Spain’s ‘bad bank’ could push down the price of property in the country

Spanish banks may be forced to
sell property assets at lower prices than they had hoped because of the impact
of the country’s new ‘bad bank’. Reuters has reported that this is because banks
have to ‘compete for buyers with Sareb, the agency tasked with clearing up the
weaker banks after a property crash.’

All this could mean that Spanish
properties could become cheaper in 2013, as we see next.

Banks may be forced to offer even steeper discounts

Reuters reports that ‘banks were
left holding hundreds of thousands of houses, half-built commercial and
residential developments and plots of land after borrowers and developers ran
into trouble when the property boom turned to bust in 2008.’

In 2012, Spanish banks began
selling property assets at significant discounts in order to get these homes
off their balance sheets. However, with Spain in recession and facing an
unemployment level of 26 per cent, domestic demand for homes has been weak, even
at bargain prices.

Now, however, the banks face
competition from Sareb, the ‘bad bank’ set up to manage the property assets of
lenders who secured a bail-out. The first lot of 13,000 Spanish properties was
put up for sale at the end of January 2013, many at significant discounts.

Since Sareb is taking over assets
from rescued banks at discounts that are greater than those forced on the
sector by the government, many experts believe that these disposals will push
down prices.

Sareb has to sell its property
assets at substantial discounts and so the other banks may have to follow
suit. Banks will have to offer similar prices to those offered by Sareb and that
could well benefit overseas buyers looking for a great deal on a Spanish home.

For example, BBVA has reported that it sold 12,000
foreclosed properties in 2012 at an average 40 per cent discount. To compete
with Sareb it may have to offer even greater discounts!

 
Author
Nick
Marr