Good article I ready today from Global edge.co.uk see below
Capanes del Golf
There will be no enemies for me other than unemployment, the deficit, excessive debt and economic stagnation”.
These were the words of Mariano Rajoy, the leader of Spain’s centre right popular party, as he swept to victory in the polls earlier this week.
A great sound bite but one of his first tasks is to clean up the banking system. If he is serious then he will be making few friends among Spain’s overleveraged developers.
Pablo Cantos, one of leading advisors to the Spanish banking system, predicted a large number of banking casualties this week and my implication a spate of developer bankruptcies.
“I foresee Spain will be left with just four large banks,” he said in an interview with Bloomberg.
Land “in the middle of nowhere” and unfinished residential units will take as long as 40 years to sell, only bigger banks such as Santander, Banco Bilbao Vizcaya Argentaria SA (BBVA), La Caixa and Bankia SA are strong enough to survive their real-estate losses, according to Cantos.
Impossible Valuations
One of the biggest issues facing the new government is the fact that property prices have fallen substantially but prices have not been marked down on the banks’ balance sheets.
For the property market to fully recover bad debt needs to be squeezed out of the system. The government will have to inject billions of euros to recapitalize the banks. Given the current austerity measures this will be both logistically and politically difficult.
The best solution is a managed and slow deflation of asset values. But even a managed solution means banks will be forced to call in their developer loans which will trigger a spate of bankruptcies and an increase in the supply of property and further price falls.
Spain’s housing stock problem
Much is made of Spain’s supposed 1 million unsold homes but one of the main issues is that so much has been built in areas with so little demand.
According to Fernando Rodriguez de Acuna Martinez, a consultant at Madrid- based adviser R.R. de Acuna & Asociados puts it concisely.
“More than a third of Spain’s land stock is in urban developments far from city centers. About 43 percent of unsold new homes are in these areas, known as ex-urbs, while 36 percent are in coastal locations built up during the real-estate boom.
“If you take into account population growth for these areas, there’s no demand for them, not now or in ten years. Around 35 percent of Spain’s land stock is in the ex- urbs, which means it’s actually worth nothing,” he said.
Comment: Pockets of prosperity
The overall macro economic picture looks bleak for 2012 but as ever there are sure to be pockets of prosperity. Prime coastal locations like Mallorca and Marbella are driven by the international market and have not suffered as much in terms of over-supply.
The new prime minister has a tough job and needs to act quickly to take advantage of the political momentum he has. Unfortunately the short term actions he needs to take will be painful but waiting is just delaying the inevitable.
There are many banks and the developers who need to be put to the sword. Without it, a return to a healthy mortgage and property market is just a pipe dream.
The reality of the situation is that the article nails the myth about crisis in Mallorca and Marbella but especially Mallorca which is like the London of the Spanish real estate market. In Marbella you only have to go 20 Km down the road and you can buy for half price such is the complex nature of Prime Location Spanish property.
However the fact you can’t buy prime location property at bargain prices surely has to be a good thing in that you know you’re making a good property investment for the future.
property for sale in Soller
Property for sale in Llucmajor
