Spanish Banks Assume High Risk to Sell Properties

Spanish banks are thought to possess some €30 billion in unsold property, and to clear these properties off their books banks are willing to lend more than 100% …

Spanish banks are thought to possess some €30 billion in unsold property, and to clear these properties off their books banks are willing to lend more than 100% of the value to prospective buyers. This means buyers may be able to acquire property by investing little or no capital in the transaction, while the bank assumes all the risk. Experts note that it is a policy unheard of in the rest of the world and is a sign Spanish banks believe properties have found a bottom and are prepared to start increasing in value. In some cases, it is resulting in properties being sold for half their original estimated value and being bought with money that comes entirely from the bank. For more on this continue reading the following article from Property Wire.

Spanish Banks are prepared to lend over 100% on their own properties that have been repossessed, it has been revealed.

They are also selling them at rock bottom prices to attract buyers so that they can reduce the amount of property on their books.

According to Adam Cornwell, managing director of Feltrim International these are quality properties in desirable areas.

Recent reports from a leading risk adviser say banks have around €30 billion worth of property that they can’t sell.
‘Whilst Spanish mortgage lending is not expected to recover in 2012 due to high unemployment and limited bank funding, financial institutions have to optimise their balance sheets,’ said Cornwell.

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‘To incentivise quality buyers they are prepared to offload these homes at rock bottom prices and with the highest mortgages. If a bank is prepared to lend all of the money, more than 100%, on a project that has fallen to 50% of its value five years previously then it must have the confidence that the market has reached the bottom and that the properties will regain value in the not too distant future,’ he explained.

Examples include a luxury beachside development close to Marbella at 50% off the developer’s 2007 price plus a 110% mortgage option with two years interest only. A one bedroom penthouse in Soto Serena, designed by archtiect Melvin Villarroel, with landscaped gardens, pools, gym and sauna, is available for €184,000 compared with €368,000 in 2007.

‘We are now in a situation where the best units in these marked down resorts are selling fast, just like in the heady days of the property boom when the best off plan units were snapped up fast, albeit now they have the peace of mind of something complete and tangible,’ explained Cornwell.

‘Investors can buy using very little, or none, of their own capital with the risk being entirely taken by the bank. This simply does not happen in any other distressed market in the world,’ he added.

He pointed out that Marbella is regarded as safe a location with excellent infrastructure, licensing issues have been resolved under the new urban plan (PGOU) approved in 2010 and tourists come in a steady stream attracted by more than 70 golf courses, year round sunshine, endless beaches and no frills flights.
In 2009 Ryan Air established a base at Málaga Airport and the carrier now operates 39 routes whilst over recent years Delta Airlines has added a direct flight to JFK in the United States, Saudi Arabian Airlines fly direct to Jeddah and Riyadh and Aeroflot has introduced direct flights to Moscow.

On top of that €109 million plan to expand Marbella’s fishing port has been given the green light. The long planned transformation of La Bajadilla into one of the most luxurious marinas on the Mediterranean can now take shape after the Junta de Andalucia, Marbella town hall and the Nasir Bin Abdullah & Sons Consortium signed a contract allowing construction to begin.
The plan, which is expected to take four years to complete, includes a commercial area of 23,000 square meters, a five star hotel and three times the current number of moorings including access for cruise ships and mega yachts.

This article was republished with permission from Property Wire.


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