Tag: financial crisis

BBVA, the First Bank on the Iberian Peninsula to Return to Financing 100% of Property Values

2 April 2018

BBVA recently began advertising mortgages that will cover 100% of a property’s value, or even more than 100% of the bank’s valuation should the selling price exceed that figure. The Spanish bank’s move is a part of its strategy to attract clients.

Spain’s BBVA has taken another step in its strategy of attracting customers and in recent weeks has offered mortgages that cover 100% of a property’s value, or even more, than 100% of the bank’s valuation should the selling price exceed that figure. It has thus become the first bank on the Iberian Peninsula to offer such conditions, which until now has only been offered, on a very limited basis, to specific clients who were acquiring foreclosed properties from the banks themselves, a major burden on the banking system, El Economista reported.

In Portugal, to date, there is no bank that is returning to these practices, very common before the financial crisis.

This type of mortgages, which central banks consider high risk, were granted by all credit institutions at the time of the credit boom and was one of the causes that led to the collapse of the sector, with the housing bubble (in Spain).

The recovery of the economy and construction, coupled with the need for the bank to increase profitability through an increase in business, led BBVA to give up its commercial policy.

Until now, the bank offered differentiated prices on its mortgages based on the clients’ monthly income, that is, based on their ability to pay (effort rate). Currently, this segmentation is focused on the financing request, known as Loan to Value (LTV), that is, the money that the client receives over the assessed value when acquiring any type of property for first address, says El Economista.

This differentiation applies to both variable rate and fixed-rate mortgages. In the first case, which is encouraged by the expectations of an increase in the price of money from 2019, BBVA offers Euribor plus a spread of 0.99%, except in the first year if the so-called LTV is less than 80%. If this percentage is higher, the spread increases to 1.25%. The bank also admits that solutions can be found if the client needs a larger loan to buy a home, which could be instrumented through the signing of a consumer credit or personal loan.

This greater flexibility in the lending policy leads, however, to more demanding conditions of association. Customers, in order to access the advantages of the loan, must have contracted not only the direct debit of the payroll or pension but must have a life insurance, a home insurance and a pension plan with a minimum annual contribution of 600 euros. In case the LTV exceeds 100%, the bank may require additional guarantees to the mortgaged apartment, in order to guarantee the recovery of the value granted, reports El Economista.

Original Story: Jornal Econômico – Maria Teixeira Alves

Photo: Susana Vera / Reuters

Translation: Richard Turner

 

 

 

 

Unicaja Takes In €20 Million Through Sale of Land

26 March 2018

Unicaja, the Malaga-based bank, is accelerating its sale of the real estate assets it was forced to take on during the financial crisis. Last year it sold a portfolio of land, reducing its holdings of foreclosed assets by one hundred million euros, and reported a gross profit, due to the transaction, of 20 million euros, according to a report.

In addition, Unicaja reached an agreement last year with the Norwegian fund Axactor to create two joint ventures and de-consolidate more than 4,000 foreclosed assets (in lieu of debt payments) valued at €252 million. The Nordic fund paid Unicaja between 150 million and 200 million euros in the transaction, according to knowledgeable sources. One of these companies will take control of 3,035 of Unicaja’s foreclosed assets, and the other will take on a further 1,034 foreclosed assets from España Duero. Axactor will control 75% of both, while the remaining 25% remain with the Unicaja group.

Unicaja’s real estate management platform, called GIA, will manage the properties. The majority are located in Andalusia and Castilla y León, where the two institutions are based.

The transaction has not had a significant impact on its financial statements, according to the report.

Property assets

In total, the Unicaja group, including its subsidiary España Duero, reduced its volume of unproductive assets by 21% last year. In absolute terms, €1.201 billion in toxic assets left its balance sheet. Such loans to developers and real estate assets generate many expenses and no income, reducing profitability.

Unicaja earned 138 million euros last year, 2.5% more than in 2016. The level of balance sheet provisions related to real estate stands at 64%, one of the highest in the sector. Its delinquency rate stands at 8.7%.

The bank has a market value of €2.225 billion. Investors who took part in its IPO in June 2017 have seen their initial investment go up by 23% in nine months.

