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Spain has become a battleground between banks hurt by a five-fold increase in residential mortgage arrears since 2007 and debt-laden homeowners who are appealing to the government to reduce the burden on those facing foreclosure.
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Home prices may fall by an additional 20 percent in the next four years before bottoming out, R.R. de Acuna & Asociados, a Madrid-based real-estate consulting firm, said at a briefing last month. The company estimates there are about 1.5 million unsold homes, which won’t be absorbed for another six years.
For those who have asked where the property market in Spain is going, that’s one view: it may fall by another 20% over the next four years.
If it is true, what does that make the total collapse % since this all started? Will those who predicted around a 40% drop a few years ago be far wrong in the end?
Chris – what is your opinion? Near the mark?
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Charlie, real estate prices are down 40% already if you compare sales prices from 2005 to 2011 ……….. in no go areas prices are down 75% and so called top areas maybe only 30%………..
regarding the repossesions in Spain, well, the party is just starting but will mainly affect the so called “working class” areas on the outskirts of cities/ towns……….. Rich Spaniards will always keep their savings in real estate; don’t forget it’s still the main area where they can pay a part in “black”…..
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@charlie wrote:
If it is true, what does that make the total collapse % since this all started? Will those who predicted around a 40% drop a few years ago be far wrong in the end?
Chris – what is your opinion? Near the mark?
I think those who predicted a drop of 40% a few years ago have been proven to be correct yes.
Frankly, I am aghast at that, and would never – no never – would have expected it to be possible.
But then I am not an economist, but boy have I learned some stuff on this site over the past five years!!
On the view of Acuana Asociados and whether they know what they are talking about depends I suppose very much on what set of stats they are using, prices in our area have depending on which high you use from what period, and in which area have often been 50% below and are almost unilaterally down 25%+ by this time.
I still say we are at the front end of all of this and are the ones that have a unique and most up to date perspective, but nobody ever asks us – well except you Charlie!
So, far wrong, no pretty much bang on the money – with the caveat that this is relative to area and type, quality etc.
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@mark wrote:
Spain has become a battleground between banks hurt by a five-fold increase in residential mortgage arrears since 2007 and debt-laden homeowners who are appealing to the government to reduce the burden on those facing foreclosure.
I have heard that rather than foreclose on a property, banks prefer to offer a “dacion en pago”, but you need to have enough equity in the property to do this. (difficult in these times, of course)
My sister in law has just signed over her “dacion en pago”. Her property was purchased for 200.000 euros in the boom and the bank have now taken it back off her for 145.000 euros and “forgiven” her the rest. So she didn’t even have enough equity in her property. They said no to her initially and she got a laywer involved and has finally, after 6 months, had it accepted. During the whole 6 months the bank manager kept on telling her that there was only a 10% chance of her getting it accepted, but perseverance pays off sometimes!This mush be a very tempting offer to struggling people who dont’ want to spend the rest of their lives paying the bank back. They say foreigners are more likely to get accepted as it is more complex for the bank to persue you abroad, where as with a spaniard, they can just take the money owed off their wages.
Apparently the dacion option looks better on the banks books than a reposession.
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Jonas,
I looked into “dacion en pago” for getting rid of my second Spanish property in 2008. The bank said no. So I just sold it cheaply instead and paid the outstanding mortgage off myself, rather than pursuing the matter. I appreciate not everyone is in a position to do that.
If I remember correctly for “dacion en pago” to be suitable, you must not have any outstanding mortgage payments, secondly the property value must be greater than the outstanding mortgage. Under these conditions the bank have a legal responsibility to accept “dacion en pago”. You forfeit any capital in the property above the outstanding mortgage. If these conditions are not met then the Bank has no legal responsibility to accept “dacion en pago”.
Well given the current situation I would expect that not many people who bought in or around the peak (2004-2008) will be in a position to meet the criteria of “dacion en pago”. Realistically prices have fallen 50% from the peak and I would imagine that individuals in difficulty that need to sell financed their property with a LTV greater than 50%.
You said….
