# Real estate sector “bankrupt” says Spanish Mortgage Association



## adiep (Jan 10, 2010)

Ouch !!

Real estate sector "bankrupt" says Spanish Mortgage Association | Spanish Property Insight Blog

“The real estate sector is bankrupt”. That is the claim made yesterday by Mr. Santos González Sánchez, President of the Spanish Mortgage Association (AHE), speaking on behalf of Spain’s mortgage lenders. This has serious implications for the Spanish banking sector and the wider economy.

Spanish developers had a combined debt of 324 billion Euros in the third quarter of 2009, the equivalent of around 30% of Spanish GDP, according to figures from the Bank of Spain. The interest bill alone is around 15 billion Euros a year, which developers cannot hope to pay.

With property prices falling, the banks are increasingly reluctant to swap debt for property. They are said to be ready to turn off the taps and refuse developers more credit, fearing that it could become a downward spiral.

More than 50% of the debt was used to buy land, for which there is now no market. “Whilst those plots of land are not properly valued, the financial system can’t start afresh, and won’t be able to finance new homes,” Mr. González told the Spanish press.

“The viability of the property sector is in question and it is putting the financial sector in danger,” warns Mr. González, who called on “someone” like the banks, the Government, or the Bank of Spain to take a lead in tackling the problem. All of them are said to be aware of the danger, but all of them are looking the other way.

“Bad Bank” solution

The solution lies in creating a “bad bank” where all the toxic real estate loans can be dumped, freeing the banks from their bad debts and enabling them to start lending again, argues the AHE.

Worst of all, the situation with the developers is pushing up the cost of credit for the whole Spanish economy, through lower bank credit ratings, argue the AHE. “The developers’ debts affect the credit ratings of the financial institutions, with all the consequences that has for a sector that still hasn’t fully recovered its liquidity. The financial system will have to explain how long it can bear this situation,” said Mr. González.

This serves to remind us that, on the whole, the Spanish property sector is far from out of the woods, and the longer the problem drags on, the more damage it does to the Spanish economy.


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## jojo (Sep 20, 2007)

cheery news!!!

Jo xxx


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## adiep (Jan 10, 2010)

jojo said:


> cheery news!!!
> 
> Jo xxx


Hey ho


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## nigele2 (Dec 25, 2009)

And this arrives in parallel to the warning that the Euro zone needs to address the disasterous positions in Greece, Italy, Spain and Portugal. "Roubini cree que España es una 'amenaza inminente' mayor que Grecia". It will be interesting to see if the northern european rich say "Who cares" or if they see the longer implications and are willing to help.

Can't wait for the French and Germans to suggest a Mediterranean Euro 

Hopefully these things will atlast wake up the spanish people and lead to a general strike. Sadly it won't happen today .

Anyways the pound is motoring upwards as a consequence and that for sure is not due to good UK news.


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## jojo (Sep 20, 2007)

TBH, altho this seems to be almost surprising news, I've often wondered how and why nobody could see this coming when we all know that the Spanish housing market was plummeting and mortgages were/are being foreclosed etc

I dont know about the implications to the EU, but my simplistic view makes me wonder that if Britain and the pound are rising against the euro, property prices slump even more in Spain, is that gonna open the floodgates again for Brits to come over and buy, buy, buy??????

Jo xxx


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## nigele2 (Dec 25, 2009)

jojo said:


> I dont know about the implications to the EU, but my simplistic view makes me wonder that if Britain and the pound are rising against the euro, property prices slump even more in Spain, is that gonna open the floodgates again for Brits to come over and buy, buy, buy??????
> 
> Jo xxx


That is a good thought Jo. If Germany and France don't help out then I guess the north south divide will grow and having a weekend home on a sunny beach will be within reach of many more people. But the north still needs to fully recover of course.


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## mrypg9 (Apr 26, 2008)

nigele2 said:


> That is a good thought Jo. If Germany and France don't help out then I guess the north south divide will grow and having a weekend home on a sunny beach will be within reach of many more people. But the north still needs to fully recover of course.


