Spain’s Bad Bank will boost sales of good property10/09/2012
Spain’s newly confirmed Bad Bank is likely to have a pass level for bank-owned toxic property of 56% below valuation – a further 11% reduction from current national average peak to present discounts.
The Spanish Government created the so-called Bad Bank to take over tens of billions of Euros in defaulted loans and unsaleable property and to accelerate the clean-up of the banking sector, said Economy Minister, Luis de Guindos today.
More than half of the newly created and merged banking groups are likely to dump the worst performing repossessions and worst located developments into the Bad Bank to be managed by their regulator, the Bank of Spain.
Spain overhauled its banks for the fifth time in three years to secure up to 100 billion Euros in European aid for lenders burdened by bad loans from a property market crash that started in 2008 as residential prices reached all-time peak.
Minister Luis de Guindos said: “The prices of these assets banks transfer to the bad bank must ensure that no further losses are generated during its lifetime, something that is very important to minimize the impact on taxpayers.”
Ireland’s Bad Bank took in properties at least 56% below valuation and real estate pundits estimate the same discount would work equally well for Spain.
With 100,000-plus unwanted Spanish apartments removed from the market and the banks’ books in the November 2012 to March 2012 period, those remaining are more likely to find buyers among the growing number of interested international buyers, attracted by discounts averaging 44% – and now by the confirmation that they are being offered bargains in good locations.
“The Bad Bank will help to further stabilise the Spanish real estate sector by allowing vendor banks to concentrate on providing their best properties and attached mortgages to international buyers seeking bargains along their favourite Costas.
An extra 11% discount that would qualify property for the acceptance by the Bad Bank was only a reflection of their poor quality, inferior location and unsuitability for the new marketplace – “the best properties sell first and it could be 10-15 years before any real interest is shown in the Bad Bank portfolio.”
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