“…the bank have now taken it back off her for 145.000 euros and “forgiven” her the rest. So she didn’t even have enough equity in her property”
Phrasing it a little bit more precisely do you mean:- Your sister had an outstanding mortgage of 145,000 Euros and the bank valuation was less than this, nevertheless they have cancelled the mortgage for return of the keys.
If so then she is lucky as that would mean everyone could simply hand back the keys under “dacion en pago” and walk away, which is not allowed under Spanish Law.
According to brianc_li
Price decline is around 27.8% from peak, so 55k off 200k is 27.5%, so at a guess I would say that maybe (with the bank being generous) she has just scrapped into the allowable criteria for “dacion en pago”, but not without a lot of hassle no doubt and a falling market whilst the negotiations continued.
I expect the window for dacion en pago, for most people has or is about to close.
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@jp1 wrote:
Jonas,
I looked into “dacion en pago” for getting rid of my second Spanish property in 2008. The bank said no. So I just sold it cheaply instead and paid the outstanding mortgage off myself, rather than pursuing the matter. I appreciate not everyone is in a position to do that.
If I remember correctly for “dacion en pago” to be suitable, you must not have any outstanding mortgage payments, secondly the property value must be greater than the outstanding mortgage. Under these conditions the bank have a legal responsibility to accept “dacion en pago”. You forfeit any capital in the property above the outstanding mortgage. If these conditions are not met then the Bank has no legal responsibility to accept “dacion en pago”.
Well given the current situation I would expect that not many people who bought in or around the peak (2004-2008) will be in a position to meet the criteria of “dacion en pago”. Realistically prices have fallen 50% from the peak and I would imagine that individuals in difficulty that need to sell financed their property with a LTV greater than 50%.
You said….
“…the bank have now taken it back off her for 145.000 euros and “forgiven” her the rest. So she didn’t even have enough equity in her property”
Phrasing it a little bit more precisely do you mean:- Your sister had an outstanding mortgage of 145,000 Euros and the bank valuation was less than this, nevertheless they have cancelled the mortgage for return of the keys.
If so then she is lucky as that would mean everyone could simply hand back the keys under “dacion en pago” and walk away, which is not allowed under Spanish Law.
According to brianc_li
Price decline is around 27.8% from peak, so 55k off 200k is 27.5%, so at a guess I would say that maybe (with the bank being generous) she has just scrapped into the allowable criteria for “dacion en pago”, but not without a lot of hassle no doubt and a falling market whilst the negotiations continued.
I expect the window for dacion en pago, for most people has or is about to close.
Hi Jp1, I just phoned her to get the exact picture:
She purchased in the boom and the tasacion back then was for 280.000 euros. Her morgatge was for 240.000 euros
They now did a tasacion for 140.000 euros.
As she is a single mum with no assets and a low income (living on the coast so only summer income) they have agreed to finalise the dacion en pago at 140.000euros (even though her mortgage is in the 220.000 euros region, not sure of the exact amount, forgot to ask, but higher than the 140.000 euros) It would be highly unlikly that would ever be able to get the funds off her so I assume this is why they have accepted it under these terms.She said that it is better for them to do the dacion at a lower amount for the “books” (don’t know why this is though, maybe someone can highlight us on this)
So basically they have now signed it over even though the tasacion was for only 140.000 euros and she still had a mortgage for around 220.000 euros.
As I said previously, they saide they “perdonan” the rest (entre comillas). These words exactly from the bank.She said apparently it was over “tasado” so they had to accept it. Sounds bizarre I know, but it is completely what has happened. Interesting to say the least!
Jp1, you said that they have to accept it legally if it ticks the criterias, but I am not so sure. As far as I know, they do not have to accept it under any terms. (even though my sister in law had it accepted, but I think it is studied on a one on one basis)
This is exactly what happened and I am not sure as to why she has had it accepted but she has!
