Moody’s downgrades 16 Spanish banks

May 18, 2012 – 8:54 am

Banks in Spain and tenerife downgraded by Moody's as a result of Euro crisis

Credit rating agency Moody’s has downgraded 16 Spanish banks including two of Spain’s biggest lenders, the Banco Santander and Banco Bilbao Vizcaya Argentaria (BBVA).

According to a statement from Moody’s, nine banks were cut three notches and seven were kept on review of the agency for further downgrades.  Spain’s borrowing costs shot up at a bond auction on Thursday, after economic data confirmed the country is back in recession and reports of an outflow of deposits from nationalised Bankia hammered its share price.

According to official data, Spain is in recession recording a 0.3 percent contraction in the economy in the first quarter. Moody’s cited bad loans, recession, funding access worries, real estate crisis, high unemployment rate and lower credit worthiness of the government as the reasons for the downgrade. “The Spanish economy has fallen back into recession in first-quarter 2012, and Moody’s does not expect conditions to improve,” the credit rating agency said in a statement. “Banks will continue to face highly adverse operating and market funding conditions that pose a threat to their creditworthiness,” it added.

The agency has also cut the ratings on Santander UK, a subsidiary of Banco Santander, the eurozone’s largest lender. Santander UK maintained that the downgrade would not have any impact on its operations.

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Asking prices for property in Spain fall

May 17, 2012 – 11:11 am

Property prices on the slide in Tenerife and Spain

Asking prices for Spanish homes fell 9.5pc over 12 months to the end of April, according to data from Idealista, a Spanish property portal.

With Spain back in recession, and banks refusing to lend on anything but their own properties, home owners trying to sell have no alternative but to drop their prices. The average resale property in Spain now has an asking prices of 1,993 €/m2, down from 2,202 €/m2 a year ago. On a monthly basis, asking prices fell 1pc in April.

Asking prices fell the most in Castilla La Mancha, Navarra , Murcia, and Extremadura, and the least in Castilla y Leon, La Rioja and Galicia.

You can read the full monthly house (asking) price index report from Idealista  here (pdf in Spanish)

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Spain back in “crisis mode”, but affordable property good news for investors

April 23, 2012 – 9:31 am

Spain in crisis,but property in Tenerife is good value for investors

Spain is back in “full crisis mode”, according to one bank, as property prices continue to plummet. “It is looking more and more likely that Spain is going to have some form of bailout,” Rabobank told OPP. “Assuming there is not an (ECB) intervention, you would not see a cap on Spanish yields, they would just keep increasing.” After the country’s 10-year boom came to a messy end in 2007, Spain’s economy has been dropping like a stone, taking the property market with it. Mortgages payments are rising as rates of inflation rise to 3.4 per cent and banks are left in a vulnerable position, holding one-fifth of the country’s 1 million vacant homes. The new Spanish government are introducing austerity measures to recoup lost finance, including cuts to education and health, but with almost five million unemployed and the economy still shrinking, the return of recession is “likely to suppress local demand”, according to Reuters columnist Maharg-Bravo. But more affordable property remains good news for overseas investors, as real estate values continue to decline at 22 per cent to 29 per cent each year. 

 Tenerife, with it’s beaches and sunshine is still attracting investment from overseas.

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Banks forced to sell properties in Spain cheaply.

April 5, 2012 – 3:09 pm

Banks forced to sell properties cheaply in Spain and Tenerife

Banks are going to be forced to sell properties in Spain cheaply, accelerating a four year decline in residential property values that are already 30% below the peak reached in 2007. Most Spanish property market commentators agree that home prices in the country still have a long way to fall. But despite historically low demand and a glut of homes on the market, vendors, residential developers, estate agents and banks have been reluctant to slash property prices sufficiently to meet today’s perceived market value, in order to avoid major losses.

But Economy Minister Luis de Guindos is now leaning on lenders to make €50bn (£42bn) of additional provisions and capital charges for losses linked to real estate over the next two years. Consequently, residential property prices are now poised to fall the most on record this year, leaving a quarter of all home owners in negative equity, as the government forces the banks to sell real estate holdings.

According to research conducted by advisory firm R.R. de Acuna & Asociados, the average price of a home in Spain will fall by 12%-14% this year. That’s the most since the National Statistics Institute started tracking values in 2007.

Based on an analysis of 800,000 mortgages, Standard & Poor’s forecasts borrowers with negative equity may increase to 25% this year, up from 8% in 2010. “There will be more serious price drops this year because of the government decree,” said Fernando Rodriguez de Acuna Martinez, a partner at the Madrid-based firm. “Banks are now prepared to incur big losses on real estate to shift all they can.”

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Euribor rate falls

April 3, 2012 – 11:29 am

Spain's Euribor rate falls, causing mortgage costs to fall in Tenerife

Euribor (12 months), the interest rate normally used to calculate mortgage repayments in Spain, fell to 1.45pc in March, leaving it 25pc lower than the same time last year. As a result, repayments on a typical 25-year, €120,000-mortgage resetting now will go down by around €25/month or €300/year.

Mortgage rates are plunging because of the new policy by the European Central Bank (ECB) to provide banks with unlimited funding for 3 years. None of this means cheap credit for mortgage borrowers.  When banks can only get short-term (3-year) financing, they avoid lending to house-buyers for 25 years.

Partly as a consequence, new mortgage lending in Spain has collapsed, down in January an annualised 41pc by volume, and 47pc by value, with the average mortgage value down 10pc.  It’s clear Spain is back in a credit crunch.

So mortgage rates have plunged, but so has new lending. The result is less money available to buy housing, which means downward pressure on prices.

