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Government puts pressure on banks to reduce house prices

The Government has introduced higher capital requirements and bigger provisions on property portfolios with the objective of driving down house prices.

It’s not often a Government actively targets lower house prices, but that’s what this Government believes it has to do to clean up the banking system and get credit flowing again.

The main measure being introduced is higher provisions on the property portfolios held by banks.

“We believe that with this reform we will give credibility to the financial system and clear up the doubts surrounding the banks’ real estate assets,” de Guindos told the Spanish press.

By Government estimates, the Spanish banking system is troubled by €175 billion of loans to developers that are in default.

By forcing banks to recognise bigger provisions, the Government hopes house prices will fall, the property market will pick up, and banks will start lending again.

But some experts have warned that the new measures will fail.


SPI Member Comments

One thought on “Government puts pressure on banks to reduce house prices

  • If govenments throughout the world implemented something like but better than this? I recon if property was forced down by a new pricing scheme in every country to a new leval playing field then the world would not be in the mess it is now

    People may say “But, i wont be able to buy a house as good as what i already have”? “Of cause you would! Because the house down the road in your price bracket has also gone down! Everything is relative, Houses are for living in, Not to buy and sell like cars and every one on this planet has the God given right to live with a decent roof over their heads

    But sadly it will never happen? So many ruthless and greedy people in power and the real estate fraternity will always pump the prices upwards and thats the way it is!

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