Scepticism over Spain’s new bad bank selling bargain properties

Bank owned properties in Spain can be an attractive bargain for second home buyers and a new ‘bad bank’ has been created to deal with the huge number of homes that lenders can’t sell.

But experts point out that the details are sketchy and it won’t necessarily offer a range of cheap properties for bargain hunters.

‘Until we know the exact terms of the Bad Bank, what properties are going to be transferred into it and at what price, it’s hard to pre-judge the situation. However, the reality is that, to date, many Spanish banks have been a nightmare to deal with when handling their repossessed stock and foreigners have been put off doing business with them,’ said Nick Stuart, director of Marbella based Spanish Hot Properties.

‘They tend to be inefficient, not always conversant in English and haven’t the incentive or motivation to focus on property sales so there is low expectations that this Bad Bank is going to be any different,’ he explained.

A lot depends on what properties the bank will have on its books. Stuart reckons that they are unlikely to be the kind of homes overseas buyers like.

‘A large proportion of homes are likely to be in city suburbs or non-coastal locations and most international clients wouldn’t consider housing their dogs there, let alone live or holiday in them personally,’ he said.

‘Some of the new build bank stock has sat empty for years as nobody has ever considered it worthy of purchase, just because it’s in a Bad Bank won’t suddenly make it desirable,’ he added.

The reality is that repossessed or drastically reduced property that is attractive to overseas buyers is bought quickly and unlikely to ever see its way onto the books of the bad bank.

This could lead to prices creeping up according to demand as the supply of quality property dwindles. Stuart believes that a flood of bargain bottom end homes entering the market from the bad bank will have little or no downward effect on mid to high end house prices at all.

The bad bank will become operational by the end of November and is set to become the biggest property company in the country holding up to €90 billion in assets.

Government officials have vowed that it won’t become a ‘parking space’ for real estate but have active management and promotion of its stock to the market. It will be expected to sell its plots, developments and individual residential homes at a profit over the next 10 to 15 years.

Experts also point out that as the bank cannot offer loans to people to buy the properties it is selling it could struggle to find buyers.

‘The only way it may be able to achieve sales with attractive mortgages is by reaching financing agreements with other banks, which will be competing to deleverage their own real estate,’ said Fernando Acuna Ruiz, managing partner of Taurus Iberica Asset Management in Madrid.