Spain moves on property market25/07/2012
It’s been another good week in for Spain, as the first EUR 30 billion of EU bailout cash was sent to the country’s troubled banks and the Government was granted an extra year to sort out the fiscal failings
Channelling the loan directly to the banks, is a further boost to Spain because it won’t be counted as “sovereign debt” by the ratings agencies nor add around 10% of GDP to the debt burden, as would have been the case if it had been shunted through the Madrid Government.
There’s now just 11 banks left standing after a 3-year frenzy of consolidation that has seen nearly all the original 45 cajas (savings banks) vanish from the scene.
The country’s three strongest banks, Caixabank, BBVA and Santander, are unlikely to call on the “Rainy Day” refinancing funds from the EU, so the remaining eight banks will get their coffers boosted directly by the EU and can use it to strengthen their balance sheets.
With the pressure off for a year, the Spanish banks can be expected to effect a more efficient disposal of their 1,000s of unwanted housing developments and repossessed homes.
With peak to present prices down an average of 44% already, it is unlikely there can be further cuts, but with the Euribor base interest at its lowest point and Sterling at its strongest level against the Euro for four years, the banks will be targeting the UK and other rainbelt countries in the Eurozone.
Low prices, generous low interest mortgages and plenty of choice is a positive marketing message that applies uniquely to Spain, still the number one holiday and property buying destination. Couple this with the summer’s wet and windy weather, no growth economies in the UK and northern Europe and the present trickle of buy to let investors could become a flood over the next 12 months.
All the Spanish banks are up to their ears in unwanted property, but September is likely to reveal marketing changes to further reduce their holdings and strengthen the balance sheets. The key to sales currently is proving to be the generous mortgages that now cost around EUR 700 a year less after the Euribor rate cut is applied to a typical mortgage funded sale.
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