Repossessions in Spain – Are There Any Estate Agents Left in Spain

The Spanish property crash continues unabated and it is now getting to the point where the massive – and we do mean massive – amount of repossessed property in Spain is in danger of bringing the country to it’s knees. Despite the quiet injection of 60 billion Euros by the European Central Bank in to the Spanish property market by way of covered bond purchases in May, 2009 – we have now reached the point of no return we feel.

For some time now the problem of Spanish repossessions has been disguised by large amounts of  “debt for equity swaps,” by the banks taking over developers instead of letting them fold, but crunch time is here. Recent downgrades on most of the Spanish banks point to the bubble finally bursting. Banco Santander’s 2009 accounts look more like the next installment of Harry Potter and the only thing keeping them afloat seems to be the Brazilian property bubble which must surely be ready to burst any time soon.

About time say we – this business of dragging the problem out and forcing the market to stay inflated has been bad news for everyone – except the banks. Hopefully some of this excess stock – even the banks do not know how much stock they hold – will come on the market at a reasonable price and we can let the market correct properly instead of dragging our heels. Are there even any estate agents left in Spain?

On Tuesday, Barclays Capital downgraded both Banco Santander and BBVA to “underweight” and lowered its price targets on both banks to €9 ($12.18) from €15 and €12, respectively.

In a research report entitled “A dose of reality,” the investment bank said the price premium both banks have enjoyed relative to the European bank sector—15% for Santander and 44% for BBVA—are likely to be eroded “significantly” owing to increasing signs of stress in Spain’s property market and fear over the fiscal situation here.

That same day, Moody’s lowered its rating on hybrid securities issued by the big banks and several other domestic lenders, affecting about €32 billion ($43 billion) of securities.

Markets were already fretting over reports the Bank of Spain might raise the minimum amount banks hold as provisions against the value of repossessed real-estate assets to 30% from 20%. The ratio was 10% in November. The bank’s governor, Miguel Angel Fernandez Ordonez, confirmed that as a possibility to journalists on Tuesday.

Analysts at Goldman Sachs say the change would hit domestic banks hardest, forcing higher provisions for Banco Popular, Banco de Sabadell and Banco Pastor. They rate Santander a “buy,” are neutral on BBVA and have “sell” ratings on all domestic banks except Banesto, which has a “neutral” rating.

A spokesman for Pastor said the company raised its generic provisions by more than €100 million in 2009, so the impact of that 30% rule would only hit what it already has increased. The bank also has more than €830 million in total provisions, more than in 2007, and said no more capital raising would be needed, with its Tier 1 ratio at 10.55%.

The Spanish banks are not looking too healthy right now, and it is anyone’s guess how far things will crash – but crash they must unless we want another few years of this limbo. A twenty percent unemployment rate?  How long is that sustainable for? And that is the official figures – goodness know what the true rate is.

Lets see a few banks go under and some genuine bargains again.