Spain Real Estate News

The division of Barclays Bank said increased profits in UK and Ireland were wiped out by losses in Continental Europe and New Markets .

Impairment charges in the division increased 32% to £949m, largely driven by a £433m impairment based on the Spanish property loans book.

Barclays said increasing assumptions about the severity losses on the property loans book has led to the impairment.

The losses within the Barclays Corporate division were not indicative of results at Barclays Bank PLC which reported pre-tax profits of £3.95m for the half year – an increase of 45%.

Source: PropertyWeek

The stress test results published by the Bank of Spain on Friday underlined the performance gap between the commercial banks that account for half of the sector and many of the savings banks whose bankrolling of the Spanish property surge left them exposed as the construction boom collapsed.

Five Spanish banks are likely to require a total of about €2 billion, or $2.5 billion, in additional capital after failing the stress tests carried out by the Bank of Spain. Their failure did not come as a shock, however, because many of the savings banks, or cajas, had already needed to seek additional government funding.

“A lot of progress has been made since the start of the crisis — and this is part of the progress,” Miguel Ángel Fernández Ordóñez, governor of the Bank of Spain, said in Madrid on Friday. The tests, he said, showed “the enormous means” available to Spanish banks to overcome any deepening of the crisis.

“When there are doubts, you have to be absolutely transparent, and this is what we have done,” he added. “People are not stupid and will realize that the Spanish banking sector as a whole is pretty clearly above average.” He added: “I have faith in the markets.”

Mr. Fernández Ordóñez said the test results vindicated the recent push to force the cajas to consolidate, as well as a regulatory overhaul approved last week by the Spanish Parliament to allow the cajas to open up as much as 50 percent of their capital to outside investors.

The five banks were also among a recent wave of mergers that are due to cut the number of cajas to about 20 from 45. One of the test failures, CajaSur, was de facto removed from the list following its recent takeover. The Spanish central bank rescued CajaSur in May after it rejected a merger proposal from a larger rival. CajaSur was then auctioned, with the winning bidder, Banco Guipuzcoano, announced only last week.

In contrast, all of Spain’s commercial banks relatively easily passed the stress tests, led by Banca March, whose Tier 1 capital would remain at 19 percent even under a deepening hypothetical economic slump. The Tier 1 capital of the largest Spanish bank, Santander, would meanwhile remain at 10 percent, well above the 6 percent minimum level recommended by the committee that carried out the European tests. The commercial bank with the weakest Tier 1 capital structure, according to the tests, was Banco Pastor, which would just meet the 6 percent threshold.

Iñigo Vega, banking analyst at Iberian Equities, a Madrid brokerage, said that the tests showed it would be “manageable” for the restructuring fund, whose funding capacity could be leveraged as high as €99 billion to cover any additional shortage of capital for the cajas.

“Over all, there were no surprises; if anything, there was lower capital shortage than expected,” Mr. Vega said.

Read more at NYTimes

 Spain’s banks are deliberately stifling the property recovery they are desperate to see by screwing agency commission rates down to 1.5% to 3%; and by forcing developers to the wall.

Agents and developers are getting increasingly frustrated with the inept way in which the Spanish banks are trying to offload their huge glut of repossessed properties.

“It’s a mess,” says Greg Butcher of developers Ocean Village Gibraltar. “The Spanish banks just don’t respect property agents. They see them as reactive and not pro-active. And they don’t feel that they can justify to their shareholders giving reasonable commission rates to an agency right now.”

According to Butcher, “the banks are happy keeping the agencies to 1.5% to 3% (perhaps 5% at best if you make a special case.) They are not ready to go anywhere near a proper 10% commission rate yet.”

The end-result is that there is not enough margin in the process to attract good quality agencies and, says Butcher, “the market is not going to move. We keep telling the banks that there is nothing wrong with the concept of Spain and that north European buyers will come back, but not until they start controlling their price discounts properly and the start to bring in a much more professional and aggressive approach to sales.”

Ian Waudby of Crest Group International agrees. “We come across master agents who get 5% but most agencies are struggling on 1.5% to 3% commission rates and that is not going to change. It is a very, very difficult situation … there is no margin for the sales network to reinvest and lots of agencies are not going to be able to make a profit.”