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House prices have fallen 35% since peak

March 8, 2012 – 12:08 pm

Property prices fall by 35% since peaking Spain and Tenerife

Luis de Guindos, the Economy Minister, says house prices have fallen 35pc since the peak, much more than official figures suggest.

According to an article in the Spanish daily El Pais, de Guindos says it is his “impression that finished housing sells at a discount of 35pc compared to prices before the crisis.”

That’s not enough for De Guindos, who has introduced financial-sector reforms forcing banks to make bigger write-downs on their properties, with the stated objective of bringing down house prices.

De Guindos has criticised banks for only lending to buyers of their own properties to “maintain the fiction of the value of their properties,” something he hopes his reforms will discourage.

The reforms introduced by De Guindos had an immediate impact on vendor expectations, with a 30pc increase in asking price reductions (by an average of 9.5pc, or €26,200) in the week after De Guindos announced his banking reforms, according to figures from Idealista  a property portal

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Euribor down,mortgages cheaper?

March 5, 2012 – 12:16 pm

Euribor falls again in Spain and Tenerife

Euribor,(12 months), the interest rate typically used to calculate mortgage repayments in Spain, fell to 1.678pc in February, leaving it 2.1pc lower than the same time last year. This is the first time that annualised Euribor has turned negative in 19 months. As a result, repayments on the average 25-year, €150,000-mortgage resetting now will go down by around €36/year.

This time last year Euribor was still rising fast as the European Central Bank (ECB) tightened monetary conditions. The Euribor has been on a downward trend since August last year and shows no sign of changing direction, 

Rates will stay low whilst the ECB keeps up it’s unlimited lending policy, giving banks 3-year financing in return for dubious collateral. Unfortunately, this does not mean cheap credit for mortgage borrowers. Quite the opposite. When banks can only get short-term (3 year) financing, they avoid lending to house-buyers for 25 years.

Partly as a consequence, new mortgage lending in Spain has collapsed, down 32.6pc in 2011 (to 409,337)  the biggest annual fall since the crisis began  according to figures from the National Statistics Institute (INE). The overall value of new mortgage lending fell 35.5pc to €45.8 billion, and the average mortgage loan fell 4.3pc to €111,950, at an average interest rate of 4.35pc, up 11.54pc on 2010.

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Spanish banks prepared to lend over 100% on repossessed properties

January 12, 2012 – 10:51 am

Spanish Banks are prepared to lend over 100% on their own properties that have been repossessed, it has been revealed. They are also selling them at rock bottom prices to attract buyers so that they can reduce the amount of property on their books.

According to Adam Cornwell, managing director of Feltrim International these are quality properties in desirable areas. Recent reports from a leading risk adviser say banks have around €30 billion worth of property that they can’t sell.

Source:  PropertyWire.com

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Buying opportunities in Tenerife and Spain

December 13, 2011 – 12:10 pm

Property bargains abound in Tenerife and Spain

The recent credit crisis has opened up some superb buying opportunities for buyers seeking a second home in Spain. While prices have fallen typically 25% from their peak.

For example, the Polaris World resorts were made famous by endless TV adverts featuring Jack Nicklaus before the recession hit, now these superb, complete golf resorts have a small proportion of unsold properties which the banks are keen to sell.

Buyers are advised to move quickly as much of the stock made available by the banks has sold in the last twelve months. Prime position property is becoming more difficult to find for buyers and the future of such cut price deals and mortgages remains uncertain with the government bailout of CAM about to result in a sale to a stronger banking group in Spain.

Villa Cashback MD Paul Williams remains cautious about continuing half price deals. “At this stage we don’t know what form a future CAM bank will take and what the pricing strategy of the new banking group will be. What we do know is that a weak CAM bank has so far undercut the stronger banks in pricing their property. Now it’s about to be bought by a stronger institution there’s no guarantee of the property giveaway continuing.”

Brand new apartments are available on resorts such as Hacienda Riquelme where front line golf apartments are available at less than half their original prices. Mortgages of up to 90% are available for overseas buyers. The resort has proved extremely popular with UK and northern European buyers this year.

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Property prices to fall further?

November 28, 2011 – 9:37 am

 The distressed nature of the Spanish property market combined with the country’s fragile economy suggests that property prices will fall further, despite the fact that they have tumbled nationwide since the peak of the market in 2007. The Eurozone debt crisis that has already seen three countries, Greece, Ireland and Portugal bailed out is now threatening much bigger economies like Italy and Spain. Furthermore, with unemployment and foreclosure levels in Spain both growing, it is hard to see how further price falls are not inevitable, presenting purchasers with an opportunity to bag an even cheaper priced home in Spain. Fresh research by an association of homeowners facing foreclosure (AFES), reveals that almost 20% of Spanish mortgages signed between the boom years of 2004 and 2008 are or will become delinquent. AFES calculate that over 700,000 families will have had their homes repossessed by 2015, which is a tragedy. But while extremely unfortunate, it does present those in a position to buy property, with an opportunity to secure a home at an even cheaper price, crushing any slim hopes that that market will soon embark on the road to recover. Mark Stucklin of Spanish Property Insight wrote: “Specifically, there were four million home purchases between 2004 and 2008 , the bubble years of the Spanish property boom  of which 170,000 have already been foreclosed, another 170,000 are in process, and another 375,000 are expected to be repossessed by 2015.” “All this at a time when there are more than three million empty homes in Spain,” he added. AFES propose partial or total debt forgiveness by banks, more mortgage lending, and lower property prices to making housing affordable. “The big social drama is that after losing their homes people are saddled with debts they can never afford to pay,” said Carlos Baños, President of AFES. or total debt forgiveness by banks, more mortgage lending, and lower property prices to making housing affordable. “The big social drama is that after losing their homes people are saddled with debts they can never afford to pay,” said Carlos Baños, President of AFES.

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