Eurozone rules prohibit such assistance. I'm not so sure that the rising £ will persuade that many people to buy in Spain although who knows?
Pegging the euro against the German economy is now no longer sustainable. German domestic demand is still weak although German exports are holding up well,. Merkel has problems with her junior coalition partner. So things aren't all rosy in Germany.
I wonder about a resurgence UK buyers in Spain. The £ still is nowhere near its level of three years ago and in spite of what has been said by some I don't regard most of the people who tend to look to Spain for their retirement as truly 'wealthy'. Private sector pensions and investments generally have taken a knock and prospects for good returns on invested capital are in the short and medium terms dire. Plus UK property prices are just creeping up to the levels of two years ago so the downward trend has worked both ways. 
Truly wealthy people with surplus capital may not want to invest it in a country with an economy that is likely to take a nose-dive from a position that is already weakened by the burst construction bubble.
If I had loadsamoney I'd be looking further afield than Spain and if I were considering Spain I'd be looking at 'posh' areas where property prices haven't really fallen that much.


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## littleredrooster (Aug 3, 2008)

jojo said:


> TBH, altho this seems to be almost surprising news, I've often wondered how and why nobody could see this coming when we all know that the Spanish housing market was plummeting and mortgages were/are being foreclosed etc
> 
> I dont know about the implications to the EU, but my simplistic view makes me wonder that if Britain and the pound are rising against the euro, property prices slump even more in Spain, is that gonna open the floodgates again for Brits to come over and buy, buy, buy??????
> 
> Jo xxx


Gonna be a long time before or if that happens,
The UK recession has only just bottomed out,(we hope),and it will be a very long and slow climb back.
Finance is still fairly tight and the exchange rate is still not good and needs to improve quite a bit yet.
Punters are also well versed on the illegal properties fiasco,so many will er on the side of extreme caution.
Even if the Spanish property slumps further, I cant see any floodgates opening,...more like a slow trickle methinks,... for a good while anyway.


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## mrypg9 (Apr 26, 2008)

littleredrooster said:


> Gonna be a long time before or if that happens,
> The UK recession has only just bottomed out,(we hope),and it will be a very long and slow climb back.
> Finance is still fairly tight and the exchange rate is still not good and needs to improve quite a bit yet.
> Punters are also well versed on the illegal properties fiasco,so many will er on the side of extreme caution.
> Even if the Spanish property slumps further, I cant see any floodgates opening,...more like a slow trickle methinks,... for a good while anyway.


Agreed! It would be interesting to know how many Brits are trying to sell up and go back to the UK. A fairly well-heeled friend with a substantial property here plus one rented property has put her house on the market.She does realise that she may wait for years to sell as her property is in the zone between the lower/middle market end and the top price bracket.
It's these wealthier 'middle-class 'people who imo may consider other destinations for their second homes in future.


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## mickybob (Dec 31, 2008)

jojo said:


> TBH,
> 
> my simplistic view makes me wonder that if Britain and the pound are rising against the euro, property prices slump even more in Spain, is that gonna open the floodgates again for Brits to come over and buy, buy, buy??????
> 
> Jo xxx


Why Jo, So that i a few months time they are told " sorry, your house is going to be bulldozed into the ground"? I dont think so.


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## jojo (Sep 20, 2007)

mickybob said:


> Why Jo, So that i a few months time they are told " sorry, your house is going to be bulldozed into the ground"? I dont think so.


Is that how the media are dipicting these demolitions?? Its not quite that simple

Jo xxx


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## mrypg9 (Apr 26, 2008)

mickybob said:


> Why Jo, So that i a few months time they are told " sorry, your house is going to be bulldozed into the ground"? I dont think so.


That's a slight exaggeration, mickeybob Hundreds of thousands have bought with no problems whatsoever. Without wishing to reopen a previous discussion
a number of people who bought these mainly less expensive properties knew they were cutting corners, to say the least. Others were genuinely deceived or ignorant of the legal requirements. Future buyers will hopefully learn from the plight of these unfortunates.
On another subject: The Economist ran a piece about Ireland's economy, to the effect that Ireland's recession has come to an end. GDP rose by 0.3% in Q3 of 2009 and unemployment figures beginning to steady if not fall. Added to this the public finances in better shape than expected with the 2009 deficit being around 620 million euros less than expected.
So....are you all cracking open the Guiness?


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## mickybob (Dec 31, 2008)

mrypg9 said:


> On another subject: The Economist ran a piece about Ireland's economy, to the effect that Ireland's recession has come to an end. GDP rose by 0.3% in Q3 of 2009 and unemployment figures beginning to steady if not fall. Added to this the public finances in better shape than expected with the 2009 deficit being around 620 million euros less than expected.
> So....are you all cracking open the Guiness?