To make matters worse, banks like Santander and BBVA have set up their own internal sales agencies … but they are domestically focused and the staff involved often only speak Spanish.

“Their strategy was to wait for a summer rush in sales,” says Greg Butcher. “A rush that is not going to come. We’ve had dozens of meetings with the banks and told them that their internal agencies are not going to be any good at selling to north European buyers, who will be the real market when things come back.”

Miguel Martinez-Marino of Bancaja Habitat is trying a different route on behalf of his bank. He will give “between 5% and 10% commission depending on the volume of properties sold,” he says. “We have decided to use a network of agencies in the UK and we are finding buyers for sure. Confidence and interest levels are increasing again … but outside of Spain.” Bancaja is finding properties priced between €90k and €200k on the Costa Blanca are doing well, along with “any apartment on the Mediterranean coast.”

Martinez-Marino has sold 1,528 properties so far this year and he is finding that lucrative finance deals from the parent bank are working well to boost confidence levels. Bancaja is offering an 80% mortgage with nothing to pay for the first three years. After that there is a range of options with borrowing periods up to 50 years and a rate pegged to the Euribor plus 1.2%.

Ocean Village Gibraltar estimates that Spain’s banks now have more than 180,000 repossessed homes on their books. And the volumes are so great that it is squeezing out new developments. “This whole process has been putting projects on hold and causing developers to go bust for at least a year now,” says Butcher. “The banks are obsessed with their repossessions and new build is having to wait while they work out what to do.”

Source:  OPP

Torrevieja is the Spanish resort that exploded in size as Brits snapped up apartments and villas as frenetically as the developers knocked them out. But the town dubbed the Costa del Yorkshire is now better known to the Spanish banks as the home of the "British plumber mortgage", and knee-deep in negative equity as properties that once sold for €200,000 (£167,000) are now fetching as little as €60,000 (£50,000).

Don't expect a rebound in prices any time soon. The Costa Blanca was the most over-built region of Spain during the boom years, and a glut of property estimated to be as high as 1.2m units across the country will take many years to shift.

"There's an awful lot of rubbish out there that just won't sell at any price," says Martin Dell of kyero.com, a website that lists 100,000 Spanish properties for sale by 1,500 estate agents. "There's huge developments on golf courses miles from anywhere, and bad-quality apartments in poor locations with no local amenities. When they talk about 40% or 50% discounts, even at that price they're not worth it."

Desperate Spanish banks have started to offer 100% loans to anyone who will take distressed properties off their hands – and the buyers don't have to make a single repayment for three years. The 100% deals (on mortgages priced at about 3.5%) are for Spanish residents only, but they will give British buyers loans of up to 80%.

Andy Fox, who runs spanishbankproperty.com, acts as an agent for lender Bancaja and has access to 20,000 distressed and repossessed properties. He points to developments such as one in Adra near Almería, where prices on apartments that have never been occupied since being erected two years ago have plummeted from €150,000 to €74,040. And he is marketing a one-bed apartment repossessed by Banco Santander in a resort near Villamartin for €43,000 (£36,000).

But even he hesitates to describe prices as bargain-basement. "Please don't stick the word 'investment' on these properties. It's only a great time to buy if you are not interested in making money. Don't expect anything to jump in value, possibly for years."

British buyers, once the kings of the Costas, are now thin on the ground. During the boom, the British made up about 70% of the foreign purchasers along the Spanish coast, with stories of plumbers and taxi drivers buying three, four or five apartments at a time, often with large euro-based mortgages attached.

According to Mark Stucklin of SpanishPropertyInsight.com, the number of transactions has collapsed. One set of figures this week suggested that in the past six months only 500 homes have been bought by non-resident buyers across the whole of Spain. But Stucklin recommends taking such figures with a large pinch of salt. "There are few reliable statistics and indices. They are often based on asking prices which are vendor fantasies," he says.

The only figures that are reliable are those for transactions, which have fallen to 33,000 a month nationally, compared to 70,000 a month at the peak.

"The market has shrunk but it has stabilised," Stucklin says. "There is still a huge glut of unsold property that needs to be mopped up. The market is digesting the surplus stock in Madrid and Barcelona but elsewhere it will take a lot of time.

