Spanish Property Receives Boost In Revival Hopes11/11/2013
The large number of construction sites left untouched since the burst of the real estate bubble may have been a major concern for the Spanish property market in recent years, but there seems to be light at the end of a long dark tunnel. Several banks that financed the development of these projects have ceased the sites, resulting in rumbling house and apartment prices.
However, foreign investment in the nation’s property market has considerably improved since the beginning of 2013. Good deals are being completed on real estate assets that around eighteen months ago, were not even considered by the same investors.
Unsold homes and price falls
Spain’s inventory of unsold homes stands at 650,000, and average price falls recorded in the country were around 30 per cent, following the crash of the market in 2008. Sales and mortgage lending were at their lowest during the past five years, but an influx of investment from overseas suitors has left the country with hope for the future.
A number of private equity funds have been scouring the market for quality commercial properties while several individual investors have been keeping their eye on residential developments that offer great amenities for reasonable prices.
Residential as well as commercial properties can be purchased in major cities like Barcelona or Madrid for much lower prices when compared to real estate in major European cities like Paris or London. Real estate agents in Spain say that there are many investment funds and family offices that are monitoring properties within the country. Although only small sized deals have been struck so far, it seems to establish a foothold for the market to build upon as market insiders reveal that 2014 will be much more positive.
Reasons for a positive 2014
There are two main reasons as to why the Spanish real estate market is set to attract more deals next year. The “Bad Bank” created by the government is the first. SAREB as it is called, ceased 54 billion euros worth of property loans from nationalized lenders in the country. They did so before placing the assets associated with them into portfolios as it looked to lure investors. The bad bank has infused plenty of confidence back into potential buyers thanks in large to the massive reduction in prices.
The other main reason as cited by market insiders in the provisioning rounds imposed by the government, urging hesitant banks to reduce the value of bad loans as a means of raising capital to make up for previous as well as potential losses. Lenders have thus been encouraged to sell off their properties at low prices to attract overseas investors back to the market.
According to real estate analysts, the bad bank has become an active seller of its portfolios, meaning that an increasing number of large players have been put into good selling positions. What urges buyers to re-enter the market is the fact that property prices are very low, while rental yields remain high. Since this gap is expected to become smaller with time, investors want to make the most of the present situation to rake properties for significant discounts
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