No Bl***y way  are we cracking open the black stuff, I thought you knew better than belive what you read in the papers. Unemployment has eased over the last month or two, but our "Celtic Tiger" was also fed on a diet of a building 
boom. The Government have just cut Public sector wages for the third time in just over a year. Today is the last working day for 1200 Special needs assistants, as they have been made redundent. There is also a review body reporting in March about how many more SNA's to sack this year. Emigration is up, that is why unempolyment figures have not been so high, Immigration (Legal & outherwise) is down. It was reported in the paper the outher day that the governments statement that there is now light at the end of the tunnel is over optimistic, or as one wag said," that light is the train comming towards us at a bl***y great speed."
So, no celibrations yet.


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## mrypg9 (Apr 26, 2008)

mickybob said:


> No Bl***y way  are we cracking open the black stuff, I thought you knew better than belive what you read in the papers. .


Depends on which paper you read. Data presented by 'The Economist' is usually reliable as opposed to tabloids such as the UK 'Daily Mail' which has done much to misrepresent the situation regarding illegal builds in Spain.
I think that most Governments the world over are faced with the need to make deep cuts in public spending. There will inevitably be hurt.
The public sector in the UK has accounted for over half the jobs created in the past decade and although I have myself worked in that sector I feel that as these public sector jobs are paid for by revenue from taxes etc largely from the private sector it's time for a long cool look at what the state should be doing and what could be left to private enterprise.
I'm interested in franchising by Government of public sector provision as is the practice in Canada, France and Sweden.
Business where possible Government where necessary would be my slogan.


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## topcat83 (Apr 16, 2009)

jojo said:


> Is that how the media are dipicting these demolitions?? Its not quite that simple
> 
> Jo xxx


It never is!! We do have friends living in Spain who are trying to re-mortgage so they can fund their son on a course, and are being told that there is no way because of the current upheaval with 'legal' houses being reposessed.


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## mrypg9 (Apr 26, 2008)

topcat83 said:


> It never is!! We do have friends living in Spain who are trying to re-mortgage so they can fund their son on a course, and are being told that there is no way because of the current upheaval with 'legal' houses being reposessed.


Do you mean repossessed rather than demolished? If the former, it's unfair but understandable from a commercial point of view as so many people are -again according to the media -having problems repaying mortgages taken out on properties at the height of the boom and which are now in negative equity.
As for 'legal' houses being demolished -even the Daily Mail is now recognising these as illegal builds. It would be sad if this misrepresenting of the situation is having these knock-on effects.


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## topcat83 (Apr 16, 2009)

mrypg9 said:


> Do you mean repossessed rather than demolished? If the former, it's unfair but understandable from a commercial point of view as so many people are -again according to the media -having problems repaying mortgages taken out on properties at the height of the boom and which are now in negative equity.
> As for 'legal' houses being demolished -even the Daily Mail is now recognising these as illegal builds. It would be sad if this misrepresenting of the situation is having these knock-on effects.


It is a kind of repossession, isn't it? And regardless - theirs is a legal build (they believe), but the bank still won't remortgage because of the current situation. And it's got nothing to do with their inability to pay - currently they don't have a mortgage!


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## mrypg9 (Apr 26, 2008)

topcat83 said:


> It is a kind of repossession, isn't it? And regardless - theirs is a legal build (they believe), but the bank still won't remortgage because of the current situation. And it's got nothing to do with their inability to pay - currently they don't have a mortgage!


Well, demolition is the ultimate repossession -nothing to possess!
From what I've read, Spanish banks are currently facing a situation where they are exposed to enormous loans made to property developers whose collateral is much diminished because of the fall in real estate prices. I guess they are reluctant to grant new loans, even to customers with incomes sufficient to make repayments.
The situation in the UK was similar until recently - banks are reluctant to lend to individuals or business. From what I have heard recently in connection with a property transaction -a house sold within twenty-four hours of being placed on the market -funds are being released, albeit slowly.


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## jojo (Sep 20, 2007)

topcat83 said:


> It never is!! We do have friends living in Spain who are trying to re-mortgage so they can fund their son on a course, and are being told that there is no way because of the current upheaval with 'legal' houses being reposessed.



