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CaixaBank: “The Banks Have Lost €150bn Due to ‘Real Estate'”

26 January 2018 – Eje Prime

The banks have lost no less than €150 billion due to real estate. That is according to Juan Antonio Alcaraz, Director General of CaixaBank, speaking on Thursday. Moreover, the director described a panorama that has “changed radically” in the mortgage market, basically because “people no longer think about buying (a home) and, even less so, about taking out a mortgage”, said Alcaraz.

The current situation of the banks with respect to real estate is that of reconstruction. “Our portfolio has recovered somewhat, but it is much smaller than before”, acknowledges the director, who recalls “the years when 900,000 new homes per year were being built in Spain, whereas now just 80,000 p.a. are being constructed”.

In 2017, CaixaBank undertook property developer loan operations worth between €15 billion and €20 billion. The decline in demand for these types of loans from banks has had an impact on the emergence of “new players, which have caused the figure of the property developer loan to disappear for certain vehicles”.

Moreover, at the meeting between professionals in the sector at Madrid’s IESE, Alcaraz recalled that there is still a shortage on the demand-side for the purchase of new build homes in Spanish society: “Three-quarters of the transactions closed in the residential sector involve second-hand homes”. That fact had an impact in 2017 given that Spain’s banks granted “around 60,000 new mortgages”, much fewer than in the past.

In terms of the emergence of real estate projects, which have been booming in recent years with the arrival of new property developers, the CaixaBank representative says that “there is not a single project that has not been performed for lack of financing”, although he clarifies: “The problem is what type of projects we are talking about and what is being financed”.

“On the stock market, there is space for many more companies in the sector”. Having recently arrived from London, where he works as a Director of Real Estate Investments for the bank Crédit Suisse, Jaime Riera spoke about overseas funds, the largest investors in the Spanish property market. “The whole world understands that it is a cyclical sector and that, leaving aside the recent political events, there is consensus over the strong performance of the real estate business”, said Riera. Nevertheless, the executive has diagnosed “less potential for transactions in the retail sector”.

Another established connoisseur of the British market, Fernando Bautista, European Director of Real Estate Investment at Citi, highlighted at the same meeting that the weight of the real estate sector on the British stock exchange “is much greater than on the Spanish stock market”. For that reason, and after recalling that “without Anglo-Saxon demand, we would not be talking about the Socimis today, or about Neinor and Aedas”, said that “there is room for lots more companies on the Spanish stock market”.

The legal certainty of the new mortgage law

Drafts are already being prepared by the Government for the processing of a new mortgage law, news that is welcomed by the banks. “A new law would give us the legal certainty that we do not have at the moment”, said Alcaraz, who indicates that “the crisis has generated a very high degree of uncertainty over residential assets and mortgages. That is very harmful to us in economic terms”.

Original story: Eje Prime (by Jabier Izquierdo)

Translation: Carmel Drake