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S&P: "Spanish Home Prices To Drop Another 25%"

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  • S&P: "Spanish Home Prices To Drop Another 25%"

    For all the news out of Spain: tumbling sovereign bonds, bailed out banking sector, there really is just one driver of everything: the same one many have been warning about for years: the artificially inflated valuation of the Spanish housing sector. Because the only reason why banks are suddenly finding that their assets are worth much less than previously expected, is because it is now impossible for local banks to keep the real-estate "assets" on their books at marks-to-model (read par) as the bulk of them have long since become impaired, delinquent or outright defaulted.

    The common theme of course is that they no longer generate cash inflows. What however is still there are bank liabilities, which most certainly generate cash outflows. And in the absence of retained earnings (but plenty of retained losses), there is just no more cash to mask the capital deficiency. That's the whole issue with not only Spain, but Europe in a nutshell, the same we have been banking the table on for the past year: the accelerating disappearance of money good and cash-flow generating assets. Furthermore, once the spigot has been turned on, there is no stopping it, and the marks-to-market start pouring in fast and furious.
    Read full post here: http://www.zerohedge.com/news/sp-spa...rop-another-25
    Free business resources - www.BusinessBlogsHub.com

  • #2
    How is the Spanish market looking right now? A good buddy of mine is thinking about investing in property in Madrid.


    • #3
      Originally posted by mattinvestor View Post
      How is the Spanish market looking right now? A good buddy of mine is thinking about investing in property in Madrid.
      NOt sure now but it can't have changed much since May: http://www.guardian.co.uk/world/2012...t-prices-banks.

      If someone is brave enough to buy European property at the moment I think you would need to look at the main cities in Germany and Austria. Both countries experienced a very static and even declining value Property market for much of the last decade. In the last year or so as Interest rates on mortgages have gone into real negative territory ( mortgage interest rate lower than inflation rate) property has taken off. In Vienna Property has outperformed the inflation rate ( but be warned only in the last 12 months). Also the costs of buying average between 11-15% over the contract purchase price. Austria, at least, is looking at a capital gains tax on property I suspect the same might occur in Germany. If you buy in Austria the general principle is you really have to hold it at least 10 years before you can even expect to break even with the costs, although that may change for the better I think it would have to be a very very brave person to buy at the moment ( unless you were buying the family home). As for Paris I think the time to buy was 10 years ago, Paris prices are astronomical and with France heading to make PIIGS into FPIIGS it is possible there could be stagnation in the Paris market.
      The mission of any business enterprise should include the aim to develop economic conditions rather than simply react to them.


      • #4
        How is the euro crisis affecting the property market in the uk?


        • #5
          killing it

          most of the uk's trade is with the eurozone

          so as the euro falls brit. exports and services in pounds become more expensive

          plus the wettest spring since 1750? has put a damper on the warm up to the games
          have you defeated them?
          your demons


          • #6
            Will there be any improvement in near future? Or only if the euro crisis ebbs away?


            • #7
              Sorry If I'm posting too many questions, but what do you think will happen in the next year in europe? I personally don't think it will the situation will stabalize very soon. I'm kind of worried that the Euro will collapse. Would that have an even worse impact on the UK, even though they don't share the same currency?


              • #8
                Can you predict what the weather will be like in a year's time?
                Who knows what will happen in Europe in a year's time?
                "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx


                • #9
                  expect a looooong sloooow japanese style soft landing

                  where no one gets toooooooo hurt

                  where the old keep hold of the money and live to 100

                  and the young can't get excited about having lower living standards than their parents


                  something worse

                  on the bright side

                  anything else will appear to be a bonus!
                  have you defeated them?
                  your demons


                  • #10
                    The advertised prices of houses are MUCH cheaper than in NZ, however the average wage is £23K. To get a rough idea of those figures to $NZ, just double it.

                    Like all property markets, there a huge variety from region to region, city to city and suburb to suburb.

                    Foreclosures/mortgagee sales are advertised as "mortgagee in possession" or "repossession".

                    As a (very rough example) I noticed a property advertised recently - mid-terrace, two bedroom, two reception rooms, two stories, mortgagee NOT possession (ie no access to the property, so purchaser is buying property unseen) sold in 2007 for £95K. Going to auction, guide price £35K!!! I'll do research next week and find out what £'s are expected.

                    Alternatively, someone I know has a four + bedroom in the country, outbuildings, offices, two storey, on 10-15 acres, north Yorkshire. Originally on market TWO years ago for £1.2m. No bites whatsoever. Price reduced by steps to £750K, no buyers. On and off the market, repeatedly. Put back on the market recently at a further reduced price and STILL no buyers.

                    Interest rates are extremely low but qualifying is a *cough* and Banks are very dodgy (public word for them!). Banks manipulating the LIBOR (London Interbank Offered Rate) ie Barclays (& 20 other Banks), HSBC (laundering drug money). One of many cases of banks colluding in fraudulent activity.

                    All of this is affecting bank lending rates worldwide of over a £trillion!!!

                    Still problematic buying houses here because of over-zealous Councils and their planning permissions, listed buildings. Even streets cannot be dug up to install infrastructure ie fibreoptics for Broadband. It's just not allowed.

                    If one had £'s, I would definitely be negotiating some hard deals and be holding for the long game.
                    Patience is a virtue.