Wel exactly the same thing has happened to us on our UK house. We used to have a mortgage, never failed payments, had an exemplary track record. My OH wanted to borrow against it at less that a quarter of its value and the bank who we'd previously had our mortgage with, who has our family accounts and my husbands successful business accounts said no - simply cos of the current crisis, banks dont like remortgaging!!!! 

Jo xxx


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## mrypg9 (Apr 26, 2008)

jojo said:


> Wel exactly the same thing has happened to us on our UK house. We used to have a mortgage, never failed payments, had an exemplary track record. My OH wanted to borrow against it at less that a quarter of its value and the bank who we'd previously had our mortgage with, who has our family accounts and my husbands successful business accounts said no - simply cos of the current crisis, banks dont like remortgaging!!!!
> 
> Jo xxx


And the poster states that the people don't have an existing mortgage so they are seeking a loan with the property as collateral. Maybe the fact that there is uncertainty as to the value of property in Spain for the next few months never mind the next ten years or so is also making banks reluctant to lend.
It's probably not enough to _believe_ your house is legal.....you must be 100% sure with all stamps, permissions etc. at hand.
Like you, I believe the best course at the moment and for the foreseeable future may well be to rent......although we never intend to own properties again. Ever.


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## linsell (Jan 29, 2010)

*Spanish Banking System*

After of years of over priced housing the bubble has burst! Until the Spanish banks allow people to borrow, we will all be in tight times.


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## mrypg9 (Apr 26, 2008)

linsell said:


> After of years of over priced housing the bubble has burst! Until the Spanish banks allow people to borrow, we will all be in tight times.


Yep! And it could take a long long time to revert to 'normal', whatever that may mean.
1.6 million unsold homes in Spain...I'm not sure if that figure includes new builds only or 'second-hand' properties also.


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## gus-lopez (Jan 4, 2010)

mrypg9 said:


> Yep! And it could take a long long time to revert to 'normal', whatever that may mean.
> 1.6 million unsold homes in Spain...I'm not sure if that figure includes new builds only or 'second-hand' properties also.


No I think that's new builds, with 3 million being the total on sale that I read recently!


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## mrypg9 (Apr 26, 2008)

gus-lopez said:


> No I think that's new builds, with 3 million being the total on sale that I read recently!



How long will it take to clear that backlog????


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## jojo (Sep 20, 2007)

mrypg9 said:


> How long will it take to clear that backlog????


Hhhmmm, who knows??? I guess that depends on so many things, but where the world economy is heading will be a big part of it??!!?

I think Spain needs to do something really big "Disneyworld"maybe??? Or something similar. I know I keep banging on about it, but it would encourage prosperity amongst the Spanish, create jobs, encourage expats to buy....................

Jo xxx


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## mrypg9 (Apr 26, 2008)

jojo said:


> Hhhmmm, who knows??? I guess that depends on so many things, but where the world economy is heading will be a big part of it??!!?
> 
> I think Spain needs to do something really big "Disneyworld"maybe??? Or something similar. I know I keep banging on about it, but it would encourage prosperity amongst the Spanish, create jobs, encourage expats to buy....................
> 
> Jo xxx


That's a good idea!! 
Don't want it built near us, tho'


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## jojo (Sep 20, 2007)

mrypg9 said:


> That's a good idea!!
> Don't want it built near us, tho'


Spains not short on space. I think they made a huge mistake building the "Disney" thing in France. Geographically its central, but weather wise and as a holiday destination suitable for the masses, Spain would have been the better choice. Too late now tho. 

So build an even better one in Spain !!(but not near mrypg9!!!) :clap2::clap2::clap2:


Jo xxx


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## topcat83 (Apr 16, 2009)

mrypg9 said:


> That's a good idea!!
> Don't want it built near us, tho'


Nimby! 



mrypg9 said:


> ....From what I've read, Spanish banks are currently facing a situation where they are exposed to enormous loans made to property developers whose collateral is much diminished because of the fall in real estate prices. I guess they are reluctant to grant new loans, even to customers with incomes sufficient to make repayments.....


That's exactly it. Doesn't help my friends much though, who now have a son who is likely to be asked to leave the course he's always wanted to do because they can't find the ready cash for it.....


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## mrypg9 (Apr 26, 2008)

topcat83 said:


> Nimby!
> 
> That's exactly it. Doesn't help my friends much though, who now have a son who is likely to be asked to leave the course he's always wanted to do because they can't find the ready cash for it.....


