Banks have accumulated 140,600 finished Spanish real estate assets that could already be for sale. The banks’ portfolio of Spanish properties for sale has a rough value of 26,700 million euros, but in little more than a year it will be devalued by 35%, according to the firm CB Richard Ellis. This is the provision that the executive branch of government demands for finished housing in its restructuring plan.
What originally would be worth more than 26,000 million in mid-2013, when the reform culminates, will have a countable price of 17,300 million, which is 9,400 million less. The Economic Ministry trusts that, with this reduction, these homes will be launched to the market more easily.
“The finished residential product tends to be hard to digest for the Spanish real estate industry, but in the long run it ends up being assimilated. They are homes for end users, and if the prices are lowered, rentals are offered with the right to buy or the rents are strengthened, and the operation ends up being carried out,” explains José Luis Marín, network director of offices and assets of the firm CB Richard Ellis.
The executive branch wants the financial entities to assume part of the loss of value that properties for sale in Spain have suffered since the crash of the property bubble because of the over valuation that they made on the price of the flats. According to the government, houses became appraised at between 13% and 30% over their actual prices.
Overprice between 13% and 30%
The banking sector seems capable of assuming the dation in payment in extreme cases that the executive branch proposes, but to accept the “devaluation” that Spanish real estate has suffered since the explosion of the bubble is a theme that generates more controversy. The government has situated the excess in the appraisals of home prices between 13% and 30%, part of which would have to be compensated by the financial entities, who are the owners of various appraisers.
In order to attain the goal of the government that the banks share this housing depreciation, it would be supposed that after the embargo of a house for non-payment, the bank would have to provide a percentage of the price of the home, which would be subtracted from the outstanding debt of the people with the mortgage, reducing their outstanding bill after losing their house.
The Price of the Used Home in Spain Fell 9.4% in February
The price of the used home in Spain fell 9.4% in inter-annual valuation in February, to 2,023 euros per square metre, according to the latest housing price index on idealista.com, which also reflects a drop in respect to the previous month of 1.1%.
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