Spain Pain continues
Spain’s infamous property sector is “reviving” the problems not many talk about. With the English strong sterling buyer, the biggest group of buyers gone, the biggest problem is there are no “real” buyers around. Left to buy is the local buyer, but he is running into problems, as unemployment is hitting new highs. Left is the Russian luxury buyer and an occasional Scandinavian or German buyer. The problems is though, despite the “sale” prices comparing today’s with sale price to prices 4 years ago, there are still simply way too many houses empty, and these can’t be absorbed by the market.
Banks have just recently started the repossession process, and due to the administration processes, many properties spend more than a year before even reaching the market. Valuation at banks are still way off, so everybody still lives in an illusion of prices still at “old” levels.
We have argued, property prices will continue falling, as there simply are no buyers to absorb the supply. Spain is in many ways the Florida of Europe, and we all know what happened to Florida property prices. Your money still buys twice the size, double the quality in Florida compared to Spain, so those sellers must come down before the bargain hunting starts. Bloomberg reports;
Spanish residential mortgages decreased for an 18th month in October as banks reined in lending amid a surge in borrowing costs and bad loans.
The number of home loans fell 43.6 percent from a year earlier after a 42 percent drop in September, the Madrid-based National Statistics Institute said in an e-mailed statement today. Total capital lent on all mortgages fell 40.6 percent, it said.
Spain is struggling to digest a glut of 700,000 unsold new homes since the collapse of the building boom that has pushed the unemploymentrate to 23 percent. Prime Minister Mariano Rajoy, who holds his second cabinet meeting on Dec. 30, has pledged to bring back tax rebates for mortgage holders and clean up an estimated 176 billion euros ($230 billion) of soured assets linked to real estate from the books of the country’s banks.
The local buyer is more concerned about the job prospects than buying a property….
And don’t forget, Spain has it’s own Ghost Towns.