That's a real shame. There are so many ways in which the antics of greedy bankers, property speculators etc.etc. ad infinitum have dashed the hopes and prospects of decent hardworking families.


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## nigele2 (Dec 25, 2009)

It will be interesting to see in the future what target tourist profile the spanish regions want to attract. 

I believe that Catalunya will recover strongly (relatively) from this recession and attract investment while many former coastal strongholds will struggle to do so. (The Islands have their unique appeal of course).

Can Spain do more to promote its history and culture combined with sea and sand? Or are there other formulas? Because if they keep bashing away at the s, s and s I can see them meeting stiffer competition from the likes of North Africa and other European destinations now even easier to get to (and some of these are not tied to the Euro). Or (and I'm at a total loss to suggest any) can they attract new industries?


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## jojo (Sep 20, 2007)

nigele2 said:


> It will be interesting to see in the future what target tourist profile the spanish regions want to attract.
> 
> I believe that Catalunya will recover strongly (relatively) from this recession and attract investment while many former coastal strongholds will struggle to do so. (The Islands have their unique appeal of course).
> 
> Can Spain do more to promote its history and culture combined with sea and sand? Or are there other formulas? Because if they keep bashing away at the s, s and s I can see them meeting stiffer competition from the likes of North Africa and other European destinations now even easier to get to (and some of these are not tied to the Euro). Or (and I'm at a total loss to suggest any) can they attract new industries?


Spain desperately needs to do something more than s,s & s. Sadly ity may only be a two hour slight, but Spain (in general) has now got itself a bit of a reputation for being full of boozy Brits and lots of British type nightlife, which, while it still may appeal to some, that appeal is fading, as you say, due to new destinations that arent much further away and are cheaper and less touristy - funny really, tourists and holiday makers dont like going to touristy type places anymore! Altho those who have families I think would still like Spain cos of the short travel distance - but its no longer cheap when they get here. As for the culture and history, I think those who appreciate that, are the type who would only come to Spain once, maybe twice and then want to see the rest of the world and people with children may not be overly interested. 

When we used to go on holiday with our brood, our motto was always "if the kids are happy, then so are we" and cultural and historical trips were a "nono" in the main, (altho we dragged them away from the pool, and around a few places, but the bribes were expensive). We simply found a nice safe hotel, with good "kiddie" facilities and guarenteed nice weather. In fact we went to the same hotel (Pollensa Park, Mallorca!!) for three years running, simply because the children loved it! YAWN!

So I think Spain should concentrate on what its got and appeal to families, but it needs to be less high rise hotels, boozy night clubs and more "Spanish" looking and somehow make itself cheaper??? I dont know, maybe thats inadvertantly happening with the pound/euro recession. That said, Spain is a big place and there really is something for everyone and I guess that should be their selling point?????

Jo xxxx


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## mrypg9 (Apr 26, 2008)

nigele2 said:


> It will be interesting to see in the future what target tourist profile the spanish regions want to attract.
> 
> I believe that Catalunya will recover strongly (relatively) from this recession and attract investment while many former coastal strongholds will struggle to do so. (The Islands have their unique appeal of course).
> 
> Can Spain do more to promote its history and culture combined with sea and sand? Or are there other formulas? Because if they keep bashing away at the s, s and s I can see them meeting stiffer competition from the likes of North Africa and other European destinations now even easier to get to (and some of these are not tied to the Euro). Or (and I'm at a total loss to suggest any) can they attract new industries?


I agree with you. Although Spain will never lose its appeal completely -the more downmarket resorts on the Costa Blanca and CDS will always attract the 3xs crowd and the less affluent older holidaymaker as these resorts are less 'foreign' and offer all the amenities of a good night out in the UK plus day-long sun -other destinations especially those outside the Eurozone such as Turkey, Bulgaria and Australia will grab a higher share of the market for the more adventurous traveller.
People who fly rarely and only for pleasure won't be deterred by long-haul flights as they'll see the experience as part of the holiday.
Both Turkey and Tunisia have managed to lose the cheap'n' cheerful image of a decade or so ago and are now attracting a more affluent segment of the market.
They've learnt that more can sometimes mean less.
People who like Spain tend to like Florida and with cheap transAtlantic flights and a weaker dollar, the U.S. may prove a greater attraction.
But who knows? Who, three years ago, could have foreseen the slide in the £ and the collapse of so many bubbles?


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