According to JP Morgan Chase the Spanish property market will bottom out within 12 months, increasing the opportunities for frustrated investors.
“There is still some way to go, given the large overhang of land, further write downs to come and further de-gearing by property companies and banks,” Harm Meijer and three other London-based analysts at the investment bank said today in a note to investors.
Spain’s property boom really ended in 2008, leaving Spanish banks with 315.8 billion Euros ($454 billion) in loans related to real estate in the fourth quarter of 2010 forcing banks like the Bank of Spain to take on buildings and land in return for cancelling debt to bankrupt developers.
Mounting investor concern about the health of Spanish savings banks led Spain’s Finance Ministry to announce new capital requirements to be met by September that will force lenders to sell off assets to bolster capital. The Spanish government has also been employing a vigorous PR campaign over the last few months with visits to the UK intended to attract the investors back.
“Banks are more willing to cut a deal than they were six months ago,” the analysts said in the note, adding that they expect lenders to hold more distressed sales and sell more branches to raise capital.
“There is great uncertainty regarding land values, which we see as the key issue and expect further valuation hits,” the analysts said. Spanish lenders have 63.5 billion Euros in loans backed by land and 30.2 billion Euros of repurchased land assets, according to the report.
Meanwhile, Spain has seen a massive increase in its level of distressed property listings, the latest index from the Royal Institution of Chartered Surveyors (Rics) has revealed. According to its Global Distressed Property Monitor, the pace of economic recovery in many markets and rising interest rates are causing listings to rise.
In the coming three months, Ireland, Spain, Hungary and Italy expect the highest numbers of distressed properties to come to market, while Russia, China, South Africa and Poland expect the lowest. It’s hoped that this news could encourage a number of investors to consider purchasing a distressed property in Spain, with such homes often selling for a price well below actual market value.