"We are seeing the Germans and the Nordics emerge as buyers in place of the Brits. The Germans withdrew during the boom, while the Brits paid top euro. Now the Germans are coming back," he says.

Official figures from the Spanish ministry of housing say prices have fallen nationally by only 11.2% since their peak. But indices from the two main domestic property websites, Idealista.com and fotocasa.es, suggest a fall of about 22%. "This seems to be a fair indication of reality," Dell says, but he adds that asking prices remain in many cases "bonkers".

Read more at Guardian.co.uk

Sir Sean Connery was facing a fresh probe into alleged financial irregularities today after a judge widened his investigation into the former 007.

Connery, 79, and second wife Micheline Roquebrune, 81, are already being investigated over the sale of a seaside property they owned in the millionaires' playground of Marbella in southern Spain.

Today it emerged judge Ricardo Puyol also wants to quiz the pair over a separate multi-million pound land sale in Malaga six years ago.

Investigators believe a property firm linked to Connery and his wife may have failed to pay tax on the sale of development rights to land it owned on the outskirts of the city.

Local newspaper Sur today published a report by police and tax authorities alleging that the company omitted to pay £1.4m in corporation tax.

Puyol is said to have ordered a formal request for the former James Bond and his wife to appear before him to give evidence.

The request is expected to be made through a rogatory letter to authorities in the Bahamas where the couple have their official residence.

Sur said Spanish authorities were keen to quiz Connery as soon as possible because the alleged tax irregularities will become spent on July 25.

The Scot does not figure as a director of Montelagares, the Spanish firm reportedly identified in court papers as the company behind the July 2004 land sale linked to Connery.

But a lawyer at the Madrid law firm he has used is named as a former director.

The firm, Diaz-Bastien & Truan, is also under investigation over the sale of Connery's beachside mansion in Marbella, Casa Malibu, and the subsequent reclassification of the land.

It is thought to have represented the former 007 in the sale of the house.

Read more at the Daily Mail

Prodded by a query from a journalist, Kyero.com managing director Martin Dell recently took on the daunting task of analyzing the vast array of conflicting data on the trends in Spanish property.

Eventually he compiled the numbers from 14 different reports tracking the Spanish market, focusing on three main sources—official data, valuation companies and property portals.

Beyond charting the laughable discrepancies in the government data, Dell concluded the “stand-out figure,” the one reliable fact, is that the number of property transactions has fallen approximately 56 percent from the peak of Spain’s real estate glory years.

The rest of the data is less conclusive, ranging from plausible to ridiculous.

The “most pessimistic” numbers come from Idealista, a property site, which shows prices down about 23.7 percent from the peak. At the other extreme, perkier sources place the drop closer to 7 to 12 percent, a range Dell concludes is “clearly ludicrous, based on personal experience and market hearsay.”

The large portals have access to the most data and they place the drop around 22 percent, an average Dell labels the “most realistic” in the report.

“Given that the number of property transactions is down by around 56 percent, it's difficult to see how prices could not have slumped by at least 20 percent as motivated sellers undercut each other to appeal to a reduced number of buyers,” Dell says.

Dell found broad inconsistencies in the official government reports. For example, the government agency tracking transactions pegged the peak of the market as the first quarter of 2006, but the Ministry of Housing’s data, based on price per square meter, shows the market staying robust until a full two years later (and a slight 10.7 percent decline prices).

If nothing else, Dell says his analysis spotlights a gaping hole in Spain’s market.

“What the market needs is for the Spanish government to publish actual transaction prices of individual properties so that the 'hard facts' are available for further analysis,” he says. “While this will not reveal the 'actual' price paid for the property in most cases--thanks to a cash element of many property transactions--it will level the playing field.”

Source: International Property Journal

 Asking prices are still between 10% and 20% too high, reveals a new survey of house-hunters carried out in March by the Foundation of Savings Banks (FUNCAS).

 The Spanish property market correction will run into 2012, with prices down by 30% in total, say ratings agents Fitch.

FIGURES RELEASED by the College of Registrars for June reveal an impressive 7.04% increase in Spanish property sales over the same period in 2009. This is further reinforced when compared with the 16.28% increase over the final quarter during the previous year.

The reasons for the spike in the graph are contentious.  The consensus of informed opinion suggests the Euro’s eighteen-month high against the pound has been aided by a belief that property prices in Spain have finally bottomed out.

