Spain - 35% writedowns suggest carnage ahead

baby_boomer

Telegraph - Mortgage books written down by 35% in anticipation of another stage to the house price crash

And these are loans written by Santander, which only recently was boasting of how they could teach the British & American banks a thing or three about responsible, low risk banking

"....Fitch said the loss provisions on the debt suggested a write-off of 35pc against book value. "What they are effectively saying is that property prices in Spain are going to fall by almost that much [35%]," said Andy Brewer, the agency's senior director for structured credit.

The arrears rate on the most recent vintages has reached 7pc to 8pc, with high levels of default among foreign residents. Fitch said it suspected that British and other North European owners of second homes in Spain were throwing in the towel.

This may create serious legal complications. British owners may assume that they can walk away from a Spanish property that has fallen into negative equity. In fact, they can be pursued for the assets and income in Britain until the outstanding debt is paid off...."

GDB2222

The situation is not helped by people finding out that the house they bought in Spain did not have the right permissions, or those are withdrawn because obtained through graft. Then their house is seized/bulldozed.

baby_boomer

This is Money

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


The collapse in the Spanish property market is expected to leave more than 900,000 new homes unsold this year and Spain's prime minister Jose Luis Rodriguez Zapatero warned this week the nation's banks will not escape unscathed. 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......"

"...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...."

That's more new homes unsold than they build in America in one year :eek:

American population = 300 million.
Spanish population = 40 million

The pain in Spain
will wipe out any gain

michellecyprus

I tend to agree with the above comments, it looks like it will get worse before it gets better. A friend of mine has been trying to sell her place in Almeria for the last six months, even though she has it on the market for 20% less than she paid off plan, she has struggled to get interest, although there is a forum/web site for private individuals looking to sell direct to potential buyers, thus cutting out the need for an agent, which therefore means you will net more from the sale. She has it on www.sellabroad.com and although she has not sold yet, she has had a couple of enquiries so you never know.
Michelle

moanymoany

I was under the impression that the prices in Spain have been falling for about a year.

zappahey

michellecyprus wrote: »

She has it on www.spamabroad.com and although she has not sold yet, she has had a couple of enquiries so you never know.
Michelle

Hmm, 4 posts and every one seems to mention this this site and another which is very similar.

Credit where it's due, you've been reasonably subtle.

Trollfever

Supply/Demand.

I recall reading that more new homes were being built in Spain than in the UK and Germany combined.

mystic_trev

Second para - the web nanny thing won't let me use the actual word!

“Those who don’t sell for 25% to 35% less (or whatever necessary) will be bugered by an extra little problem: financial costs of 7% (Euibor plus 1.5% at best for new refinancing deals) on 80% of the cost of the property,” Ortiz is quoted as saying. “That means an additional annual financial cost of 5.6%. After 2 or 3 years the developer will have older homes - commercially damaged goods - and 17% more expensive, which means having to sell for 42% to 47% less in real terms.”

:rotfl:

http://www.spanishpropertyinsight.com/buff/?p=270

baby_boomer

All of this isn't stopping a Spanish property "Robin Hood" building more apartments for young first time buyers in Madrid. Perhaps the existing properties are just in the wrong place, at the wrong price.

Sunday Herald - Long queues for cheap homes.

".....Developer and self-styled Robin Hood Jose Moreno offered 18 to 35-year-olds the chance to buy a flat on the outskirts of Madrid for as little as 120,000, paid in instalments of up to 600 per month over a 20-year period.

The 2100 flats have not yet been built, but Moreno hopes to buy sites in the south of Madrid and surrounding areas to start more cheap housing projects, similar to other schemes he has started...."

The property boom in Spain left millions of young people living with their parents, and cramping their style.

seven-day-weekend

I'm glad to say we do not have a mortgage on our Spanish house. Neither is it a new-build, nor is it a holiday home, neither is it on the coast, nor in its own halfway up a mountain. It is an old traditional village house in a traditional village It is a cheap house, we did not want to overcommit ourselves when we bought it, and if we hadn't been able to afford anything for the capital we had available, then we wouldn't have bought anything..It is our full-time home at the moment.

It will weather the recession better than some and if and when we sell it (which will not be yet) we will be quite happy to get whatever we can for it - hopefully we should get our money back, but if not, well, we'll still have lived in it for so many years (coming up to five already).

We also have a mortgage -free house in the UK where we can live if necessary.

So we are not actually too bothered about our personal situation.

However, I have seen here expats with huge mortgages, and no income, who have sold everything and bought here right at the top of the price rises.. Heaven knows what they are going to do because they WILL be in negative equity.

Some friends of ours downsized to release capital, but they can't keep doing that. Hopefully this capital will last until there pensions kick in.

Not everyone has this option though.

Spain has an enormous glut of half-finished houses and apartments which they will never sell and many of them are illegal. I think the crash in their construction industry is chickens coming home to roost quite frankly.

baby_boomer

There was a recent news item about how the exchange rate change has taken away the spending power of English expats in Spain so that many who were able to enjoy themselves were now just surviving or even thinking of packing it in.

This isn't going to help the Spanish property market, and nor is the drying up of remortgaging in the UK which funded many previous purchases.

Of course, if Spain wasn't in the Euro then its currency would have fallen along with the £ because of the severity of the recession and unemployment.

But Spain IS part of the EMU.