Could the financial reform accelerate the decline in the price of real estate ?
17 February 2012 @ 15:34
The Spanish real estate market might face an imminent change in the price of its real estate holdings, due to the reform of the financial system being prepared by the Government. Luis de Guindos, the Economy Minister, had a clear message early this week: “Banks have one year to stop speculating and set their real estate stock to a realistic market price”.
Spanish property prices should decrease
This means that prices “should” decrease, and Banks “should” assume losses in their balances as a result of real estate stock. Some experts’ point of view highlight that the Minister hidden message is to try to persuade home buyers and investors to buy a property in 2012.
Spanish financial reform
“The primary objective of the financial reform is to put the highest number of houses on the market and at the best prices.” The Economy Minister believes that the difficult protection requirements imposed on the banks will make access to the spanish real estate market easier for citizens, prices will go down, and banks will grant mortgages more easily.
Banks have four months to set their property assets at market prices and cover their backs against “toxic assets” to 65% in the case of current projects (previously 27%) and to 35% in completed buildings and housing (previously 25%). What does this mean? This means that the more housing stock banks sell, the fewer capital resources they will need to reserve in order to cover or justify their property portfolios. Thus, banks will be keener to sell apartments at lower prices than expected.
“the reform will not help the Spanish property market”
Other experts also underline that in the current economic crisis the mentioned reform is not the dramatic change Read the full article