Spanish property still weighing heavily on banks
News by Propertyshowrooms.com
Distressed Spanish property is still proving to be a thorn in the side of banks, with many expected to make bigger losses than previously hoped. Reuters reported that with Sareb now releasing toxic assets to the market, other banks are struggling to compete. Consequently, they are left with large volumes of real estate repossessed from borrows.
With financial institutions forced to make extreme cuts on distressed property – around 50-60 per cent – the situation is understandably weighing heavily on the country. What’s more, despite considerable discounts, demand for property is weak, with most foreign buyers looking for prime units.
Losses are proving to be unavoidable too, according to the newspaper. Should banks turn to private equity firms and hedge funds to clear their books of toxic assets, they will typically have to discount them by 60-80 per cent. Fernando Acuna of Taurus Iberica told Reuters: “The sale of secured assets to investors would likely be done at prices below those of the Royal Decrees (the government-enforced clean-up), with big discounts. The discounts from the decrees were more in line with the prices seen in the normal consumer market.”
It isn’t just banks that are feeling the heat either, with real estate company Reyal Urbis filing for insolvency on Tuesday (February 19th). This is the second biggest corporate crash Spain has endured and reflects the impatience of banks with debt-strapped companies that are unable to recover from the property crash.
Reyal Urbis collapsed after they were unable to renegotiate €3.6 billion (£3.1 billion) worth of debt and despite having a property portfolio valued at €4.2 billion (£3.6 billion approximately), their asset values are lower than the money owed. The decision now lies with the courts whether or not to liquidate the firm, which may take years.
For banks, staying afloat is now a matter of being able to pick up the pace, selling off the majority of assets before Sareb gains momentum. Santander is just one institution taking this approach and claims it will aggressively rid itself of distressed property assets this year. The bank has set aside €1 billion in its budget to cover any losses. Santander chief executive Alfredo Saenz told Reuters: “If we can get in there before the Sareb starts achieving cruising speed, so much the better.” International Property and Real Estate News from Propertyshowrooms.com
2013-02-25 17:02:18
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