Chris Mercer, director of Mercer’s Costa Calida’s hub is upbeat about the improving market. He says: “We can reveal a quite spectacular increase of 157% for the first quarter of 2010 over the same period in 2009, based on the number of enquiries we are receiving.”

Perhaps the clearest signals are coming from international property portal Rightmove.  Their findings show that during May, Spain topped their potential buyers’ enquiry list. As yet these figures have yet to translate into a similar increase in sales; when they do so the sales figures are set fair. Over the first quarter of 2010, five-thousand homes were sold to non-residents of which 1,574 were buyers British by nationality.

It is clear that sales will need to accelerate to clear the log jam of unsold properties, especially new builds. It is, however, a big step in the right direction.

Mike McLaughlin of southerncomfit.com says the news is ‘a real confidence builder’ and will be welcome news for buyers and sellers.

Source:  RoundTownNews

Two years ago, Spanish banks prevented waves of mortgage defaults by swapping homeowners debt for assets -- homes. This averted huge write-downs on debt, but loaded up Spanish banks with houses as assets instead of loans.

Thus Spanish banks kicked the can down the road two years ago hoping that they would be able to sell of their inventory of acquired homes into a rebounding property market.

Too bad the rebound hasn't happened yet.

WSJ:

Spain's housing market has only gotten worse, and now the bill is coming due as the banks labor under the weight of an estimated €59.7 billion ($73.8 billion) in real-estate assets on their books. Under pressure to make further markdowns on the assets by their main regulator, the Bank of Spain, many banks are now scrambling to unload the properties as quickly as possible.

In some cases, that means offering deals to consumers that are suspiciously like those that got the global housing market in trouble in the first place. The tactics include not just 100% loans, but also low initial teaser rates for buyers or initial payment deferrals for as long as three years.

They're now desperate to sell off the property assets on their books, especially since the Spanish central bank has declared that banks must increase their loan loss provisions against their property assets within a few months, fearing that Spanish banks haven't properly set up reserves against the risk of their vast property holdings.

Given that increasing loan loss provisions would force Spanish banks to recognize losses in their income statements, many are now eager to sell off their houses -- even with no monye down and low teaser interest rates, just to get them off the books and effectively convert their property assets back into loan assets. It's ironic how they initially acquired these property assets in order to do the exact opposite.

So once again, Spanish banks appear to be trying to kick the can ever further down the road and avoid recognizing losses, by offering out dirt-cheap loans whose potential losses won't have to be dealt with for another few years.

"Need a home? Now is the moment!" says Caja Madrid on it website, where it also advertises financing options and special offers, such as an apartment in the small city of Manresa, near Barcelona, for €247,000.

"Escape your old home!" says the site of Valencia-based savings bank Bancaja, which advertises no payments for as long as three years at the start of the mortgage.

Note that even the seemingly more responsible Banco Santander (STD) is in on the teaser mortgage game according to the Wall Street Journal. One has to wonder if the easy mortgages are available to Americans, because if so, then with the weaker euro it's a great time to buy that Spanish vacation property you always wanted.

The latest real estate figures on prices and transactions are giving some hope that the Spanish property market is improving but foreign buyers are still not returning to the country in any great numbers. Prices are still falling, but less with every passing month, according to the monthly house price index published by Tinsa, one of Spain’s leading appraisal companies.

Average Spanish property prices fell by 4.4% over the 12 months to the end of May. ‘If the Tinsa figures are to be believed, the rate of decline in Spanish property prices has been slowing since June 2009, when it peaked at -10.1%. If the trend towards smaller declines keeps up, average property prices will be stable, or even growing slightly before the end of the year,’ explained Marc Stucklin of Spanish Property Insight.

But he points out that the Tinsa figures are based on their own valuations, not actual transaction prices. ‘Most of these valuations have been paid for by banks and for several reasons they might not give a true picture of property prices. Nevertheless, they are interesting in what they reveal about trends, not to mention the valuations used by banks for mortgage lending purposes,’ he said.

The Tinsa figures show that prices have fallen the least over 12 months in coastal areas and the Islands, areas traditionally popular with foreign buyers looking for holiday and retirement homes. Prices are down 4.1% on the coast and 2.4% in The Canaries and The Balearics. On a peak to present basis prices are down 16.5% nationally, 21.4% on the Mediterranean coast, and 12.8% in the Canaries and the Balearics.

