The Bank of Spain is forcing Spanish banks to increase provisions against their repossessed property portfolios and real estate divisions from the 1st of October, which could mean lower prices for bank repos, most of which won’t appeal to foreign buyers.
The regulator wants to force the banks to reduce their real estate exposure by increasing their property sales rates, which they can only do by lowering price. If the banks are forced to increase their write-offs, that gives them more room to lower prices.
The Spanish press reports that banks are not happy with the new move, which they see as too inflexible and forcing them to write off yet more capital. Some banks will take a significant hit, reports the Spanish financial daily Cinco Días. The regulator says the move will have little net effect on balance sheets.
The troubled real estate exposure of Spanish banks has risen every year since the crisis started, despite huge write-offs each year, rising to a total of of €84 billion at the end of 2015.
Does this mean we can expect a flood of cheap and attractive bank repos coming onto the market in coastal areas and city centres where foreigners tend to buy? Unfortunately not. Most of nice stuff like the Illa del Mar development in Barcelona’s Diagonal Mar district (Sant Martí / Poble Nou) by the beach (pictured above), and the Les Terraces de Cala Tarida development in Ibiza (pictured below), or Solvia’s San Roque development near the Costa del Sol (pictured bottom) was sold long ago. Generally speaking, I get the impression most of the bank stock today is of little interest to foreign buyers looking for good locations and better quality than the glut still left over from the boom years.