Santander fire sale “zero effect" on Spanish property prices
By Kevin Barnett, 01 Nov 2011
The Spanish bank, Banco Santander may be trying to offload 12,000 of its repossessed homes in Spain to a Wall Street investment consortium for an eye-watering EUR 3 billion, but it is unlikely to affect prices in places international buyers would want to be.
Most of the bank's "fire sale" properties may not reflect prime beachside locations with tourist amenities, restaurants, bars and shopping opportunities – the main drivers for second home owners and their rental potential.
These are properties that have been offered to, and rejected by, Santander staff across the globe as Europe's biggest bank tapped its own 170,000 workforce to help corporate recovery and meet the new stringent equity levels demanded by regulator, the Bank of Spain. Unwanted by staff, even with big discounts and generous mortgage deals, suggests undesired by “choosy” international buyers.
If Wall Street investors do eventually put up the cash, it is likely they will have to wait five years before the market recovers to a level where there is a profit to be made. Legal fees, taxes, sales and marketing costs will add around 20 percent by the time the, mainly city urban, apartments are offered to the public.
Spanish property experts are predicting the deal will have a zero affect on the current market because the Santander properties have not interested international buyers and the domestic market can already choose from a million similar properties on offer from rival Spanish banks – as and when locals can afford to start buying again.
Despite media coverage suggesting a massive “buyers’ market” in Spain, it seems that location and lifestyle opportunities remain more important than rock bottom prices to the serious international buyer.
Spanish bank property specialists, PropertyInSpain.Net claim only around 40% of the one million repossessed properties are likely to interest the international market where buyers are mainly “lifestyle”, wanting a place in the sun based on location and amenities where they can enjoy annual family holidays and rent out to friends when they can’t be there.
“The same parameters apply to individual investors seeking high rental yields. Any Santander deal with Wall Street will have a zero effect on property prices in Spain,” said sales manager, Ben Walker.
He added: “Five years ago there were huge numbers of buyers, including speculators keen to buy offplan and sell for a profit before completion, only possible because there were fewer properties available than there are today. Today there are more lifestyle buyers than investors, but there are still huge numbers of properties on the market that keep the prices at a record low level.”
Spanish banks base their valuations predominantly on the size of the property, not its location, views, facilities, decorative order, etc, and different banks give different valuations, according to the outstanding debt. On popular key ready apartments the price is linked to a defaulting development's debt level and is a hefty discount from list price..
It may be a buyers’ market in terms of cheap bank property and lots of it, but the best bargains get snapped up quickly as lifestyle buyers will pay the going rate for the right property in the right place. The property mantra remains “Location, location, location”.
IMAGE: Sea views at bank-owned Coto Real Duquesa - with 100% mortgages
Spanish Property News from PropertyInSpain.Net