But for the Spanish market to recover it needs foreign buyers to flock back and there is little sign of happening at the moment. The latest figures from the Ministry of Housing show that non-residents bought just 513 holiday homes in Spain during the first three months of the year.

According to the Ministry transactions were up in the first quarter by just 1.5% and on a cumulative 12 month basis sales were down 85. Sales increased over 12 months in places like Catalonia, up 13,6%, The Balearics, up 7,9%, Asturias up 4,6%, Madrid up 4,5%, Valencia up 4% and the Canaries up 1,4%.

Prices fell by 22% in Murcia, were down 14.4% in Extremadura, down 10.3% in Castilla La Mancha, saw a fall of 9.5% in Andalucía, some 7.8% in Navarre, 2.8% in Cantabria and down 0.6% in Galicia.

Stucklin also points out that foreigners who are buying tend to be economic migrants from places like Morocco and Ecuador buying primary homes in or around Spain’s big cities.
‘They won’t help mop up the glut of holiday homes on the coast. There are tens, if not hundreds of thousands of holiday homes for sale on the coast that will need to attract foreign buyers in large numbers if the holiday home glut is to be dealt with anytime soon,’ he explained.

Last week a new report from Spain’s Property Registrars suggested that transactions are bottoming out, though it is still too early to declare a recovery under way. The number of property deeds of sale recorded in the property registry rose by 7% in the first quarter of 2010 compared to same period last year. This is the first time in several years that annualised sales have risen in a quarter.

The report cautions against declaring a recovery under way. They point out that temporary factors such as the imminent increase in VAT on home sales, and elimination of tax relief on mortgage payments, could be bringing forward sales and boosting the figures temporarily.

Source:  PropertyWire

Spain saw a marked increase in overseas property searches in May on leading listing site Rightmove. The country was responsible for half of the site’s top 10 climbers in May with key indicators of interest being Minorca up 9.06%, Marbella up 6.68%, Galicia up 5.96%, Northern Spain up 5.22%, and the Balearic Islands up +3.65%.

“May was a great result for Spain, fed by returning confidence among buyers as the bad memories and headlines of last year fade,” said Robin Wilson, Head of Overseas at Rightmove this week.

“It’s always hard to let go of what your property was worth at the peak of at the market and accept times have changed, but vendors also seem more open and have much improved realism about prices necessary to make transactions happen. The improving Euro exchange rate is definitely playing a part, up 10% on January this year and 20% on January last year, meaning buyer’s budgets can go further.”

Foreign exchange specialists Moneycorp also saw a rise in enquiries for Spanish properties, with enquiries up 11.8% between March and May. According to David Kerns, Head of Private Clients at Moneycorp, “throughout May, sterling gained good ground against a weak euro. Having started the month at €1.14, the rate eventually reached €1.18 towards the end of the month.”

The pound also benefited from economic data which continues to support the view that the UK recovery is gaining traction. In contrast, the euro has continued to weaken, following news that Spain’s AAA credit rating had been downgraded. It was sent even lower when the European Central Bank warned that eurozone banks faced writing off another €195 billion of bad loans last week. The increase in the sterling/euro exchange rate would have made properties within the euro zone an increasingly more attractive prospect for euro buyers, and explains the surge in interest in Spain.

The United States also saw some interesting trends in the Rightmove Search Report with a 15.5% fall in searches for Florida, a 9.11% fall in the Gulf Coast and 6.05% fall in the Orlando/Central Coast region.”

Finally, Malta was up for the 5th consecutive month and on course to break into the top 10 countries on Rightmove this year. Search volumes were up 73% on April 2009 and not far off 2008 levels.

Source:  OPP

After a decade that has seen a rapid growth in house prices in European markets, S & P question now whether the correction that began in the last months of 2007 has really come to an end.

House prices in Spain could fall another 12%, according to a report by Standard and Poor's

This is revealed by a document issued by the credit rating agency that analyzes housing markets and affected European countries where this sector has undergone a major correction and fall of prices as in the case of Spain, France, Ireland, the United Kingdom, Italy and the Netherlands.