Original Story: ProOrbyt Expansion – R. Lander / R. Sampedro

Translation: Richard Turner

Greece to Auction Liened Properties to Qualify for Eurogroup’s Latest Tranche

23 January 2018

Despite the good news coming from the Eurogroup meeting, which saw the conclusion of a political agreement to release the fourth tranche of the European Stability Mechanism program, 2018 will be another year of austerity in Greece. The Greek government still needs to implement additional measures which are likely to affect the middle class particularly badly.

The Eurogroup’s political agreement to release a €6.7 billion tranche for Greece will imply further austerity measures. Despite complimenting the Greek government’s policies, and the fact that some targets have not only been met but exceeded, Greece will have to increase its austerity measures, which will fall heavily upon a middle class which has already been hit before.

According to a document containing the Eurogroup’s new demands on Athens, which was reviewed by the Greek newspaper To Vima, the Greek state will have to move ahead with the sale of 10,000 real estate assets later this year and to auction a further 40,000 properties between 2019 and 2021.

According to To Vima, this requirement will inevitably lead to the sale of the primary residences of many families whose mortgages have gone into arrears, which would very likely trigger a wave of social dissent, as the middle class will be especially hard hit.

This Monday, Mario Centeno’s debut as the president of the Eurogroup, Eurozone finance ministers agreed at a political level to unblock part of the fourth tranche of the Greek financial assistance program agreed upon in the summer of 2015.  Total lending under the program could reach 86 billion euros.

However, the release of 1 billion is conditional on the pursuit of “prior actions” that will have to be applied “urgently,” the Eurogroup wrote in the final communiqué following yesterday’s meeting.

After the eurozone’s ministers gave the green light, the European Stability Mechanism (ESM) will also have to review the third periodic evaluation of Athens’ compliance with the Greek memorandum.

The first €5.7-billion tranche could then be released in February, an amount to be used for debt servicing, the payment of debts to suppliers that are currently in arrears and to create a buffer to boost Greece’s cash reserves. This last is considered to be the most critical, as it would aid in Greece’s ability to tap financial markets.

The remaining €1 billion could be released in spring by the European Stability Mechanism, and its German managing director, Klaus Regling, after European institutions confirm compliance with the new measures.

Higher Levels of IRS and VAT on exempt islands

In addition to the need to auction off real estate tied to non-performing loans, the Greek authorities will also have to bring forward a reduction (to 2019, initially planned for 2020) of the minimum level at which Greek taxpayers are subject to income taxes, from around an annual income of 8,700 euros to €5,700. However, this measure will only have to be implemented if the country fails to meet the primary budget surplus target of 3.5% of GDP.

Also, according to the document that To Vima reviewed, in the coming months, Alexis Tsipras’ government will be required to move ahead with a new wave of privatizations aimed at raising a billion euros in revenues. It would also have to impose a further increase in the VAT charged on Greek islands that have so far benefited from a temporary exemption/rebate.

The three-year program is set to expire on August 20 of this year, and between the third review, which is still ongoing, and the fourth review of Greece’s compliance with the memorandum, Athens will also have to implement 88 new measures linked to structural reforms that are being demanded by the troika.

European leaders confident of a happy end to Greece’s troubles

“We have reached a political agreement on the review, an agreement that reflects the enormous effort and cooperation between the Greek government and the [troika’s] institutions,” the Portuguese ex-minister of Finance, Mário Centeno said in Brussels yesterday.

In the statement, the Eurogroup underscored the Greek government’s commitment to reach a surplus of 3.5% in its Budget for 2018 and highlighted the capacity of the Tsipras-led team to exceed the fiscal targets set for the previous three years. It highlighted the improvements in the capacity of the Greek government’s ability to collect taxes and the improved business environment.

In addition to the progress made by Athens, which was highlighted by Centeno and Regling, Spain’s Economy Minister Luis de Guindos said Tuesday that he was sure that the third revision would merit a validation by the ESM. Germany’s Finance Minister Peter Altmaier said he did not see any need for a fourth assistance program for Greece once the current one is completed.

So far, the ESM – responsible for implementing the Greek memorandum – has already disbursed €40.2 billion for Greece. Athens made early repayments of €2 billion. Of the €86 billion rescue, €45.8 billion remains to be disbursed, part of which is earmarked for after the memorandum of understanding’s last revision.

Original Story: Jornal de Negócios – David Santiago

Translation: Richard Turner

 

Cranes Return To Spain After Almost A Decade Away

19 December 2016 – La Vanguardia

After nine years away, since the financial crisis first started to crush the real estate bubble in 2007, cranes have returned to form part of the Spanish landscape during 2016, They are a visible sign of the recovery that the real estate sector has been enjoying since 2014.

