Repossessed Property in Spain reaches epic proportions

For the last two years, the Spanish banks have been slowly but surely turning themselves in to the biggest property owners in the country. The amount of "debt for equity," swaps and bank repossessions is almost impossible to calculate. In fact, there is a suggestion that the banks themselves do not know exactly how much property they own. Obviously the intention behind this practice has been to artificially inflate the value of property and prevent a complete collapse.

Distressed property sales in Spain on the rise

Some time ago, I suggested that property prices in Spain will only start to reflect the genuine state of the market when it reached the point where the banks were forced to unload the massive stocks they are holding. Spanish property insight has taken the trouble to compile a list of bank owned properties and some of the efforts being gone to by the banks to dispose of these properties in a way that keeps the market inflated. This is the list they compiled:

• Banco Santander (Spain’s largest bank)
  1,300 discount properties, 400 of which have already been sold to the bank’s employees or other select groups (such as employees of Telefonica, Spain’s version of BT) with discounts of 20% to 30% and 100% financing with terms of 40 years. Now starting to sell to the general public through its property division Santander Altamira Real Estate.
• BBVA (Second largest bank)
  900 new builds and 600 resales all around Spain. On sale to the general public with ‘offers’ but no overall discount policy. Available through property division Anida. Best ‘bargain’ on offer flat of 56m2 in Madrid for 125,000 Euros
• Banco Popular
  700 properties around Spain on offer to general public, but preferential financing terms only offered to employees and family. Selling through property division Aliseda Gestión Inmobiliaria. Best ‘bargain’ on offer flat of 93m2 in Manresa (near Barcelona) for 166,000 Euros.
• Banco Sabadell
  Property portfolio largely comprised of building land, rather than housing. Selling to professionals through property division Solvia Gestión Inmobiliaria.
• Banesto
  1,3000 new builds all around Spain, with prices that “reflect the market situation.” Selling through 20 agents, including Knight Frank, to general public, offering preferential financing terms of Euribor +0% for 40 years. Reported to be closing more than 100 sales a month; star product 2-bed flats in Ensanche de Vallecas (Madrid) for 164,500 Euros. Setting up own real estate portal Casaktua.
• La Caixa (Spain’s biggest savings bank)
  2,000 resales all over Spain, largest selection being 320 resale properties in Murcia. Offering discounts of 25% minimum, and 5% on top for good clients. Selling through own real estate division Servihabitat, branch offices, and select estate agents. Best ‘bargain’ 76m2 flat in La Latina (Madrid) for 205,200 Euros.
• Caja Madrid
  1,000 properties primarily located in big cities and on the coast. Biggest selection in Madrid (244), Valencian Region (276), Catalonia (177), and Murcia (91). Offering discounts of up to 40% and financing of Euribor +0.5% with no opening commissions. Selling to general public through website and auction house Reser. Best ‘bargain’ 67m2 flat in historic Old Town of Barcelona for 152,500 Euros.
• Bancaja
  800 resales at prices “adapted to the times” but no across the board discounts other than “3 properties at give away prices every week” available from its website. Half of stock located on the coast, Valencia (240), Alicante (134), Castellon (59), Murcia (24). Best ‘bargain’ 90m2 flat in Barcelona for 225,000 Euros, down from 290,000 Euros.
• Caixa Catalunya
  Stock of 3,600 properties all over Spain, 1,700 on offer with discounts of up to 30%, and 1,800 properties available for rent with option to buy. Selling to general public through real estate division Procam, promising to repurchase property if buyers run into problems paying the mortgage. Best ‘bargain’ 85m2 flat in Chueca, the ‘gay’ district of central Madrid, for 157,500 Euros or 540 Euros/month in rent.
• CAM
  2,500 properties (not all residential) with discounts of 20% to 50%, sold through real estate division Mediterranean Inmobiliaria with auction and bidding system online. Best ‘bargain’ 98m2 flat in Elda (Alicante) for 35,610 Euros.

I have a feeling this is an under-estimation, but even so, it is clear the problem has now become so large that these properties will eventually have to be released onto the market at realistic prices. Which is when we will see a genuine market price. The ECB was recently forced to inject 60 billion euros into the Spanish property market by buying Spanish covered bonds with money created out of thin air. This is not going to solve the problem, nor is it going to prevent the market from eventually correcting. At best, it will delay the correction, as it has been doing for the last few years. There will be hundreds of thousands of distressed properties in Spain for sale, because there is somewhere between 1.5 and 2 million empty properties in Spain right now. Look out for some bargains in the near future.