thespanishbrick.co.uk
The aftermath of the credit crunch for Banks in Spain is that they have become a major player in the property business because of repossessions.
At the pick of the crisis, mid 2009, Banks had a portfolio of 100,000 units in Spain. According to Idealista.com, 40 different Banks offer currently more than 17,000 properties in their corporate websites. Also, Banks are organizing their own corporative Property show in an attempt to get rid of property assets.
This is a bad moment to have a large property portfolio if you are a bank given that from October 2010 Banks must have a provision of 30% of the value of the property assets, which currently are already valued in € 60 billion. That is why they put hands on selling the properties that they had to repossess.
Is positive for property investors in Spain that Banks are holding a large portfolio of properties and willing to sell them as soon as possible? I would say: Not really!
Given that there is an oversupply of around 800,000 units in the Spanish market, it is likely that there are plenty of low quality properties in Bank portfolios that have been already launched to the market. The portfolio has been generated from repossessions and if the property price is 40% to 70% off it is because they are extremely difficult to sell.
During the expansion of the property bubble, unprofessional developers were building in remote places enlarging the property stock with really poor products that nowadays are unsalable. Those products are today the repossessed by banks.
I mean unprofessional developers because out of the blue hundreds of new developers wanted to take a stake of the property pie and develop for speculative purposes. They built up developments without any market guidelines such as location, quality and cost efficiency. There are many professionals in Spain but during the bubble the market become a significant mess.
Unfortunately, there is not a proper inventory of these “junk properties”. That may be a good task to do: a list of junk property developments !!!!
The main cities never fail
Properties in main cities are still the best investment in Spain. Forget the coast and second residences if you are an investor. Prices have dropped in cities by 12% since the crisis started and the demand slows down. Banks and professionals shared the viewpoint that the property price in cities will not drop furthermore, in a recent Property Forum held in Madrid three weeks ago.
CONCLUSSION: It is potentially a good time to invest in Spain but do not get caught by attractive banks offers. Probably it will take a while to find the right bargain but it is there. Get advice and the service of an agent with a good history. Do not trust the bank… they are not agents and cannot lead your investment