According to the report by the chief European economist of the credit rating agency, Jean-Michel, Six housing markets of the continent "are showing signs of emerging from the recent correction in prices."

Thus, with the exception of Ireland, the collapse in prices has slowed in many of these countries, like France, Italy, Spain and the Netherlands.

After a decade that has seen a rapid growth in house prices in European markets, S & P question now whether the correction that began in the last months of 2007 has really come to an end.

He notes that the German market seems to be "undervalued", which is not entirely surprising, as that report says, as that country "did not participate in the ‘boom’ of other European markets".

In the case of the UK, property prices began to rise in November last year and this sector has experienced a rapid recovery. Prices stopped falling in October, according to data provided by Halifax, the largest lender in the country and since then, inflation in housing prices has returned to positive territory.

Several factors explain this rapid recovery in the short term, among which are included, as in the rest of Europe, the fact that interest rates have fallen dramatically in the UK from August 2007 to 0.5 per cent today.

For Spain, the document said that prices could fall even 12 percent more before the market recovers.

S & P indicates that there is evidence to suggest that the Spanish property market crash is near the end but conditions remain fragile. It also notes that although the country still has a decrease in the price of their homes, the pace of decline has fallen.

According to official figures contained in the report, the annual rate in house prices in Spain fell 6.1 percent in the last quarter of last year.

Source:  BarcelonaReporter

MADRID (MarketWatch) -- The stream of negative news from Spain's savings bank sector continued on Tuesday, with a report that the second largest player, Caja Madrid, will tap the government for 3 billion euros ($3.6 billion) of rescue funds.

A spokesperson for Caja Madrid said the report that appeared in several Spanish newspapers saying it will ask for funds from the government's rescue fund was "speculation."

The savings bank said last Friday it was in talks to merge with several regional cajas -- Caja de Avila, Caja Insular de Canarias, Caixa Laietana, Caja Segovia and Caja Rioja.

More bad news emerged for Caja Madrid when Standard & Poor's placed its A/A-1 long and short-term ratings on the savings bank on CreditWatch negative, saying it expects "pronounced pressure" on its operating profit this year and into 2011.

The negative status reflects the possibility of lowering counterparty credit ratings on Caja Madrid, though S&P said any downgrade is unlikely to exceed one notch. It's standalone credit profile and its hybrid securities could suffer a downgrade by one or more notches, warned the ratings agency.

S&P said Caja Madrid, Spain's fourth-largest banking group by total assets, will be closely monitored over the next 18 months to evaluate the magnitude of expected deterioration.

Downgraded on Tuesday was Spanish bank Banco Sabadell, the nation's sixth-largest group by total assets.

Fitch Ratings, who downgraded Spanish sovereign debt last Friday, cut its long-term debt rating on Sabadell to A from A+.

Fitch also downgraded Caja de Ahorros del Mediterraneo's long-term debt to BBB+ from A- with a negative outlook, and Banco de Valencia and Bancaja each to BBB from BBB+ with stable outlooks.

Caja de Ahorros del Mediterraneo is Spain's only publicly traded savings bank. Those shares /quotes/comstock/06x!ccam (ES:CAM 5.94, +0.02, +0.34%) were down 0.2% in Madrid.

It wasn't all bad for Sabadell, whose shares were down 3.6% amid weaker Spanish and European markets overall from nearly the start of trading.

Fitch praised its "good domestic retail franchise, particularly with small to medium-sized enterprises, as well as its track record of sound pre-impairment operating profit, good cost efficiency and an improvement in regulatory capital."

Read more...

Spanish savings bank Cajamadrid said Friday it is in talks with five other such institutions to merge some of their operations.

The announcement reflects ongoing consolidation in an industry that is heavily exposed to the Spain's now-collapsed real estate sector.

Cajamadrid is Spain's second-largest savings bank and its fourth largest financial group. In a filing with stock market regulators, the bank said it is in talks with smaller savings banks Caixa Laietana, Caja Avila, Caja Segovia, Caja Insular de Canarias and Caja La Rioja.

Cajamadrid said the six are negotiating an arrangement under which they would pool assets to provide each other with liquidity but retain their distinctive brand names.