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… From the belegal.com website
In plain English, a dacion en pago means handing back the keys to the lender, and in exchange the lender will fully discharge all mortgage debt, not holding you liable in the future. The lender will also renounce pursuing the debt in your home country or elsewhere against any other assets you may hold. This procedure is based on Art 1175 of the Spanish Civil Code, which establishes that a borrower can cancel his creditors’ debt handing in exchange any of his assets.
Jonas can I ask a personal question.
Has your sister-in-law’s financial situation recently changed that has forced her into this situation? Or did the bank really lend her 240,000 Euros knowing her financial position?
Anyway looks like she has had a lucky escape, if you can call a loss of 60,000 Euros (deposit + payments) lucky.
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@jp1 wrote:
… From the belegal.com website
In plain English, a dacion en pago means handing back the keys to the lender, and in exchange the lender will fully discharge all mortgage debt, not holding you liable in the future. The lender will also renounce pursuing the debt in your home country or elsewhere against any other assets you may hold. This procedure is based on Art 1175 of the Spanish Civil Code, which establishes that a borrower can cancel his creditors’ debt handing in exchange any of his assets.
Jonas can I ask a personal question.
Has your sister-in-law’s financial situation recently changed that has forced her into this situation? Or did the bank really lend her 240,000 Euros knowing her financial position?
Anyway looks like she has had a lucky escape, if you can call a loss of 60,000 Euros (deposit + payments) lucky.
Hi, yes ask away.
Basically, back then she was still a single mum with her daughter, she had a partnership with her parents in a restaurant, which was going really well back then, but due to the recession things have gone down hill financially. So she got to a point where she couldn’t afford the mortgage.
She is spanish, so don’t know if this maybe helped the situation.
So in answer to your question, they loaned her the money she could afford with the income she had back then, but over estimated the price of the house on the tasacion. The bank actually admitted to her that the tasacion was way too high back then.
I think the reason they have just allowed her to hand back the keys in exchange for the cancellation of the debt is because they know that the chance of them getting their money back off her would probably takes years, if they ever do get it back. Apparently you are allowed to earn a mininum amount in Spain before the bank is allowed to take their monthly payment off you from a repossesion. And the lawyer said as she is also a single mum that counts aswell.
To be honest I am as baffled as you are as to why they have just “let her off” in a way, but they have.
But fair point, she has lost money what with the deposit and fees etc…but not as much as she would stand to lose if they had of rejected her request for dacion en pago.
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@jp1 wrote:
… From the belegal.com website
In plain English, a dacion en pago means handing back the keys to the lender, and in exchange the lender will fully discharge all mortgage debt, not holding you liable in the future. The lender will also renounce pursuing the debt in your home country or elsewhere against any other assets you may hold. This procedure is based on Art 1175 of the Spanish Civil Code, which establishes that a borrower can cancel his creditors’ debt handing in exchange any of his assets.
are you saying that they have to accept it by law???
I thought they were under no obligation to accept it, maybe I am wrong. -
There is a lot of posts about this on the spanish forums and they say they are finding it impossible to get the dación.
A spokesperson from one bank says they cannot do this as they would then have to write down the property on their books.
It is one thing quoting the law but we all know that is just the theory in Spain as opposed to what really happens.
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@jonas wrote:
are you saying that they have to accept it by law???
I thought they were under no obligation to accept it, maybe I am wrong.Yes, that it my understanding, under Spanish law if the conditions are met then it must be accepted. But as Katy says what is law and what is reality is very different.
But in your sister-in-law case they were under no obligation as the asset is valued less than the loan.
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@jonas wrote:
Apparently you are allowed to earn a mininum amount in Spain before the bank is allowed to take their monthly payment off you from a repossesion. And the lawyer said as she is also a single mum that counts aswell.
Its something like 900euros per month before they can take anything isn’t it?
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@peterhun wrote:
@jonas wrote:
Apparently you are allowed to earn a mininum amount in Spain before the bank is allowed to take their monthly payment off you from a repossesion. And the lawyer said as she is also a single mum that counts aswell.
Its something like 900euros per month before they can take anything isn’t it?
