SAREB Bad Bank May End Spanish Property Bonanza
The surge in buying of Spanish second home property
at huge discounts could come to an abrupt end in the coming months following the announcement that the Spanish government will absorb any unsold distressed properties
from the banks in Spain
into a "bad bank" known as SAREB.
In the last two years UK and overseas buyers have moved in to grab properties offered by the Spanish banks at less than half and sometimes one third their original prices. Apartments which originally sold for €185,000 are still on offer from as little as €68,100, a 63% discount from original price at resorts such as Hacienda Riquelme
The properties have sold quickly, but not quickly enough for the distressed banks as they dropped prices even further earlier this year.
As part of the conditions for extra funding from the EU the Spanish government is to set up the scheme pioneered in Ireland where a so called "bad bank" was created to take back any repossessed properties from the high street banks. The bad bank in Ireland is now beginning to make a profit and that is the stated aim of the Spanish government with the SAREB for any properties it takes on.
The Spanish government intends to run the bad bank for up to 10-15 years making a profit over the long term as the property market recovers and prices rise. Hence there's no desperation to sell on the repossessed properties quickly and the reason why we expect prices to be adjusted upwards from current distressed levels. The government simply does not need to sell anywhere near as quickly as the banks do.
Over the last two years Villa Cashback has been the leading seller of bank properties
on the Polaris World resorts
selling several hundred bank properties to UK and overseas buyers, in particular on Mar Menor
, Hacienda Riquelme and Condado de Alhama resort. Because of the economic situation in Spain, Spanish buyers have been unable to take advantage of the huge discounts on offer. However overseas buyers have moved in quickly to take advantage of the huge discounts snapping up many of the best bargains. Bank stock on two of those resorts is now down to a third of its original level of two years ago and the banks are already within sight of selling out.
The Spanish government has set a deadline of the end of November 2012 to implement the bad bank ("Banco Malo"). However we may see prices adjust or the withdrawal of properties from the market before that point as banks know the safety net is there and as they prepare to offload any stock to the government.
All of this is likely to be good news for owners looking to sell property in Spain
as many have found it difficult dropping prices to a half or even one third of their original price in an effort to compete with the bank stock.
Prospective buyers who have been considering a property purchase in Spain are advised to act in the coming months, while there is still availability and prior to any re-pricing of properties.
Please call our UK office on +44 (0)208 429 7115 for full details and to speak to one of our experts in this area.