“Prices haven’t dropped and buyers won’t return"

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This topic contains 15 replies, has 8 voices, and was last updated by Profile photo of angie angie 7 years, 2 months ago.

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  • #55222
    Profile photo of Anonymous
    Anonymous
    Participant

    A good article describing the con involving Spanish banks and their incredible effort to stop the decline of prices. They managed to do it in the ’90s but now they needed to
    acquire at least 20 billion euros ($29 billion) of real estate in the past 18 months,
    and thee worst is yet to come…

    http://www.bloomberg.com/apps/news?pid=20601109&sid=aXWVn3mlVH4c

  • #94393
    Profile photo of Anonymous
    Anonymous
    Participant

    Good article. Sums things up pretty well.

    One of the people I´ve been following recently is Barcelona based economist Edward Hugh. He is convinced that Spain will have to call in the IMF before long.

    Also he has just posted this in his Facebook blog:

    “Banco Popular has no intention of selling homes for less than the bank thinks they’re worth because low interest rates mean the cost of holding them is comparatively cheap, Chief Financial Officer Jacobo Gonzalez-Robatto said in July.”

    This is what you call short sighted-ism gone mad. Since just imagine what happens when interest rates rise and they have to sell the just when the cost of servicing the mortgages will also be rising for the people who might like to buy…. Read More

    Remember, Spain cannot set its own interest rates, and France won’t be thrown into its own huge bubble just to help out Spain’s banks.

    All these people in the Spanish banking sector are way way out of their depth.

  • #94394
    Profile photo of Anonymous
    Anonymous
    Participant

    @brianc_li wrote:

    This is what you call short sighted-ism gone mad. Since just imagine what happens when interest rates rise and they have to sell the just when the cost of servicing the mortgages will also be rising for the people who might like to buy…. Read More
    [/i]

    They do not care about tommorow. They hope the hoards of Northern European citizens would return like locusts to buy every single apartment/house.

  • #94402
    Profile photo of Anonymous
    Anonymous
    Participant

    Just had lunch with Edward Hugh, a very charming man. We both agreed that, for better or worse, these are fascinating times to be living in Spain. And if you’re a housing market analyst like me, it couldn’t get more interesting. We are looking at a once in a lifetime event. You just have to hope you’re still standing when it’s all over (which could take years).

    He pointed out to me something I hadn’t picked up on. There’s a funny case of moral hazard going on in all this. The Spanish banks appear to be burying their heads in the sand with regard to their property problems. But in fact they are following a rational course of action. If the problem doesn’t explode, then they might be able to muddle through until things pick up again, and may even be able to turn a profit when they sell. But if it explodes, guess who will have to pick up the bill? Germany and France, that’s who. So it’s tails Spain wins, heads the Germans lose (bailing out Spain – that’s the bargain implicit in the Euro). Nice one.

    Mark

  • #94404
    Profile photo of Anonymous
    Anonymous
    Participant

    “He pointed out to me something I hadn’t picked up on. There’s a funny case of moral hazard going on in all this. The Spanish banks appear to be burying their heads in the sand with regard to their property problems. But in fact they are following a rational course of action. If the problem doesn’t explode, then they might be able to muddle through until things pick up again, and may even be able to turn a profit when they sell. But if it explodes, guess who will have to pick up the bill? Germany and France, that’s who. So it’s tails Spain wins, heads the Germans lose (bailing out Spain – that’s the bargain implicit in the Euro). Nice one”

    Perhaps Blomberg article and Edward Hugh are right, I don’t know,…time will said.

    But what really intrigue me is the way this very important news arrive to the light,…like a secret,…”in petit committee”…Isn’t it very strange?.

    I mean, if Blomberg or Edward Hugh is not right,…what they have lost?,…a little of credibility,… in the present times not too much.

    But it looks to me that the people, financial corporations, companies, governments… who really take decisions and are risking their money have another impression or perhaps a worse information.
    • Moody didn’t downgrade the risk of the Spanish debt.
    • The big Spaniard Banks have had a great support in the Stock market.
    • With all this problems to the Euro-zone (the Spanish probably bailout) the Euro currency have been wining positions against other currencies.

    Any of the facts I numbered above shouldn’t be happening if the actors who really take decisions are aware of the secret,…billions of Euros, invested in companies, in Euro governments debts, Government reserves in Euros notes,…am I the only person skeptic about secrets?.
    My regards

  • #94405
    Profile photo of Anonymous
    Anonymous
    Participant

    @tree wrote:

    But what really intrigue me is the way this very important news arrive to the light,…like a secret,…”in petit committee”…Isn’t it very strange?.

    What are you talking about? There is no secret. We were just having a discussion over lunch.

  • #94406
    Profile photo of Anonymous
    Anonymous
    Participant

    To Mark:

    Sorry, If I have said that this information looked as a secret is because the huge important economically and politically implications it has,… and obviously is well ignored for very important actors,…so it looks like a secret.

    Sorry again, if I didn’t explain well, surely I get contagious about the fascinating international consequences of the lines you wrote.
    My regards

  • #94407
    Profile photo of Anonymous
    Anonymous
    Participant

    @mark wrote:

    Just had lunch with Edward Hugh, a very charming man. We both agreed that, for better or worse, these are fascinating times to be living in Spain. And if you’re a housing market analyst like me, it couldn’t get more interesting. We are looking at a once in a lifetime event. You just have to hope you’re still standing when it’s all over (which could take years).

