years.

The rest of the data is less conclusive, ranging from plausible to ridiculous.

The “most pessimistic” numbers come from Idealista, a property site, which shows prices down about 23.7 percent from the peak. At the other extreme, perkier sources place the drop closer to 7 to 12 percent, a range Dell concludes is “clearly ludicrous, based on personal experience and market hearsay.”

The large portals have access to the most data and they place the drop around 22 percent, an average Dell labels the “most realistic” in the report.

“Given that the number of property transactions is down by around 56 percent, it's difficult to see how prices could not have slumped by at least 20 percent as motivated sellers undercut each other to appeal to a reduced number of buyers,” Dell says.

Dell found broad inconsistencies in the official government reports. For example, the government agency tracking transactions pegged the peak of the market as the first quarter of 2006, but the Ministry of Housing’s data, based on price per square meter, shows the market staying robust until a full two years later (and a slight 10.7 percent decline prices).

If nothing else, Dell says his analysis spotlights a gaping hole in Spain’s market.

“What the market needs is for the Spanish government to publish actual transaction prices of individual properties so that the 'hard facts' are available for further analysis,” he says. “While this will not reveal the 'actual' price paid for the property in most cases--thanks to a cash element of many property transactions--it will level the playing field.”

Source: International Property Journal

 Asking prices are still between 10% and 20% too high, reveals a new survey of house-hunters carried out in March by the Foundation of Savings Banks (FUNCAS).

 The Spanish property market correction will run into 2012, with prices down by 30% in total, say ratings agents Fitch.