Pick up a Bargain Property as Banks Offload Assets
July 2nd, 2010
Apparently now is a great time to buy Spanish property as the banks once again play games with their balance sheets. When the financial crises struck the Spanish property market, the banks avoided making massive write-downs by converting the loan assets into hard assets – the homes the loans were on.
This was a great idea at the time but now the 59.7 billion euros worth of homes on the Spanish banks’ books have become as big-a-burden as the troubled loans they were swapped for, and the banks are now offering crazy mortgage deals including no-money-down, ridiculously low teaser rates and long deferral periods of up to 3 years.
This has been triggered by the Spanish central bank forcing banks to increase their loan loss provisions against their property assets within a few months, because of a fear that Spanish banks haven’t properly set up reserves against the risk of their vast property holdings.
Given that increasing loan loss provisions would force Spanish banks to recognize losses in their income statements, many are now eager to sell off their houses.
The banks are once again delaying the inevitable, because loans like this are almost certain to have a high default rate, but the banks know that this won’t have to be dealt with for a few years.
Thoughts on the banks doing this aside, it could present a good opportunity for buyers. Looking at the UK property market now, the recovery is being severely hampered by the fact that only those with a deposit of 10% or more can secure a mortgage. It certainly doesn’t look like this will be a problem shared by Spain.
This may also go some ways against the repossession problem, because the properties going hand in hand with these favourable mortgages are obviously being sold at a reasonable market value, rather than rock-bottom pricing seen with repossessed properties in Spain.
Story from Property-Abroad
- Spanish Banks Face Higher Provisions
- Spanish Banks Saddled With Property Debt
- Spanish Banks Better – But Still Vulnerable