There was an interesting couple of articles this week in the Spanish daily ‘El Mundo’ about bank repossessions in Spain, and what the 10 biggest lenders are offering investors.
One article pointed that Spain’s banks and savings banks – known as cajas – are now the country’s biggest real estate companies. “Nobody knows how many properties they own, not even the banks themselves,” one expert told El Mundo. Their stock of repossessions is growing fast, and is expected to keep on doing so. All thanks to foolish lending in the past.
Banks aren’t, or shouldn’t be, in the property business, so this is a big headache for them. To liquidate their growing stock of property banks start by classifying property as ‘A’ or ‘B’.
‘A’ is new build from developers who can’t repay their loans, good quality, in good condition, and easier to sell, in theory at least. This is reported to make up 70% of the stock the banks now hold. Banks are using their own property divisions – recently set up in most cases – and branch networks to sell this ‘A’ property, offering discounts and preferential financing terms.
(In my opinion the article is too optimistic about the sales potential of the ‘A’. After all, there are quite a number of new promotions, finished and standing empty, that have no future. There are just no buyers for them at any price.)
‘B’ is made up of repossessions from home owners who can’t pay the mortgage. There are forecast to be 74,000 foreclosures this year, and banks already have 9 billion Euros of bad debts from private owners on books.
The problem with ‘B’ is its variable quality, which Santiago Baena, President of the API estate agents organisation, describes as “highly suspect”. At this stage in the downturn, much of it is downmarket, in many cases gutted or vandalised by former owners. “The cheapest and the worst quality” says one expert. Banks are trying to sell their ‘B’ properties through external channels, offering big discounts of “up to 50%”, explains Baena.
The other article on the subject reviews the property offering of the 10 biggest lenders
Banco Santander (Spain’s largest bank)
1,300 discount properties, 400 of which have already been sold to the bank’s employees or other select groups (such as employees of Telefonica, Spain’s version of BT) with discounts of 20% to 30% and 100% financing with terms of 40 years. Now starting to sell to the general public through its property division Santander Altamira Real Estate.
BBVA (Second largest bank)
900 new builds and 600 resales all around Spain. On sale to the general public with ‘offers’ but no overall discount policy. Available through property division Anida. Best ‘bargain’ on offer flat of 56m2 in Madrid for 125,000 Euros
700 properties around Spain on offer to general public, but preferential financing terms only offered to employees and family. Selling through property division Aliseda Gestión Inmobiliaria. Best ‘bargain’ on offer flat of 93m2 in Manresa (near Barcelona) for 166,000 Euros.
Property portfolio largely comprised of building land, rather than housing. Selling to professionals through property division Solvia Gestión Inmobiliaria.
1,3000 new builds all around Spain, with prices that “reflect the market situation.” Selling through 20 agents, including Knight Frank, to general public, offering preferential financing terms of Euribor +0% for 40 years. Reported to be closing more than 100 sales a month; star product 2-bed flats in Ensanche de Vallecas (Madrid) for 164,500 Euros. Setting up own real estate portal Casaktua.
La Caixa (Spain’s biggest savings bank)
2,000 resales all over Spain, largest selection being 320 resale properties in Murcia. Offering discounts of 25% minimum, and 5% on top for good clients. Selling through own real estate division Servihabitat, branch offices, and select estate agents. Best ‘bargain’ 76m2 flat in La Latina (Madrid) for 205,200 Euros.
1,000 properties primarily located in big cities and on the coast. Biggest selection in Madrid (244), Valencian Region (276), Catalonia (177), and Murcia (91). Offering discounts of up to 40% and financing of Euribor +0.5% with no opening commissions. Selling to general public through website and auction house Reser. Best ‘bargain’ 67m2 flat in historic Old Town of Barcelona for 152,500 Euros.
800 resales at prices “adapted to the times” but no across the board discounts other than “3 properties at give away prices every week” available from its website. Half of stock located on the coast, Valencia (240), Alicante (134), Castellon (59), Murcia (24). Best ‘bargain’ 90m2 flat in Barcelona for 225,000 Euros, down from 290,000 Euros.
Stock of 3,600 properties all over Spain, 1,700 on offer with discounts of up to 30%, and 1,800 properties available for rent with option to buy. Selling to general public through real estate division Procam, promising to repurchase property if buyers run into problems paying the mortgage. Best ‘bargain’ 85m2 flat in Chueca, the ‘gay’ district of central Madrid, for 157,500 Euros or 540 Euros/month in rent.
2,500 properties (not all residential) with discounts of 20% to 50%, sold through real estate division Mediterranean Inmobiliaria with auction and bidding system online. Best ‘bargain’ 98m2 flat in Elda (Alicante) for 35,610 Euros.