Spanish banks whose extensive portfolios were paid for by credit during the boom years are selling them off to pay off their debts. But does that mean it’s a good time to get into a market at the bottom, as the banks would have you believe? Or is it just an opportunity to get sucked in to the whirlpool that is the Spanish property market?
The Spanish property market bears strong comparisons to the US property market. In the case of the US debt was much more diffused throughout society. In Spain, a large part of the problem was a property construction bubble, and the under capitalizing of the real estate firms involved was often a simple case of over-reaching and then being beached by a receding economic tide. But the result, that banks and property crashed more or less simultaneously, is sufficiently similar to be uncomfortable for market-savvy Americans.
One result isn’t so bleak, however, at least not if you’re planning to invest in Spain. Prices have fallen there by as much as 60%. As a result, Santander’s Spanish property website, Altamira, is offering ‘housing for all, at yesterday’s prices.’ One example of the company’s ‘retro prices’ is a four-bedroom, two-bathroom Valencia apartment for €18,000, though the property is far from a dream holiday home.
Bankia was formed from seven troubled regional banks in 2010, two years after the property market crashed. It was a marriage of convenience, and the member banks brought their increasingly burdensome debts with them to the altar. Two years on, Bankia has been bailed out to the tune of €24bn, precipitating a sovereign debt crisis and forcing Spain to ask for bailout money from the IMF and ECB. This followed 2011′s news that the organization had made a loss of €2.9bn. Unsurprisingly, Bankia is eager to sell its property portfolio and it is doing so by means of an ‘andando a la playa’ (‘walk to the beach’) promotion, selling repossessed beachfront properties for as little as €39k.
All of which paints a picture of a market that’s not necessarily in free fall, but isn’t exactly in rude health either. (In fact, Spain’s economy is in such trouble that it might not be able to run its Benicassim festival this year.) Market analysts see better times ahead though and especially for expatriates. Property values are falling in areas where there’s little chance of employment; as other European nations feel the pinch, they stop visiting Spain on holiday and areas that are dependent on tourism for their economic well-being suffer.
Properties here might be cheap, but with rental demand poor and falling, they’re not such great investments. They are appealing for some expatriates though, which might explain why expatriates are slightly swelling the property market in Spain. As 12% more foreign buyers enter the Spanish market this year, they’re concentrated in the Valencia region, home of the Costa Blanca.
The fullest picture of the Spanish market is one that includes strong rental demand in major cities, where economic life continues and rental demand is traditionally strong among a nation who rent more than they buy. But the housing in the Spanish boom docks that crippled banks are offering for peanuts is a liability to whoever owns it, as Clare Nessing, director at Conti, points out: ‘Many so-called bargains are being offered at bargain basement prices because they are of poor quality and in undesirable locations.’ Some are such turkeys that they’re dangerous to the Spanish market as a whole. Fernando Rodriguez de Acuna Martinez, a partner at Acuna & Asociados, says, ‘some of it may have to be demolished in the future to stop the slide in prices.’