Property investors with nerves of steel could do well when the Spanish ‘bad bank’ Sareb releases thousands of repossessed properties on to the market.
Sareb was created last year as a vehicle for Spain’s leading banks to offload toxic debts from its books – mainly in distressed property.
The first batch of around 13,000 properties, formally owned by banking giant Bankia, are being put up for sale in a bid to help clear the £31.6 billion of troubled real estate taken on by Sareb from Spain’s four nationalised banks.
The move is vital to help the country’s road to economic and property recovery.
Though many critics say the move is premature since the bank is still trying to finalise its business plan and the distressed sales will not deliver the necessary financial results.
However, economic data from Spain shows things might be looking up with business confidence returning and the number loans being agreed increasing.
The data news follows announcements from three leading banks that the country’s property crash continues to diminish their profits.
In the last quarter of 2012, most Spanish banks reported big net losses though Banco was hit hardest when it announced it had lost more than £2 billion last year.
All three say the rate of bad loans is now slowing and they are finding buyers for foreclosed properties.
Bankia says it raised £475 million last year by doing so, 19% more than the year previously, and it sold 1,100 properties last December.
Most of these properties are being sold at market price discounts of between 40% and 60%.
With so many distressed properties coming onto the market there are opportunities, especially for foreign investors.
Million homes for sale
Though anyone thinking of doing so should be aware that Spain’s economy is set to suffer another contraction in 2013 and the banks still have issues with the amount of bad debt they are carrying.
Spain currently has around a million unsold properties around the country and since the property bubble burst five years ago prices continue to tumble.
The country’s Mortgage Association says prices have fallen by 27% from their peak, and 10% of that drop occurred last year.
Property experts also say that property prices will not recover until they have fallen by another 20%.
Added to this uncertainty is the new bank Sareb which is about to sell tens of thousands of properties – many of them new developments after developers went bust.
Sareb hasn’t revealed exactly how many distressed properties it has or when they will be sold but market analysts say the bank is now the holder of Europe’s largest real estate portfolio.