Source:  Businessweek

Spanish savings banks, already struggling with a deep economic downturn, will be the hardest hit from tighter rules governing the way the country's banks set aside cash against bad loans, a banker and several analysts say.

The Bank of Spain on Wednesday outlined a proposal that includes a faster recognition of provisions for past due loans, and bigger provisions on real-estate assets banks acquire or foreclose on.

The rule change follows mounting concern that banks aren't recognizing the true scale of their losses from exposure to Spain's troubled real-estate sector.

A Spanish banker, who declined to be named, said the rule change would be hardest for the country's savings banks, known as cajas, and smaller banks.

Analysts welcomed the move, saying it may reduce uncertainties about the health of the Spanish banking sector and force the troubled savings banks to seek merger partners quickly.

A spokesman for the Spanish savings bank association CECA said it is studying the impact. Spain's AEB banking association, which represents listed banks, wasn't immediately available to comment.

"For the Bank of Spain and the banking sector it's an exercise of transparency with respect to the exposure to the real-estate sector, which is what international investors were asking for," said Banesto Bolsa analyst Ignacio Soto Palacios.

"We also believe that it adds to the pressure on the savings banks in the midst of a restructuring process, since they will be the most affected by these measures," he said.

The proposal comes just days after the Bank of Spain shocked financial markets by seizing ailing regional savings bank CajaSur, a relatively small lender based in Southern Spain. The intervention has since weighed on Spanish equities, bond prices and the euro.

Investors are worried about potential fallout from the sector which is reeling from the collapse of the housing market. The cajas control around half of Spain's banking business and many of them were more aggressive lenders to the real-estate sector than their listed rivals.

The listed banks were lower early Thursday. At 0903 GMT, Banco Bilbao Vizcaya Argentaria SA (BBVA) was down 0.5%, while Banco Santander SA (STD) shed 1.5%. The smaller banks were also lower. The weakness in the banking sector pulled the IBEX-35 down 0.3%.

The proposal calls for banks to set aside provisions covering the full amount of a souring loan within a year. Banks currently have between two and six years.

On foreclosures or when banks swap loans for real-estate assets, lenders will have to provision 10% of the acquisition value right away, another 10% after one year, and another 10% if they still hold the asset on their books for more than two years.

Banks' real-estate holdings are growing fast as they seize homes from owners who default on their mortgages, and as they agree asset-for-debt swaps with struggling homebuilders following the collapse of Spain's decade-long housing boom.

The rule changes did include at least one positive element for banks. The new provisioning rules incorporate the value of real-estate collateral, applying a haircut of between 20% for a home that is the primary residence of the debtor, to 50% of a loan for undeveloped land. Current rules don't make a distinction between collateralized and uncollateralized loans, meaning banks are obliged to make 100% provisions on a bad loan regardless of the value of the collateral.

Source:  advfn.com

 Sir Geoff Hurst won a High Court fight yesterday over a £600,000 investment in Spanish property.

The England World Cup hero, along with six other investors, sued Mark Cordner, their former financial adviser, for misrepresenting terms of a £2 million deal for off-plan villas in 2003 and 2004.

They claimed that, because of “deceit”, they paid the full price up-front for five apartments in a development called Aloha Royal, near Puerto Banús, in the south of the country.

Sir Geoff, 68, was used as a figurehead for the venture to encourage others to invest. He was offered apartments at a “special” price of around £300,000, believing that once built he would double his money.

He appeared in a promotional video for Royal Marbella Group, a Spanish property company that he believed would build the luxury apartments. However, it emerged that the company did not own the land, where the flats were eventually built by another company.

However, he lost the entire investment in what he said was a “cynical scheme” to con people. At an earlier hearing he told the court: “I feel some remorse at getting involved in allowing my name to be used and abused in the way it has been. Most of the people I have been associated with have been very forgiving of my role in this.”

Sir Geoff said that at the start he trusted Cordner, 47, and his boss Michael Hone, 63 over the planned development. But he added: “With hindsight looking at the documents today we would not have gone anywhere near this.”

He admitted he had not done nearly enough research into the backgrounds of the two men. He had not taken any advice before signing an image rights deal in June 2003 for him to promote the scheme. “I was at fault for not looking at the deal more closely,” he said.

He said promotional brochures using his image and words backing the scheme were approved at first even though they made up things that he was supposed to have said.

