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The global economy will take at least a decade to recover from the 2008 financial crisis, the IMF’s chief economist has warned, as eurozone services data paint a bleak picture of the single-currency area.
http://www.telegraph.co.uk/finance/debt-crisis-live/9583150/Debt-crisis-live.html
So the likelihood of any recovery in the Spanish property market before that period looks grim if you accept the IMF’s predictions. Personally I think at least a decade before the massive damage to the financial infrastructure of Spain can be repaired.
Bailouts are loans its just more credit, all be it at more affordable rates perhaps but debt never the less. That debt has to be serviced from Spanish tax payer receipts. Think how long it took the UK to pay back loans from the US at the end of WW11.
Investing for any return in periods that long is very undesirable. So much can go wrong. ‘I’m out’, as they say in a certain TV programme. 🙁
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UK households have paid back £130bn since the start of the crash, as much as that is I can see it going on for a decade before there is much change. Spain will need the UK to recover for its Costas to become invest-able again.
But the lure is the weather for retirees, and that means there will always a flow to Spain, even greatly reduced.
Neither the UK or Spain are a country worth investing in, but you have to live somewhere.For investment I prefer (high yielding) shares or even a Polish bank account – I get over 7% in my business current account. Property looks a nightmare for years hence.
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Luis de Guindos the Spanish finance minister is in London today seeking investors for the ‘bad bank’ plan. He wants to sell 55% of the new bank equity to private investors. The bank will contain all existing ‘bad property’ assets belonging to Spain’s banking sector.
I understand his optimism in coming to London which is a world financial centre. However ask yourself why would any international investor put money into a venture which is basically a portfolio of repossessed property still grossly over valued by most estimates? Worse still how in the current climate could any reasonable return ever be obtained?
De Guindos is actually selling junk and I admire his courage which cries of desperation.
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Logan, maybe it will be a bit of a wake up call? I think you’re right when you ask who would invest in that. So maybe he will be told directly by the institutions what needs to be done before they would consider investing, ie, realistic property prices applied. Whether he has the clout to take that back and do something though….
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Some pertinent comments on the bad bank from the Ibex Salad blogger
http://ibexsalad.blogspot.co.uk/2012/10/bad-bank-worse-announcement.htmlI didn’t realise the minimum value for a property is to be 100,000 euros. This alone shows the pricing is not realistic, you can find plenty of sub 65000 properties now.
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I remember back just after the crash hearing an interview with Nouriel Roubini, the Nobel prize winning economist, where he said that history shows that is takes around ten years to recover from every major shock such as the once we had just gone through then.
Trying to find it I came upon this from back then. Basically very accurate:
http://money.cnn.com/galleries/2008/fortune/0812/gallery.market_gurus.fortune/index.html
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Nouriel Roubini has been right since the beginning of this recession/depression. He is currently very gloomy about France but really it’s not difficult to be gloomy about almost everywhere.
A few examples for today:-
• UK Services PMI misses expectations – prints at 52.2.
• Eurozone Service output at 3-year low – although slightly better-than-anticipated.
• US ADP Employment grows – hits 162,000.
• Chinese Non-manufacturing PMI slows – damaging for commodity-correlated currencies.If it’s correct that the bad bank will not consider property assets worth less than €100k there is going to be an awful lot of junk still resting on banks balance sheets. Then begs the question who is going to value these properties? The banks are still over valuing most of their property asset base. Almost everyone I read knows that.
When Ireland did something similar a 58% discount was applied to the asset stock.
Do these people really believe institutions are so stupid and would believe a bog standard 2 bedroomed apartment on the Costas are worth more than €100k? The banks are still trying to sell some of them at that price.
It seems to me that the Spanish government still don’t really get it. Perhaps they will experience a sharp learning curve in the City today and have the realities explained in language a child could understand.
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Exactly, who is going to value these properties? The bank overvalued a flat to 180k for the mortgage to be upped, they value that property as a repo at 150k to the ‘world’ but in reality they can’t sell it for 25k!
If they re-valued all the repos to around 50k each then it might become more realistic? Then investors would win some and lose some?
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Senior forum users will recall a Mr Blanco in the last years of the PSOE was on a grand tour i.e. a big knees up at the expense of the tax payer.
Mr Guindos is to the best of my knowledge an ex Morgan Stanley or Goldman Sack’s. He knows very well how the city works and is not stupid to think that he could convince the city to pay for over valued assets.
I am afraid it now the PP turn to have a knees up at the expense of the tax payer, Spanish Bond holder etc.
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@shakeel wrote:
Mr Guindos is to the best of my knowledge an ex Morgan Stanley or Goldman Sack’s. He knows very well how the city works and is not stupid to think that he could convince the city to pay for over valued assets.
I saw an interview with De Guindos yesterday in the City on CNBC. He said Spain did not need a bailout either now or later. That caused some amusement to the audience who burst out in laughter, much to his embarrassment. Never underestimate the stupidity of the political class. 🙂
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@logan wrote:
@shakeel wrote:
Mr Guindos is to the best of my knowledge an ex Morgan Stanley or Goldman Sack’s. He knows very well how the city works and is not stupid to think that he could convince the city to pay for over valued assets.
I saw an interview with De Guindos yesterday in the City on CNBC. He said Spain did not need a bailout either now or later. That caused some amusement to the audience who burst out in laughter, much to his embarrassment. Never underestimate the stupidity of the political class. 🙂
I don’t believe for a second that de Guindos agrees with what he said at that point. He’s obviously under instruction from Rajoy, in order to continue that baffling brinkmanship he practices. A cynic would suggest their contacts are playing the market..
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Does not matter who he is under instruction from. Ccty is a very cruel place & he would lose his credibitly, that is if he had any before he stood up to address the city. It seems from logan’s posting that he had been in the city providing a laugh to the stress out city workers before they hit the Bar’s
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They could default but it doesn’t mean they won’t have to pay back their debts, its not like bankruptcy, countries can’t really walk away. One hedge fund is still chasing Argentina for the 2000 default, they seized a ship a couple of days ago.
Another problem with Ireland is that they are owed a lot of money by the other PIIGS who would presumably refuse to pay it back.
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I do agree with the above post, France is politically an inefficient socialist state and I have always wondered why it works so well.
The answer is the people who have a strong sense of community, conform, work very hard and pay their taxes. France has a very effective tax gathering system. French people are also very inventive, have flair,are well educated and care about what they do.
Generally speaking the French people also feel more empowered than most European states because when they protest in numbers the governments on both sides listens, take notice and acts. Rajoy take note. The population feel they are in control.
France has it’s difficulties but the country should not be seen in the same economic light as the Club Med nations or even the UK.
I have every confidence France will recover much quicker than other troubled states despite being ruled by a rabid socialist. 🙁
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