Spanish property problems deepen

Spanish holiday homeowners are about to feel further pain as the country's weaker banks struggle and property prices and demand continue to fall.

While Spain's giant banks Santander and BBVA have managed to ride the current financial storm, the nation's smaller banks and savings and loans institutions cajas are struggling to remain afloat.

Meanwhile, there is a shortage of new UK buyers, as many prospective owners struggle to raise funds with a banking squeeze in UK and Spain and the falling pound raising mortgage and property costs.

Prime minister Zapatero warned the cajas were facing mergers or takeovers this week, according to the Financial Times, as their bad debts from residential property lending rise – a scenario likely to lead to a further tightening in the property market.

The cajas are heavily involved in Spain's property industry, lending both to developers and to mortgage borrowers.

The warning came as Spanish property valuations firm Tinsa said that Spain's number of unsold homes was likely to hit 920,000 this year, with holiday hotspots hit hard.

Tinsa said that house prices fell by 4.9% annually in September, decreasing for the seventh consecutive month. This information contradicted Spanish Housing Ministry figures which said prices fell by 1.3% in the third quarter of 2008 to leave them up 0.3% on September 2007.

However, experts consider that both figures underestimate the decline in property values in many popular areas, with the Costas having large numbers of unsold and unfinished developments.

British owners of Spanish property have been relatively insulated from price falls by the 15% fall of the pound against the euro over the past year, making their Spanish home worth more in terms of sterling.

However, those who have taken out sterling mortgages in the UK to pay for their properties or are having to exchange their sterling earnings into euros to pay Spanish mortgage bills have seen repayment costs rise substantially.

Meanwhile, falling house prices in the UK and a right mortgage market have seen a dramatic reduction in equity being released from UK properties according to the Bank of England and a far lower level of demand for overseas property.

Although the Spanish property market is undergoing a correction, overseas property experts predict that a flight to quality will mean that it should remain top of the pile for British holiday homebuyers.

Conti Financial Services, an overseas mortgage specialist, says that Spain still remains the number one destination with 15% of its enquiries coming for the traditional favourite, down 2% on last year, ahead of France (14%) and Turkey (11%).

The broker said that Spain's long-established market will provide long-term growth and remained popular as a lifestyle option for expats and holiday destination with sustained rental demand.

Simon Conn, of Conti, said: ' Spain and France are still leading the pack, albeit with a narrowing margin, and it's not difficult to see why. Affordable prices, low interest rates, easy access and great weather have all contributed to the attraction of these destinations, but their lead is being weakened as investors turn to emerging markets. The strong euro has also taken its toll.' 

(from This is Money)

Thank you Roberto for posting the 'This is Money' report.

Those purchasers with  bank guarantees issued by the smaller banks and cajas could be in a really precarious position if their developer is also struggling .

Like your usual posts, it was an interesting read but does make  one wonder where it will all end.

Here is a good summary of the banking problems. It can be summed up in three words: External Money Flows,

So at the heart of the current problem in Spain lies, not the fact that 12 month euribor interest rates went up somewhat, which they did, and which was (of course) an aggravating factor, no, the real reason that Spain now has around one million empty properties waiting to be sold (apart from the fact that there seems to be no switch here to "shut off" the construction industry when it produces products for which there is no market) is that the Spanish banks have been unable to raise sufficient money to provide the mortgages that are needed to enable people to buy them (or better said they are unable to raise the money at prices which make the mortgage business a profitable one for them).

  and

According to the latest (provisional) data from the Bank of Spain, Spanish banks lent 33 million euros LESS to Spanish households in August than they did in July. After years when the banks were lending between 8,000 and 10,000 million euros a month, this situation, I think, counts as what people in the technical jargon of the trade call a "sudden stop". The whole Spanish financial system seems to have seized up in August. Even lending to non-financial corporates - which had been increasing during the boom at the same rate as to households - virtually dried up, with only 523 million in additional lending.

full story here spaineconomy.blogspot.com/2008/11/spanish-crisis-in-nutshell.html

Hi,

I hope someone can help me. My mum and i bought an apartment in la murada, orihuela, 3 years ago in cash and in full through atlas/aroca and the builder servicios y proyectos mojica.s.l  and have not received our deeds...surprise surprise!!!!! All the other atlas customers who live on our urbanisation have yet to receive their deeds. We have just found out the seriousness of our case and went to atlas who denied all responsibility and we managed to get our contract of compravenda from aroca with our solicitor and the power of attorney from aroca which we signed so that aroca could sign for our deeds whilst we were still living in the UK at the time. However, we have appointed a new solicitor in albatera to start legal proceedings against the builder as it seems that atlas blame aroca and aroca blame our builder, SPM.SL, as SPM have a mortgage on our property even though they have received our cash payment in full. I have no idea what has gone on as yet as have only started proceedings against the builder and would like anyone in the same or similar situation to contact me as i am willing to take this as far as it goes.... albeit, with not many more life savings left but will do anything and everything physically possible that we take this to the highest attention of the authorities! i look forward to all your replies!!!!

You or your official authorised representative signed for the apartment at the notary and thus you own it fully and not via private contract?  If so then what was your solicitor doing allowing the mortgage on that property to continue? 

Similarly if your solicitor allowed you to make 100% payment withoout signing at the notary then he or she was negligent in that respect......

If ARoca (do you mean Aruka?)  signed with your power of attorney and allowed the mortgage to continue then they are negligent........this all sounds a real mess, I hope you get it sorted soon