It is the minimum wage (around 600 euros plus 50%) so yes, around the 900 euros figure
This link explains it but it is in spanishWhat I don’t know is whether foreigners have more or less of a chance of having a dacion accepted as if you live in the uk and get repossesed in Spain, they have no way of taking it off your wages. It would be a very lengthy and expensive process, so maybe extranjeros have more of a chance of having it granted than spaniards (as long as there is enough equity and you are not in arrears with any payments)
Interesting, Jp1, if they do have to accept it by law, at least you could take it to a court if it came to it.
She said you normally have to have enough equity in your property, (which she didn’t) but they send their own tasadors round and you all know how dodgy their tasaciones are, I am sure they would do it in favour of the bank anyway.
So with that, you would not have a leg to stand on unless you got your own independent tasador and argued that the banks tasacion has obviously been under valued to favour the bank (even though in the boom they used to over value them in order to grant you the morgatge)
When I purchased in Spain the tasador used to ask you for what price you were getting a morgatge and they would up it (at the banks request) so they could grant you the morgatge!
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Forgot to add, by the way, that she has not only managed to hand back the property in exchange for the debt, but they are also allowing her to live in the property paying rent, which is 50% below what her mortgage was with the bank! So she is now renting her old property for half the monthly fee!
So it seems the banks are trying to help. I don’t know if it is because she is a single mum, or spanish, or who knows why.
She did say though that as soon as the laywer started quoting laws and saying that they should never has offered her a mortgage for that amount as the property was never worth that even back then, they started backing down and in the end they accepted. It took 6 months mind you.
I will try to find out what the laywers argument was to let you know. -
that must be one out of a million cases, here is one and they are appearing in the papers all the time.
Anyone read the story about the single Mother in Torre del Mar. The bank was due to evict her this week. She bought the house about 4 years ago when she was working in a property agency. Now been out of work 2 years and cannot pay the mortgage. She paid 180,000 for the apartment, the bank are selling it for 50% less. Even after she has been evicted she will still owe the bank 87,000
She is a single Mother too, basically the banks don’t give a toss about their status. -
@katy wrote:
that must be one out of a million cases, here is one and they are appearing in the papers all the time.
Anyone read the story about the single Mother in Torre del Mar. The bank was due to evict her this week. She bought the house about 4 years ago when she was working in a property agency. Now been out of work 2 years and cannot pay the mortgage. She paid 180,000 for the apartment, the bank are selling it for 50% less. Even after she has been evicted she will still owe the bank 87,000
She is a single Mother too, basically the banks don’t give a toss about their status.Maybe it’s just a case of “who you know” in the bank. She has always had a really good relationship with the bank.
I suppose actually knowing someone in the flesh who has had it accepted makes me believe this is a possibility, where as the stories in the paper are just stories
Problem is the only stories you get to read about in the papers are the negative ones.
Don’t really know whether her being a single mum has had anything to do with it at all. I was just trying to figure out why they have done it.If her case is one in a million, she must be one of the lucky ones then!
Would be interesting to hear from anyone else who has succesfully had a dacion en pago accepted, I have just been reading on spanish forums where people have had it accepted, so it seems some do get it accepted.
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Surely you have heard of the report, the woman has been on TV too. There were around 50 people demonstrating outside the house. Photos have been in all the nationals.
In English too
http://www.typicallyspanish.com/news/publish/article_31108.shtml
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@katy wrote:
Surely you have heard of the report, the woman has been on TV too. There were around 50 people demonstrating outside the house. Photos have been in all the nationals.
In English too
http://www.typicallyspanish.com/news/publish/article_31108.shtml
Yes, I have read the story and I am not saying this story is not true.
I have also been reading a spanish forum on “dacion en pago” and it is common procedure once a dacion has been accepted that the person gets to stay in the property renting with an option to buy the property back from the bank.
What I was trying to say is, in the paper you don’t get to hear about the dacion en pagos, which have been accepted, so maybe my sister in law’s case is not only one in a million, maybe it is more common than you think, but it just doesn’t get published in the papers as good news doesn’t sell papers.
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