Response to Bloomberg - 'Foreclosed Homes May Flood Spanish Market as Banks Offload Unwanted Assets'

11/12/10

If the banks merely put forward their properties at their existing book value, which tends to be a minimum of the loan that they have given, they are unlikely to sell unless they also give 100% mortgages. (see http://www.surveyspain.com/articles/100percent-mortgages-may-be-immoral.htm) This is because the prices they are offering them at are much higher than the market value in a great many cases. The banks are going to have to accept losses on loans before the market will begin to move for them.

A Spanish estate agent wrote to me recently -
'Speaking from personal experience in this market I must urge caution here! My company actually collaborated with xx Bank in 2008 and registered over 600 pre qualified vetted buyers on the bank's platform. The problem is not finding the property, this is the easy part. We cancelled our contract with that bank as the properties simply do not match the value and quality offered from private or developer distressed stock. One investment fund we work with purchased property from a bank at 30 cents in the euro below value i.e. 70% below value. They still struggled to move it on in the open market and had to sell on to another fund at very little return, far lower than anticipated. I am not saying this is not possible but would seriously urge any serious takers to speak with reputable independent professionals before transacting.'

Also, there has to be a true market of occupiers rather than just speculators buying 'cheap' properties from the banks. It was because of easy finance and speculators using it that the oversupply happened. Recycling the same problem will merely delay the inevitable. Somehow, Spain has to find occupiers for all the surplus properties and that could take many years especially now that UK and especially Irish buyers are out of the market.

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