Banks in Spain may be left with no alternative but to cut the price of repossessed Spanish homes on their books in order to attract more buyers, as part of the Bank of Spain’s plans to force banks to reduce their real estate exposure.
From 1 October, Spanish banks will be required to increase provisions against their repossessed property portfolios and real estate divisions, with the regulator planning to increase their property sales rates, which they can only do by lowering prices.
“If the banks are forced to increase their write-offs, that gives them more room to lower prices,” said Mark Stucklin at Spanish Property Insight.
The Spain property market, which finally now appears to be on the long road to recovery, has endured a torrid time since the 2008 crash in the housing market, with residential property prices plummeting, largely as a consequence of a chronic oversupply of Spanish properties.
Spanish banks now own hundreds of thousands of homes in Spain, after accepting properties from struggling Spanish property developers who would have otherwise faced bankruptcy.
“The troubled real estate exposure of Spanish banks has risen every year since the crisis started, despite huge write-offs each year, rising to a total of €84bn (£72.7bn) at the end of 2015,” Stucklin added.