Analyst Predicts Surge in Bank-Owned Property Sales

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After years of playing a waiting game, Spanish banks are ready to start selling off 40 billion euros of repossessed property, an industry analyst predicts.

Aura Real Estate estimates the banks are holding close to 400,000 properties, including homes, land and commercial real estate – far more than the banks have publicly declared.The banks have only reported ownership of 180,000 units valued at 17.2 billion euros, Aura told Bloomberg.

But signs of stabilization in the market and increasing pressure to cleanse their books of the bad deals will drive banks to sell property, Aura forecasts.

“The gap between asking prices and bids is narrowing,” Fernando Acuna, head of Aura, told Bloomberg. “Given the sheer amount of product available, we foresee a huge amount of bank-owned real estate and non-performing loan portfolios being sold in coming months.”

But this also could result in a flood of properties on an already saturated market, putting more pressure on prices. Last week Sareb, the Spanish “bad bank” overseeing 50 billion euros worth of real estate, announced it would spend 100 million euros to finish half-built projects, in hopes of attracting higher prices.

Repossessed properties in Spain are already selling at a steep discount. Bank-controlled homes typically sold for 72 percent less than the value in 2009, compared to 48.3 per cent to all properties sold, Fitch analyst Sanja Paic told Bloomberg.

But pressure is mounting for the Spanish banks to unload the real estate, analysts say.

“The provisions at banks hurt them far more than the funding and maintenance costs,” Mikel Echavarren, chief executive officer of Irea, a Madrid-based debt-restructuring firm, told Bloomberg. “The sooner they can sell these assets, the quicker they can reverse such provisions and obtain liquidity.”

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