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.
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These are a few recent headlines and predictions about when the real estate market will bottom out. Of course, there are a select few who have been calling the bottom for some time now. Oddly enough, these tend to be real estate agents and newspaper columns. Speaking of newspaper columns, we are sad to see the end of “Raising the Roof,” the erstwhile International Herald Tribune and more recently, New York Times’ very own property blog. Kevin Brass will continue to write the print edition property column for the NYT, but the online version is no more. Honestly – this was one of the few international newspaper property blogs worth reading, and I don’t think I ever once saw a “We have reached bottom, Buy Now!” headline – which may be why it has gone the way of all things? Newspaper advertising is drying up faster than the 120% mortgages did.
Property prices in Spain fell 6.8% in the first quarter of 2009, the fastest rate of decline since records began, despite the fact that sales volumes dropped 39% over the preceding year. No surprises there – it is fair to say the data has been lagging well behind the figures for the last year or so. With unemployment in Spain pushing 20% and an average Spanish home costing around 7 times the average annual salary, we obviously have a ways to go before this correction is over.
Spain, like Dubai, is seeing more and more scandals come to light. The latest in a long string of property scandals in Spain involves the Mayor of the village of Alcaucín in Málaga who is one of 13 people arrested in the latest corruption scandal.
Spain escaped exposure to the U.S. subprime crisis but risks its own property debt crisis in 2009 as defaults soar among real estate and construction firms that account for half of all Spanish corporate credit.
Sir Philip Stephens might want to reflect on the Spanish economy’s present predicament within the straitjacket of euro membership before advocating that the UK economy might be served better by euro membership once it emerges from recession.
The Spanish land investment scam run for years by Fortuna Estates has finally been busted, with the Spanish fraud squad swooping last week on several office in Mijas and Fuengirola, arresting at least 2 people, and questioning 20 others. This could be one of the biggest Spanish real estate scams to date, with hundreds, if not thousands of British and Irish victims. The Spanish authorities estimate that Fortuna Estates made at least 65 million Euros out of this fraud.
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