Banks turning into Spain’s biggest estate agents

Property companies and mortgage borrowers are defaulting in rapidly rising numbers as Spain’s property slump digs in, leaving the banks that financed them holding the baby. Defaults and repossessions are turning Spanish banks into some of the country’s biggest estate agents.

This is not the first time that Spain’s banks have become unwilling owners of some of the country’s largest property portfolios. It was the same story in the property crash of the early 90s. Last time round there was a happy ending, as banks sold off their property divisions for handsome profits during the boom.

According to an article over the weekend in the Spanish daily ‘El Pais’, Spanish banks have lent a combined 300 billion to developers, and 600 billion to private mortgage borrowers. As the recession bites, defaults rates have quadrupled to 3.29%, back to where they were in May 1997, compared to just 0.83% in December 2007. As loans turn sour, banks are having to take back properties.

To deal with the situation, Spain’s banks are having to get back into the property sales game.

Santander, Spain’s largest bank, has set up Altamira Santander Real Estate to try and liquidate a property portfolio of 2.7 billion Euros. Hefty discounts will be used to shift the stock, which will be promoted online and in catalogues distributed in Santander’s branches. The bank’s 20,000 staff will get first bite at the apple.

Banesto will use its property arm Promodomus to try and shift a growing property portfolio of valued at 1 billion Euros.

El Pais reports that CAM Bank, Banco Sabadell, Unicaja, Caixa Galicia, Caixa Catalunya, Cajasur, Banco Popular, and Ibercaja all have similar initiatives underway. Caja Madrid, Caja España, Caja Navarra and Caja Canarias are also selling properties resulting from repossessions.

Amongst the most aggressive is CAM Bank, which has set up CAM Real Estate Opportunities (Oportunidades Inmobiliarias CAM) to dump quickly more than 450 properties with discounts reported to be around 20% and 100% financing.

According to Reuters, the initial book value assets of the property companies created by the banks are as follows (in millions of euros):

 Santander, Altamira, 2,634
 Popular, Aliseda, 1,400
 Banesto, Promodomus, 1,134
 Sabadell, Solvia, 800
 BBVA*, Anida, 629
 Bankinter**, --, 59
 La Caixa, Servihabitat, 550
 Caja Madrid**, --, 600
 TOTAL,  7,806

*Last year, BBVA invested an additional 1.57 billion euros
to buy 95.6 percent of its property fund, the second biggest on
the Spanish market, according to bank data.

**Have not created subsidiaries exclusively to manage
property assets.

About Mark Stücklin

Mark Stücklin is a Barcelona-based Spanish property market analyst, and author of the 'Spanish Property Doctor' column in the Sunday Times (2005 - 2008).

0 thoughts on “Banks turning into Spain’s biggest estate agents”

  1. carlomagno

    Bank-owned foreclosed properties coming back onto the market at steep discounts are another factor that will add to the inventory overhang and keep downward pressure on prices.

  2. polaris-world

    It all helps bring prices in the market down to where they should be. Whereas we see 20-30% price drops in certain resorts/areas there are commercial restraints preventing these happening across the board. Where we do see these price falls buyers are rentering the market. As the banks reposses the constraints are lifted as the properties re-enter the market. The whole market needs to drop 20-30%. Only then can we start to recover.

    Paul Williams

  3. Ashcan

    There has been a private closed catel run by these banks for a long time now providing “special” or “privileged” contacts with access to these reduced price properties who have then sold them on for a quick profit. Perhaps this is to become a less “closed” order now? As has been said already such volumes should result in Spanish property prices normalising at long last after the artificial 30% inflation that occurred when the Peseta gave way to the €uro.

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