Question following Moody’s article on bank-owned property

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This topic contains 7 replies, has 6 voices, and was last updated by Profile photo of logan logan 6 years, 1 month ago.

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  • #55926
    Profile photo of Tinnat
    Tinnat
    Participant

    If the banks now have 20.5 billion Euros of repossessed property on their books, why are they not putting it on the market now? And when is this likely to happen?

  • #101293
    Profile photo of Anonymous
    Anonymous
    Participant

    Why are they not putting it on the market now?

    Because it would further deflate prices and erode the declared value of their assets.

    When is this likely to happen?

    The million dollar question. They rode out the early 90’s recession by holding onto properties until the market improved. It appears they are trying to do the same now. The big question is, given the scale of the problems this time around, will the be able to do so again? The jury is out on that.

  • #101296
    Profile photo of Anonymous
    Anonymous
    Participant

    How has this 20 billion being calculated?

    Using a figure of a loss of 100,000 Euros and 1.5 million UNSOLD properties then that alone is 150 Billion Euros. (100,000 is the figure I am using for the build cost of property)

    Then there are the sold homes that owners have defaulted on and have been repossessed. I don’t know this figure, but making a guess again at an average mortgage default of 100,000 Euros and 500,000 properties, then that’s another 50 billion Euros.

    Ok some guesses in the above, but 200 billion as opposed to your 20 billion is my guess at the sort of losses the banks are holding today.

  • #101297
    Profile photo of logan
    logan
    Participant

    Make no mistake the banks in Spain are in serious trouble. I spent all day yesterday with bankers negotiating a deal on bank owned property in a southern province. Currently they are repossessing more property than they can handle. Panic is starting to set in.
    The problem with Spanish banks from a private investors position is that you cannot deal with the organ grinder direct. You have to speak to the middle ranking guy they send. He then has to pass offers on up to a chain of command. Then you wait weeks for an answer. Then it starts all over again. Very frustrating.
    In one province alone in the south where I currently am, 60 developers have been foreclosed in the last 3 months. Half built developments lie gathering weeds. This may or may not present an opportunity in normal market conditions. However I am struggling to make any decisions. The sheer volume of current bank owned property is staggering. Common sense tells you it could take a decade or more to return to market norms. Its nothing short of a disaster for Spain getting worse with every passing day.

  • #101298
    Profile photo of Anonymous
    Anonymous
    Participant

    The organ grinder is not given this authority as he/she could start taking back handers.

  • #101315
    Profile photo of DrRobert
    DrRobert
    Participant

    Then why not send the man who can make the decisions?

  • #101317
    Profile photo of Anonymous
    Anonymous
    Participant

    Decision, making is an area that the Spanish dont excell. They are patrified of making mistakes in case things go wrong.

    The management does not trust the employees nor has much confidence in them or their abilty. With low self esteem & fear of making a mistage they prefer to not take a decision.

  • #101318
    Profile photo of logan
    logan
    Participant

    I think it’s more that they don’t understand market economics. The current situation is outside their experience and yes there is a lot of fear out there. Currently the banks are employing the same sales personnel that sold developments off plan a few years ago. They are given an agenda to sell but it’s hopelessly unrealistic. Senior bank management with the power to move the log jam are hiding in their offices, waiting for the roof to fall in.
    I’m in my hotel now on my way home, frustrated that deals worth a realistic investment will ever be possible in the current situation in Spain. At least I have enjoyed some golf!! 😀

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