23 November 2015 – Cinco Días
According to estimates by Analistas Financieros Internacionales (AFI), the Spansh banks still need to digest €90,000 million of real estate assets foreclosed during the financial crisis. Despite this large burden, and the other toxic assets that these experts says are eating up half of the profitability of the country’s financial entities, getting rid of real estate assets is no longer the sector’s main priority.
Since the adoption of the so-called “Guindos decrees” at the start of 2012, which multiplied the provisions required by banks on their portfolios of toxic assets, the large firms in the sector have disposed of more than 300,000 properties.
Nevertheless, (…) signs that the market is now on the road to recovery have encouraged these entities to start to reduce their rates of sales this year and to apply their new philosophy, namely, to restore profitability, to these operations, as well as to the sale of foreclosed homes.
And the market seems to be helping. “A stronger macroeconomic environment, persistently lower interest rates and fewer home foreclosures will increase the volume of mortgages granted and put upwards pressure on house prices in Spain, if demand recovers” said a recent report from the credit ratings agency Moody’s.
Moreover, analysts at the firm believe that the process tends to be self-fulfilling and will be felt even more acutely during the last quarter of the year. “The increase in mortgage loans will likely result in higher real estate prices during the remainder of 2015”, they assert.
During the year to date, entities have focused on selling properties from their own balance sheets, which means that this year’s figures are not comparable with those of previous years, when they were also committed to selling the homes of the property developers that they financed.
In total, Santander, BBVA, Sabadell, Popular and Bankia sold off 38,121 properties during the first nine months of the year. Although CaixaBank has refused to disclose its figures for the period, the Catalan entity had already said that it sold 5,907 properties during H1 2015, which takes the total number of transactions in the sector this year to more than 40,000.
If we also include properties from real estate developers financed by the banks, then these six entities had sold 68,000 properties during the same period last year. However, a fundamental difference is that during the first three months of 2014, the average sales price of banks’ properties amounted to around €149,000.
Excluding the incomplete figures received from BBVA and CaixaBank (the former does not disclose the revenues it has received and the latter does not reveal the number of homes sold), the average sales price this year amounts to €160,923.
This figure is made more remarkable by the fact that at the start of 2014, the banks were selling off homes at an average price of €125,000 in order to increase sales. This strategy enabled them to multiply the number of transactions, which had reached an average of 250 sales per day by this time last year. By contrast, this year, the entities have sold around 141 properties per day, or almost 190 if we include the homes that CaixaBank must have sold.
The strategy adopted by the financial entities is the same as the one that Sareb has been pursuing this year. Sareb, which has Santander and CaixaBank as its main private shareholders, alongside the FROB, reduced its rate of sales to individuals from 45 homes per day to around 30 per day during the first half of the year…with a total of 5,345 operations during the first six months of the year, but at higher prices than in previous years.
Original story: Cinco Días (by Juande Portillo)
Translation: Carmel Drake