Are Spanish Banks cheating?
01 September 2010 @ 14:41
Summer is over. Signs of Spanish property market recovery in June/July with a 4% price rise seem to be vanished according to the latest figures released by the INE (National Institute of Statistics).
Yesterday, the news were that Spanish Banks are giving less mortgages: the rate of mortgage concession has dropped by 10,8% in June 2010 compared to June 2009. In May 2010 it had already dropped by nearly 3% compared to May 2009.
From my point of view, the figures by themselves do not mean much: less mortgages is equal to less number of transactions, which is expected in the current economic climate. Also, summer always seems to be quite.
But there is a meaning in this data when you put a few facts together:
- We know that Banks are giving fewer mortgages according to the INE figures.
- Banks are financing 100% of the property value. Caja Madrid, CAM and Santander, finance up to 100%. Caixa Cataluña finance up to 90%.
- Spanish Banks have an important property stock that they need to sell (around 100,000 units from repossessions).
And now, please pay attention to the following figures:
- Caja Madrid sold from January to May 2010 a total 1,237 properties, which means 19% properties more that in 2009 (January to December).
- Caixa Cataluña has sold in a year (May 2009/May 2010) a total of 1,650 flats and rent out 3,750 of its properties portfolio.
- Three big state agents (Metrovacesa, Realia and Quabit) did not sell more than 500 units altogether in 1Q/2010 according to inmobiliarios20
Then, mortgages are less in number, but Banks transactions are getting better if we compare 2010 with 2009 and Banks performance with others agents.
CONCLUSSION: Banks tend to finance the assets that they reposed in order to sell them again. They support their own portfolio. Banks offer a 100% finance to encourage investors to buy a property. Obviously the buyer must be a credible client with a low risk score.
It is probably fair enough what Banks do. The key question is: if they finance their own portfolio giving a preferential rate, to what extend do they alter the market by using this practice.
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