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“I was chatting with an employee with a large bank-owned property site that are disposing of these repossesions. By law they have to ensure the properties are 100% compliant with local planning laws and taxes. They have to pay back taxes if they exist,etc…

Anyway, this employee said they have 5000 on their books to sell now and another 12000 in the pipeline for the near future. But bear in mind the process takes between 4 months and 2 years before they get through their pre-sales processes.

Its a huge logistical nightmare for the banks, they are becoming the largest estate agents in the world and also making a loss on everything they sell. The operational costs of running such an real estate organisation must be substantial.

They are also enlisting the support of local estate agents for viewings, one had just told me the “minimum price” for a place – too high but I guess that his idea of the minimum based upon his slice of “action”. They are not going to move them quickly like this.”

Spain has traditionally suffered from sellers not recording the full money received from the sale of the property, with the convention being an under declaration of approximately 30%. However, over the last three or four years there have been some very high-profile court cases involving corruption and money-laundering. Under declaration has been brought into the money-laundering field and as a result is much less prevalent. The result of this in a level market would be the Registries showing higher prices being paid for properties, which were in fact only being sold at the same total price. However, prices dropped substantially, in many cases by more than 30%. Accordingly, the net effect is that the registries are showing marginal drops in sale prices, when in fact the actual gross prices are dropping substantially.

“Does the spurious valor de tascion refer only to the cases where the bank is swapping debt for the ownership of the property or can we not trust the stated LTV of the entire mortgage book of the spanish banking system.”

Interesting question. The spurious “tasación” only refers to the properties acquired in debt for property swaps, since this formula is only applied when a property is “repossesed”.

However, the other part, the real value of the properties underlying the mortgages in the loan book, well this brings us back to the Expansion point, about who was doing the valuing in the first place. If the banks controlled 47% of the valuation companies, well… these values cannot be assumed to be objective, can they?

15 clicks away on the Algarve coast the stack a tourist flats are tough to sell. Here inland new apartment blocks (say, 8 flats in a four story) sell out before completion.

Up in the north, Porto, Viseu, Braga, Coimbra, very different story, very depressed market. Just seen a 5 bedroom flat in Porto on the market for 80,000 €. Very tempting indeed.

But to be clear, here in Spain the banks aren’t selling the things – there are no customers, someone told me the total sales to non Spaniards in the first six months were only 478, which makes sense, but I cannot confirm – they are simply swapping property for debt, and valuing the asset in the balance sheet at an imaginary price, then telling the press the level of bad debt is going down.

Incidentally, in Portugal, no boom no bust, but there do seem to be a very large number of empty properties built for tourists who never came. Half a million according to this article:

http://economico.sapo.pt/noticias/portugal-tem-mais-de-meio-milhao-de-casas-a-venda_7690.html

Edward

Here, it’s not so much of a problem, no boom so no slump. In Spain however….

In my part of the US, CA, it is Bank-owned properties that are driving house prices down. A repossessed property on your street is very bad news.