Later on in the campaign he said “absolute lies”, including the idea that he was designing a golf course — “ludicrous” for a former footballer — were also put out by the men. They also wrongly claimed he was investing in four other apartments.

After ending his links with the organisation his image and quotes were still being used.

Mr Hone has since disappeared, and so Sir Geoff brought his claim against Cordner, who lives with his wife Sandra in a £2.2 million home in Hertfordshire.

Mr Justice Keith, sitting in London, ruled that Cordner was liable and that the seven investors were entitled to damages, with the amount to be assessed later. Sir Geoff’s is the largest part of the claim and includes a £350,000 loan he made to Mr Hone in May 2004, with £110,000 not repaid. But the judge cleared Cordner of responsibility for that loan.

The judge said even though Sir Geoff was advised that it would be “unwise” to make the loan he decided to trust his own judgment and lend him the money.

The judge found that Cordner persuaded them “by deceitful or negligent misrepresentation” to buy apartments. Cordner had claimed that he too was a victim of Mr Hone.

Source:  Timesonline

The main culprit behind soaring Spanish debt levels is the over-leveraged property developers, not public spending, Arturo De Frias Marques, research analyst at Evolution Securities, told CNBC Tuesday.

“The developers are the main reason for private sector debt inflation,” Marques said.  Private sector debt currently stands at 171 percent debt of gross domestic product (GDP), compared with the government debt ratio 53 percent.

Without the developers, the Spanish private sector debt would be only 10 percent higher than in Germany, and well below the UK, US and France, he argued.

Lending to developers in Spain accounts for 29 percent of Spain’s GDP, or 320 billion euros, “which is a very big number,” according to Marques.

Financially vulnerable Spanish regional banks -- those most exposed to weakness in Spain's property market -- are starting to merge operations to improve solvency, and the government has given cajas -- as Spain's savings banks are known -- a June 30 deadline to consolidate.

“It is serious. It will take years to be fixed," Marques said. "I don’t think it’s going to end up in an ‘out-of-control’ situation, however. Particularly because the major banks are quite solid.”

Marques emphasized that Spain needs structural reforms, which will mean higher unemployment and lower growth.

“Clearly we have a couple of tough years, but it won’t end up in disaster," he said. "The steps we’re seeing are the steps that had to be taken for many years.”

Meanwhile, the balance sheets of Santander and BBVA -- Spain’s two largest banks -- are robust relative to their regional competitors, due to the banks’ “diversification and lending policy,” according to Marques.

Read more at CNBC

Spain's central bank early Saturday seized Church- controlled savings bank CajaSur, a significant step forward in its efforts to clean up the country's ailing mutually owned banks.

The takeover of the small, Andalusia-based bank comes at a time of rising concerns over Spanish creditworthiness. Earlier this month, the European Union put together a giant financial backstop to ease concerns that Spain and other countries could default on their debt. Spanish banks have encountered increasing difficulties getting funding in international markets.

CajaSur's failure is the second in Spain since the start of the global financial crisis more than two years ago, and comes at a critical time for a banking system that until now has been able to resist intense pressures from the global financial crisis. Unlisted savings banks, with strong ties to local governments and communities, have been the hardest hit.

CajaSur, based in the Southern Spanish city of Cordoba, has EUR13 billion in loans and holds a marginal 0.6% of the total assets in the Spanish financial system. CajaSur, which was founded by the Roman Catholic church of Cordoba in 1864, was considered the weakest link among the savings banks. Its solvency had deteriorated significantly by a fast-growing pool of souring real-estate loans.

Many savings banks grew faster than their listed peers during the country's decade-long construction and real estate boom, in part because they lent more to local real estate developers. As the housing bubble started to deflate and the economy stagnated, Spanish banks saw their bad loans rise at unprecedented speed.

The bulk of the country's 44 savings banks, which account for about half of Spain bank business, are now scrambling to restructure via mergers, and the central bank is pressuring them to move faster, as merger talks have become bogged down by interference from the regional governments that control many of these institutions.

The boards of CajaSur and larger Andalusian peer Unicaja agreed to merge last August. However, CajaSur had been reluctant to accept the conditions of Unicaja's merger proposal, particularly regarding labor issues and extensive layoffs.

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