As New Cycle Begins, Bank Property Director Says Sector Has Learnt From The Past

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Spain and its property sector are paying dearly for the mistakes made during the last boom. Lorenzo Castilla, the Sales Director of ANIDA, the property division of BBVA – one of Spain’s biggest banks – claims the sector now operates along more rational lines, but suggests we mustn’t forget the lessons learnt as a new cycle begins. The priority is to build to satisfy demand, and avoid over-supplying the market.

The property sector has changed beyond all recognition since boom turned to bust, Castilla recently explained in an interview organised by Inmonext, a real estate industry discussion forum run by the Spanish property portal (see above, interview in Spanish). In the boom years the priority was to build as much as possible. Today the priority is just to satisfy demand.

“The Spanish property market has gone through several phases,” says Castilla. “At first the priority was just to build, because everything that was built was sold. Later, activity started to focus on the quality of the product because it wasn’t enough to produce any old product, not everything was acceptable.”

Then came the liquidation phase, when the sector tried to “sell everything available that had not been sold in the past.”

Now we are back on a rational footing, he argues. “Nowadays, the sector is finally behaving sensibly. It appears to have learnt the lessons of the past, when coherence was conspicuously absent, and now we’re paying the price for this”.

For the moment, the sector is focused on building to satisfy needs. “If you build what’s needed, the product works. So this time it’s not about covering Spain with cranes again, but starting viable projects,” he stresses.

There are already new developments underway with sound fundamentals, he points out. “There are many examples in new areas with high demand, which makes sense,” says Castilla. BBVA Real Estate itself is studying 25 new developments with a total of 2,000 homes, to add to its 12 project (630 new homes) currently underway.

BBVA Real Estate itself admits that it’s looking at 25 projects to build around 2,000 homes. These plans are in addition to those it carried out during the crisis year (11 projects with 650 properties) and those it’s currently building (12 projects with 630 homes).

“What we need is to regenerate the productive core of the property sector with players who are rational, coherent and who present sensible projects,” says Castilla. “To do this, we need to research and study the market, and get to know and understand the client to be able to produce something that really answers their needs”.



5 thoughts on “As New Cycle Begins, Bank Property Director Says Sector Has Learnt From The Past”

  1. Campbell Ferguson

    But in 2006 and 2007, that could have been said to be happening. Builders would promote a development; they would get investor buyers committing to purchase 40-50% by putting down a 10% deposit, which they’d borrowed from the bank based on other assets; the banks would then fund the builder and so the place would be built. Unfortunately, the market turned and the original investor decided it was cheaper to abandon what he’d paid. If the value of the asset he had used as security also collapsed, then the bank had made its first loss. Then the developer found he wasn’t getting the sales expected and so he stopped the development, but only after the builder had put his money in and not been repaid. Then the bank realised that it had more problems as the loans to the developer and the builder couldn¡t be repaid and the property, on which they were secured, was only part built and couldn’t be sold anyway. And all the time the people on the ground had been asking “who’s going to occupy these apartments”. The only true test of whether a property is off the market is if it’s occupied by either a buyer or tenant.

  2. Bede

    When I was about 19 years old, i.e. 40 years ago, I worked in a bank in the U.K. at that time banks didn’t do mortgage lending but, anyway, what you were taught about lending generally was that you should always lend against the real possibility of repayment and never against the security. In the context of property this means that it’s not really important what the value of the house is, it’s much more important that the borrower can repay you from his own means. Have banks in Spain learned this lesson? Absolutely not!
    New cycle? When banks will lend you more, even 100%, if you buy the overpriced repossession property that they got stuck with when the music stopped. Sounds like -deja vu- to me…

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