With just a few weeks to go before the end of the year, real estate investment is on track to set a new record in 2016, of almost €14,000 million, thanks to large-scale operations such as the merger of two giants in the sector, Merlin and Metrovacesa, to create the largest real estate company in Spain, with assets worth more than €9,300 million.

This year, the growth of the economy, improvement in employment, low interest rates, return of financing and the continuous inflow of foreign capital have combined to allow the real estate sector to consolidate its recovery despite the political uncertainty that hung over Spain for most of the year.

After almost a decade of paralysis, the property developers that survived the crisis and others created more recently have set cranes up on the streets, especially in cities with the most economic and tourism activity, where the “stock” is now practically non-existent and demand for new homes a reality.

Quabit is planning to invest €470 million between now and 2020 on the purchase of urban land on which it will build more than 3,000 homes; and Neinor Homes has set itself the objective of launching around 40 new developments this year and selling more than 1,500 homes.

The newly formed company Dospuntos, controlled by the US fund Värde Partners, plans to invest €2,000 million over the next six years and complete 2,000 homes per year from 2019 onwards. Vía Célere has just bought the largest available plot of land in the centre of Madrid from Repsol and Adif, which is ready for the construction of homes.

Inveravante, owned by the business man Manuel Jové, and the real estate subsidiary of BBVA, have joined forces to promote 850 homes; the German investment fund Aquila Capital and Ónice will spend €100 million building luxury homes in La Moreleja; whilst Ibosa will invest another €30 million converting the Hotel Foxá M-30 into homes.

The recovery of the sector is undeniable. According to the notaries, house purchases grew by 10.3% in September, a percentage that rises to 13.2% according to INE, after registering eight consecutive months of increases and growth of 10% in terms of the signing of mortgages for house purchases.

The Ministry of Development calculates that prices rose by 1.6% during the third quarter, to complete 6 consecutive quarters of increases, whilst permits for the construction of new homes soared by 32% in September to reach figures not seen since 2011.

Moreover, house purchases by foreigners grew by 19.7% during the first half of the year, with Britons leading the ranking, despite the threat of “Brexit”. (…).

During 2017, the number of transactions is expected to grow by 6.5% and prices are forecast to rise by 3.5% to reach 2004 levels. Meanwhile, Tinsa estimates that prices will remain stable or will increase by between 1% and 2%, at most, during 2017, in line with forecasts for the end of this year. (…).

Original story: La Vanguardia (by Cora Serrano)

Translation: Carmel Drake

Spain’s Ghost City Comes To Life

6 March 2016 – El País

Anybody who has passed Seseña, 30 minutes south of Madrid on the A4 highway, and seen the so-called residential city of El Quiñón in the distance will probably have thought it a blot on the landscape, a crazed monument to all that went wrong during two decades of frenzied property speculation. But ask the people who live there what they think and they’ll tell you a different story: they might not exactly be proud of the place, but on the whole they’re happy to be there.

Granted, its wide, car-free streets are mostly void of traffic, even though the local census puts the number of residents here at 6,411, twice the figure of four years ago: that’s because most of them are in Madrid, working. What’s more, they park their cars in the garages underneath their apartment blocks. During weekdays, the only time of day when the streets come alive is during the twice-daily 15-minute school runs. After that, the silence returns.

The majority of people living here are couples in their early thirties who moved here “for the children” – that, and the spacious, surprisingly well-built, and relatively low-priced apartments. It has to be said that there are still few amenities, but for the moment, most families seem happy with the swimming pool and gardens each apartment block is built round. The nearest cinemas require taking the car to nearby Pinto or Getafe, but then Aranjuez, 20 minutes away, has a population of 60,000 and no movie house.

El Quiñón is the brainchild of Francisco Hernando, better known as “Paco el Pocero,” a man who rose from humble beginnings in the hard years of the 1950s to become one of Spain’s most successful, and notorious, property developers.

Unlike many of the thousands of property developments built in Spain during the 1990s and early 2000s, one thing that has to be said is that Hernando didn’t skimp on quality when it came to building El Quiñón (…).

In the aftermath of the crash of 2008, journalists from all over the world made the trek out to Seseña, dubbing it the “ghost town” that symbolized the excesses of the property boom. Residents blame the media for its reputation and are still wary of talking to journalists.

