Spain's banks are stifling its recovery
Thursday, July 22, 2010 @ 12:19 PM
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