    He pointed out to me something I hadn’t picked up on. There’s a funny case of moral hazard going on in all this. The Spanish banks appear to be burying their heads in the sand with regard to their property problems. But in fact they are following a rational course of action. If the problem doesn’t explode, then they might be able to muddle through until things pick up again, and may even be able to turn a profit when they sell. But if it explodes, guess who will have to pick up the bill? Germany and France, that’s who. So it’s tails Spain wins, heads the Germans lose (bailing out Spain – that’s the bargain implicit in the Euro). Nice one.

    Mark

    Mark, whatyou say makes a lot of sense. But there are some aspects which are adding to the gravity of the problem:

    – Eastern Europe (Romania, Bulgaria, HUngary, etc) has seen a huge fall in property prices. Now, who owns most the mortgages there? Austrian. Italian banks. They also hold on many properties to stop the decline.
    They will also be bailed out by Germany.

    – Italy and Greece also have a fall in property prices. Their banks will also need to be bailed out.

    – French property will also have a major correction. Their banks will also need to be bailed out.

    – as the cash-for-bangers schemes are phasing out, many auto industries will need to be helped out, especially Opel who might lose more than 20K workers soon.

    Now, who is it going to be bailed out first? Spanish banks? Austrian banks?
    French banks? Opel or BMW?

  • #94466
    Profile photo of peterhun
    peterhun
    Participant

    @tree wrote:

    To Mark:

    Sorry, If I have said that this information looked as a secret is because the huge important economically and politically implications it has,… and obviously is well ignored for very important actors,…so it looks like a secret.

    Sorry again, if I didn’t explain well, surely I get contagious about the fascinating international consequences of the lines you wrote.
    My regards

    You have a point which Edward Hugh mentioned on his Blog quite some time ago – the facts are been hidden by the Spanish media. The seriousness of Spain’s situation doesn’t seem to be commonly known to the Spanish themselves.

  • #94475
    Profile photo of Melosine
    Melosine
    Participant

    Drove down to Mojacar today and from Aguilas to Vera thay are still building estates !!
    Not I think though for the 2nd home market so presumably the Spanish must still be buying.
    Not only that but a fortune is being spent on re-routing and widening major roads, Roundabouts are springing up like daisies.

  • #94478
    Profile photo of Anonymous
    Anonymous
    Participant

    Melosine that is precisely the issue that is being highlighted by Edward Hugh and others. There are hardly any buyers for these properties.

    The banks are hiding the scale of their bad debts by rolling over loans to otherwise bankrupt developers. The hope is that, once completed, market conditions will have improved and they will be able to sell them.

    They may get away with it but the scale of the problem could well overwhelm them. I´ve seen estimates of between one and three million unsold homes. It will take at least five years, probably longer, to clear the backlog.

  • #94480
    Profile photo of logan
    logan
    Participant

    I think I should have read this thread first before writing my post Banks as estate agents. No matter. I agree with Mark that we are ‘living in interesting times.’ Only, perhaps for property professionals.
    Spain remains the same place if you simply wish to own a holiday home and let it out occasionally and keep it for your eventual retirement. The sun continues to shine if you don’t think about your declining asset values, or poor rental returns.
    The Spanish property market is now a busted flush. In fact in truth there is no market any longer in which any professionals can operate successfully.
    Anyone who buys into the current market needs to realise they will likely loose a great deal of money, with no capital growth for a generation, huge rising overheads and an inability to re-sell for years and years to come.
    I have always believed that no matter how catastrophic markets fall there is always room to make money if you know where to look. However having just spent a few weeks in Spain looking for signs of opportunity I can make a few first hand judgements.
    Spanish banks now own the majority of the unsold market and their asset base is declining rapidly as more and more repo’s take place. Whole communities are being devastated by half built buildings and a lack of maintained infrastructure. The pips are starting to squeak and banks, particularly the Caja’s are facing terminal decline. Spain has too many banks that have strayed from their principal functions as savings and loan businesses. When they become estate agents the country should worry. I predict that when ECB bail out cash ends they will hit the wall. Normally such market conditions do present opportunity. Multiples attract drastic discounts but when a market is so hopelessly over supplied it means nothing.
    I have come to the conclusion for many additional reasons connected to the state of Spain itself that the country is finished as a viable market opportunity in my lifetime and probably yours too.

  • #94484
    Profile photo of Anonymous
    Anonymous
    Participant

    It would be easier to sell the glut of homes on the coast if many of them weren’t so hideous.

  • #94485
    Profile photo of Anonymous
    Anonymous
    Participant

    @mark wrote:

    It would be easier to sell the glut of homes on the coast if many of them weren’t so hideous.

    Well, nowadays they sell hideous aparrtments in Las Vegas, Miami or Phoenix. But they go for $10K for 1 bedroom apt. not 100K Euros as in Spain…

  • #94493
    Profile photo of angie
    angie
    Spectator

    Absolutely right Mark about the glut of hideous property on the Coast which are now looking like ghost towns too, these won’t sell (although Chris Mc thinks they will) unless very very cheaply because they are poorly built and scruffy. Spain would be better off bulldozing them.

  • #94496
    Profile photo of angie
    angie
    Spectator

    How refreshing to read both logan’s and brianc’s postings above, sums Spain up in a nutshell as to it’s problems and uninvestable future for years.

    Complete opposite to the likes of Chris Mac and some others who are estate agents, the good times have gone for them because few people trust them now and rightly so. Feel sorry for those smaller agents who are trying their best but it was ruined for them by the big boys.

    Spain could of course try and mitigate their losses and mounting problems including it’s unsold property mountain, it’s depressing scarred coastline, it’s unregulated property market. It won’t of course because it’s head is in the sand and it never addresses the often media covered scams that continue with impunity.

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