But a real-estate agent based here is prepared to talk, and says that demand for apartments in El Quiñón is growing. The first people to move here, in 2007, paid up to €250,000 for a three-bedroom, 100-square-meter apartment. That was during phase one of the project, where around 3,600 people now live. The average price of the 2,300 apartments in phase two is now less than €100,000, up from the €50,000 they were being offered for in 2011.

It was thanks to the efforts of the Popular Party mayor Carlos Velázquez in 2011 that the licenses required to open phase two of El Quiñón finally came through. “We had to unblock the situation, look to the future; that’s what residents here wanted,” he says. Hernando finally agreed to pay the €6.7 million he owed the local council, and water supplies were provided.

With this, El Quiñón finally became part of the municipality of Seseña, a small community around five kilometers away, and a full range of services became available. Until then, those here were not just living in the middle of nowhere; they were living in legal limbo as well. Much remains to be done, and residents have a long list of requirements: a proper service road to the A4, a health center, another school, a nursery, better transport connections with Madrid…(…).

Original story: El País (by Iñigo Domínguez)

Edited by: Carmel Drake

What Has Become Of The Property Kings?

23 April 2015 – Expansión

The individuals that owned the large real estate companies during the boom years have suffered from sharp drops in sales and in the value of their assets. The largest has filed for bankruptcy and is now at the mercy of its creditors.

The largest land owner in Spain. The largest real estate company in Europe. Those are some of the descriptions that were used to refer to the large Spanish real estate companies almost a decade ago. At their respective helms were businessmen such as Luis Portillo, Rafael Santamaría and Joaquín Rivero (pictured above, left). As such, they were some of the hardest hit by the burst of the real estate bubble in 2007. After generating revenues of hundreds of millions of euros from the sale of homes, these companies and their managers were unable to cope with the high levels of indebtedness that they had accumulated during the boom years, and so found themselves in precarious situations.

But they are not the only ones who suffered from the effects of the sudden change in the sector. Rivero, a businessman from Jerez, is still dealing with the consequences of his stint at Metrovacesa, fighting a hard battle in the courts against his former partner, Román Sanahuja (pictured above, right), regarding the separation process that resulted in Rivero ending up with Gecina and his former partner with Metrovacesa. Sanahuja’s inability to pay the debts of his family business, Sacresa, meant that he lost control of Metrovacesa to the banks in 2010.

Another company that grew from strength to strength during the boom was Afirma (now Quabit). The company was created from the merger of the former entity Astroc, controlled by Enrique Bañeulos, Landscape and Rayet, a company led by Félix Abánades. After various refinancing processes, the businessman from La Alcarria managed to move forward with the listed real estate company Quabit. However, the same thing did not happen with its parent company, the construction group Rayet, which is now trying to exit from its bankruptcy process.

Francisco Hernando, known as El Pocero, was another one of the most well-known developers. Hernando developed a residential estate in the town of Seseña (Toledo), where he was planning to construct more than 15,000 homes. In the end, just under 5,000 homes were built; 3,000 of those ended up in the hands of the creditor bank as Hernando was unable to pay his debts.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake

Britons Buy Homes In Spain, Driven By Strong Pound

5 March 2015 – El Economista

The strength of the British pound makes (house) purchases in Spain more affordable.

Low returns on deposits (at home) encourages Britons to seek alternative investments.

Sun, financial repression and low prices. This perfect cocktail is converting Britons into the main buyers of homes in Spain, especially in areas near the beach. That is because, in addition to the traditional appeal of the coast, Britons are now facing poor returns on their savings at home, due to measures taken by the Bank of England, and because they expect to see a recovery in the real estate sector in Spain. The appreciation of the pound against the euro makes the investment even more affordable for the average Brit, who is also seeing prices in his own country year on year.

An example is Londoner Barry Leverington, who thinks that his money is better off in a Spanish home than it would be earning next to nothing in a British savings account. The bank employee, aged 33 years old, is looking at properties in the Mazarrón Country Club, in Murcia, where two-bedroom villas cost as little as €75,000.

“Anyone who has some capital can buy in Spain, with almost no mortgage, and there is potential for prices to rise”, explains Mr Leverington in a telephone interview. “I grouped together some savings, and with the current low interest rates, I realised they were dormant, not doing anything”.

