The bad bank does not really matter for overseas buyers and investors: What matters is buying now at the lower ever price and minimizing risks.
Property market prices are reaching rock-bottom in main cities. In city centres and in prime coastal areas prices are stable. We understand that the creation of the bad bank will not much affect this trend. Moreover, the bad bank may help things to reach rock-bottom a bit quicker but the influence of the bad bank on prices will not be remarkable at all.
1) The bad bank stock is a massive amount of bottomed-out sup-prime properties (around 89,000 + undeveloped land + uncompleted developments) that have been very difficult to sell and retail. The situation of many of these properties is unknown since the amount of repossessed stock is overwhelming, which makes it too difficult to sort them out case by case: utility debts (gas, electricity debts)- unresolved legal issues with the previous owner, etc… People who are really involved in the bank’s property business are amazed at the mess that this stock caused. So we are talking about a different “really toxic” part of the market.
2) The bad bank stock will be launched to big investment groups and not retailed.
3) Only in the event of massive demolition of sub-prime or unfinished developments in specific “micro-markets” (the bad bank can legally do that), those “micro-markets” will experience a better price performance. But it will not happen in the short-mid term. It will take years if it happens.
4) Prices are already reaching rock bottom (in main locations, including the top three cities of Barcelona, Madrid, and Valencia, which have stabilized). If the bad bank had been created in 2009 we would be in a different situation.
Why should people buy in Spain if there are so many problems to overcome?
Seven to ten years ago, buying or investing in property in Spain was a very expensive venture. In all the economic history books, it is said that when the prices curve at their highest, it is time to sell. When prices reach the bottom it is time to buy.
Other articles of interest:
Bargain hunters chasing a spanish property investment in 2013