Meanwhile, the banks seem to be even more cash-strapped than the population itself. The Spanish banking system was an important player in the country’s once robust real estate and construction markets, and still pays deeply for its generous missteps. Out of the total 1.79 trillion euros of outstanding loans that the banks currently hold, 308 billion euros is taken up by real estate, most of which is reportedly as good as gone. Spain’s property boom, much like the rest of the crisis-riddled world, was entirely misguided. Land development were largely concentrated in areas that have no real value; where given the current population trends, demand for units is not expected to materialise any time soon, not in the next 10-years at least. Banks then have a significant chunk of their money holed up in real estate that nobody wants to buy.

Spain’s financial sector was at the receiving end of both bailout funds and increased regulation following the global economic crisis of 2008. The public has coughed up 17.7 billion euros (and counting) to help keep banks out of the red; however, the number of surviving banks stands greatly reduced. Analysts believe that given the central banks increased demands for adequate cushioning; the end count is bound to be even smaller. Small to medium sized banks are expected to virtually go poof, since the majority of their business came from the property market, which now stands largely defunct.

Following the crash, property prices in Spain have witnessed massive downward reductions. Overall, home prices are now 28% lower than what they were in pre-bust days; whereas, land values have taken a hit of around 33%. As joblessness mounts and foreclosures become imminent, banks are expected to add even more real estate to their already overflowing portfolios. It is unlikely that these properties will be turned over anywhere in the near future; banks aren’t willing to unload at washout rates, and buyers refuse to pay stated premiums.

With the last government having largely failed to bring stability to the ongoing crisis, the newly elected popular party vows to not let the decline continue any further. The country’s problems, however, have outgrown its capacity to endure. The European debt crisis, of which Spain is an active participant, is nowhere near resolving itself. The nations industry is at a standstill; the banks’ hesitance (and apparent inability) to lend, coupled with the new leaderships proposed austerity drive can then only prolong this lull. Further, the banking systems present provisioning is based around best-case scenarios, if anything the government might have to pump in more funds to help keep the entire sector from falling under. I say, heads up ECB, another troubled soul comes your way.

Photo Credits: Chris Kimber via Flickr

This Post is from: Overseas Property Mall, part of Fuzz One Media Group

Spanish Banks UNABLE to Sell Toxic Real Estate Assets

The post Spanish Banks UNABLE to Sell Toxic Real Estate Assets appeared first on Overseas Property Blog :: guide to international real estate investment.

Hopes have emerged that the battered Spanish property market could be hitting something that feels like a floor. Pardon the vague language, but with 1 million homes still on the market to say the future is torrid for Spanish property is an understatement despite the latest positive data.

The most positive aspect of the latest data to be released shows that home sales transactions rose 5.3% between October and November last year, leaving them down just 2.6% year on year, compared to 21% in October and 17% in September.

On top of that Spanish house prices were down just 6.2% on the year ending the 4th quarter, compared to a fall of 7.8% in the third quarter, and 8.2% in the second quarter. However, this is according to the governmental housing ministry index, which is based on the valuations of surveyors. It says house prices have fallen 9.5% since the peak in the first quarter of 2008, whereas other industry bodies say prices have fallen 20%-30% in the past 2 years.

This is all very positive, especially the monthly increase in sales, which is badly needed if Spain is to start clearing the 100s of thousands of empty apartments and villas left from the construction boom. A boom that saw Spain building more properties than, France the UK and Germany put together at its height.

The devastation of the housing market from a catastrophic drop in demand has led to the devastation of the Spanish economy, because of the complete freeze in the building industry. Thousands of jobs have been lost and the economy continued contracting in the third quarter, 2 quarters after its main rivals Italy and Germany returned to positive growth.

On the brighter side, we are once again coming into the hot season for overseas property demand, and Spain is still very much a favourite with British and Irish buyers. According to the top 10 for 2009 recently released by the Property Abroad.com portal, Spain was the most popular country with those browsing and searching for property on the site.

The portal said that Spain, always a favourite with its user base had been knocked into second place since May, when America overtook it. None the less, its holding second place since saw it bring sufficient traffic and search volumes to make Spain most popular for 2009 as a whole.

February is traditionally a very good month for overseas property sales, and this continues throughout the till November. Given that demand for overseas property began increasing in the second quarter of 2009, 2010 could see sales increasing massively in Spain’s less overdeveloped areas.

Photo credits: Sanderovski via Flickr

This Post is from: Overseas Property Mall, part of Fuzz One Media Group

Spain Seeing Some Bright News but Long Windy Road Ahead

The post Spain Seeing Some Bright News but Long Windy Road Ahead appeared first on Overseas Property Blog :: guide to international real estate investment.