SERIOUSLY THOUGH! - what are the Spanish banks to do?

I almost tried growing some balcony tomatoes, even went as far to order some seeds dirt and a small pot, but that's as about as far as it went

 Spam post or abuse? Please let us know

Rob,

How were you going to get the bullocks onto the balcony?

 Spam post or abuse? Please let us know

Came across this video today from one fo the lessor known blogs I read. I wonder if the Spanish feel t his way as well. Note the video is an hour long but very very interesting.



http://www.youtube.com/watch?v=akVL7QY0S8A

 Spam post or abuse? Please let us know

Rob, our income comes entirely from the UK. My husband commutes weekly, which obviously means an expensive lifestyle! 

The exchange rate has hit us hard. We estimate we have lost 24% of our income.

 We did have a cushion, but a builder who did a huge botch job last summer and caused structural damage, has taken care if that! The courts have awarded us costs but so far we haven't recovered anything!

Such is life! There's a lot worse that can happen, than financial problems, so I am counting our blessings while hanging in there by the fingertips!

 Spam post or abuse? Please let us know

Oh I understand, I've got a good friend (family of 6 one income) going through the exact same thing. They tried returning last year but it didn't work out. Now he's stuck with increasing expenses and an decreasing income.

 Spam post or abuse? Please let us know

Back to the banks.....

I spoke to a Spanish friend today who is a bank manager.  He is saying that the small Spanish savings banks (cajas) are going to have to amalgamate or die.

So soon, your high street will have one bank instead of five, and the staff from four will be on the "dole".

 Spam post or abuse? Please let us know

Does anybody know what level of savings are secure under the deposit guarantee scheme for Spanish banks? I know there is EU legislation governing this (surprise!) but think the amount gauranteed varies from one country to another. I can't seem to find anything about it.

Regarding the state of Spanish banks, found this article:

MADRID, Sept 16 (Reuters) - 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 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 said in a statement to 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.

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.

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.

Spain's biggest banks, Santander and BBVA reined in mortgage lending before the country's real estate bubble burst and the country's banking system has some of the world's strictest reserve requirements.

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, or cajas.

The Bank of Spain has said the country's banking system is not immune to problems in the event the crisis in international financial markets drags on.

 Spam post or abuse? Please let us know

Hi Roberto,

Sounds to me like they are talking it up. 

 

Lindie - sorry to hear bout your woes, an all too common story I'm afraid.  Do you have house insurance?  The builder has probably gone bust so don't hold your breath there.

 Spam post or abuse? Please let us know

QUOTE: 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, or cajas.

Banco Popular are covering their backs by refusing to pay out on legitimate Bank Guarantees. 

 Spam post or abuse? Please let us know

Sorry, Trish, I'm a bit dim today - what does that mean?  What are they guaranteeing?

 Spam post or abuse? Please let us know

http://www.eyeonspain.com/spain-magazine/bank-guarantee-legal.aspx.
 Hope this helps to explain.

 Spam post or abuse? Please let us know

AH! got it now - thanks Tish.  

I have never bought off plan as have always bought old properties to renovate.  Off plan always seemed a bit dodgy to me anyway, along with timeshare etc. 

A friend of a friend bought into an off plan construction, the idea being that they would sell-on before construction was completed and make a killing.  Lost the lot!

Try to imagine these sums of TAXPAYER'S money being used to bail out the American banks.......
 
The United States Federal Reserve loans $85 billion to AIG to avoid bankruptcy, Lehman Brothers files for bankruptcy protection, and Bank of America announces plans to buy Merrill Lynch, all part of the ongoing subprime mortgage crisis.

(item from Wikipedia today).

$85,000,000,000 divided by 250,000,000 people is $340 for every man, woman and child in U.S. 
And that's just one bank!

Actually, it's less than the 1,000 GBP per person that Northern Rock cost the British

 Spam post or abuse? Please let us know

Buying off-plan is no different from buying any other property (or other commodity), in investment terms. In a rising market, you can make money. The advantage (if conditions are right) is that you don't have to put up all the money, and can potentially sell for a profit having only forked out a much smaller amount than if you had bought a second hand property. Therefore your % profit is greater.
The problem arises when everyone jumps on the bandwagon of easy profits, are succored into believing all the sweet talk of salesmen, and start buying all sorts of rubbish which they can't afford, thinking that the market can only go up - when as we all know now (and should have known before) it can go down as well - just like any other investment.
Greedy banks exacerbate the situation by recklessly lending 125% of the already overvalued price of badly constructed and located properties that far exceed the real demand, to people who cannot afford to repay them, and then expect the tax payer to bail them out as if it's not their fault.
And then careful people who have saved their hard-earned find that rather than those who borrowed more than they could afford, they are the ones who could potentially lose everything! So, does anyone know how much dosh Spanish banks guarantee? I'm certain it's far less than the £35,000 guaranteed by the UK protection scheme, but exactly how much, I can't find out.

 Spam post or abuse? Please let us know

Hi Roberto,

Yes, off-plan is like any other commodity except I imagine it is more like investing in the futures market.  The problems that I can imagine are legalizing the property (I have personal experience of this with old properties) and, of course, builders going bust, running off with the deposits, dodgy construction, cost over-runs, etc. etc. and that's just off the top of my head.

At least with an off plan, all you are losing is some money and a dream of a funded future from rentals / sales.  Many more are looking at losing their primary abode, and ending up where?  Bus shelter? With nothing.  All those years paying the mortgage, for nothing.

The original question to this thread was "what will happen if everyone defaults on their mortgage?" - the banks don't want to be owners of property that they can't sell.  They need to give everyone some breathing space, or they will all fold.

See also "Frozen Mortgages" blog from María.

 

 Spam post or abuse? Please let us know

I see what you mean. The problems you mention though are no doubt symptomatic of the overheated market that we saw over the last few years. In more "normal" times, the risks would probably be far less (as well as the potential returns). I wonder whether any of the major culprits will have learned their lessons, though? I doubt it. Greed overrules all other senses, I think.

 Spam post or abuse? Please let us know

And honesty, decency, humanity.

 Spam post or abuse? Please let us know

But Max a lot of people were suckered into believing that "flipping" an off plan had no tax liability and that a 125% motgage did not matter they would have sold on at the Private Contract stage and it was all pure profit. What planet did they live on?

 Spam post or abuse? Please let us know

Planet Spain?

 Spam post or abuse? Please let us know

Why should banks have to be more flexible? They offer a product, and people (read adults) buy it. They sign along the dotted line. No-one puts a gun to their pea-brained heads. And now they want the lender to be more flexible. Are people now so uneducated/foolish as to be incapable of doing even the most basic research, and of making common sense decisions about their own financial future. Sheep.

 Spam post or abuse? Please let us know

Why should banks have to be more flexible?

Because if there not they're going to go bust. Unfortunately as Americans are finding out when bubbles burst everyone hurts. This I read somewhere.

"I bought a house in Detroit a few years ago, put 20% down a 30 year mortgage and now I'm 20% underwater, what do I do."

Ouch!

I'm surprised it's taken so long but the bubble is bursting here, retail and car sales have all plunged, meaning people are doing everything they can to hold on to thier houses, unfortunatly most won't be able to. The worse of it, those like headless who avoid the maina researched and bought a reasonably price place, put down a proper downpayment will get burnt just like everyone else.

 Spam post or abuse? Please let us know