Foreigners return to Spain

Mr Leverington is not the only one. Foreigner buyers are returning to the Spanish real estate market, attracted by economic growth that exceeds the rates in most of the rest of Europe and by the signs that prices are bottoming out after years of decreases. In fact, sales of homes to foreigners accounted for 13.9% of total sales in the fourth quarter of 2014, a new record.

Britons are the biggest foreign investors, because the zero interest rates on savings accounts (at home) and the prospects for rising house prices in Spain mean that keeping their money in their own country is a much less attractive option.

In total, foreigners invested €6,050 million in Spanish properties during the first nine months of last year, 30% more than during the same period in 2013, according to data from the Ministry of Development. The 40,338 homes purchased represented an increase of 27% with respect to the same period a year before, with Valencia, Andalucía and Cataluña topping the list as the favourite destinations for foreign purchasers.

Interest from overseas investors is increasing after many left scarred, following the collapse of the Spanish real estate market with the onset of the global financial crisis and the burst of the local property bubble. The legacy from this collapse is a stock of more than 1 million homes, many of them in the South and East of the country, in areas very popular with Britons and Europeans.

House prices have also suffered a corresponding crash, having fallen by 42% since their peak in 2007, although in coastal areas, some properties have lost up to 50% of their value, according to estimates from the property appraiser, Tinsa. Nevertheless, it seems that the trend has changed, as the rate of decrease slowed from 9% in 2013 to 3% last year.

Deposits with no returns

The Bank of England has maintained interest rates at a historical low of 0.5% since 2009, which has impacted the interest rates offered by banks on British savings. A financial repression, which is making Britons look for alternatives for their savings, and from there Spanish property looks like a good option.

In addition, it is becoming increasingly expensive to invest in homes in the United Kingdom, where prices increased by 25% between December 2007 and December 2014, according to the Office for National Statistics, led by London, where prices increased by 18% last year alone.

Moreover, the recent increase in the value of the pound against the euro, which has appreciated by 13.5% in the last 12 months, means that homes in Spain are even cheaper for the Brits. This is an important effect to consider, according to the real estate expert José Luis Ruiz Bartolomé, “when something is gifted, it is even more attractive than when you purchase it with a strong currency”.

“People like me want to achieve some kind of return on their savings and they won’t get very far in the real estate market in the UK at the moment”, says Mr Leverington. “Properties in Spain are currently under-valued. It is a win-win situation for everyone”.

Spaniards are also returning to the market, although at a slower rate. The purchase of homes by Spaniards increased slightly by 2.2% in 2014 to reach 319,389 properties, the first increase since 2010, according to date from INE. A ray of light for the sector, although it is still a long way from the highs of 2006, when 955,186 homes changed hands.

Marbella, at its peak

Another symptom of the improvement is that despite the (housing) stock, cranes have reappeared in some areas of major cities and on the coast. Darío Fernández, from the consultancy Jones Lang LaSalle, explains that “we are seeing demand for primary residences from Spaniards in Madrid and Barcelona, and demand for second homes from foreigners in coastal regions. People are confident that the economic risks have disappeared, and see that prices are still very low”.

In fact, in some areas, such as Marbella, demand is so high that international funds are partnering up with local players to buy land and build new homes, adds Fernández. Currently, there are 400 homes under construction in the Malagan town, the highest number in the last six years.

Mr Leverington, the London bank employee, is going to travel to Murcia in June to get to know the area, and if he finds a property he likes, he will buy it. “I have already spoken to some estate agents, I don’t want to wait much longer, because as soon as there is any good news, the market will recover and I don’t want to miss out”.

Original story: El Economista

Translation: Carmel Drake

Sareb Holds Board Meeting As Martinsa’s Deadline Looms

26 February 2015 – Cinco Días

Sareb held an ordinary Board meeting yesterday (as it does once a month) with the case of Martinsa Fadesa on the table. The creditor banks of the real estate company have until today, Thursday, to decide whether or not to approve the new proposed agreement presented by the company to avoid its liquidation. According to financial sources, the debt obligations that Sareb holds in Martinsa Fadesa amounted to €1,457.8 million as at June 2014. The (real estate company’s) second largest creditor is Caixabank with €907.9 million.

Martinsa Fadesa submitted a new proposed agreement to avoid its liquidation to its creditors on 30 December, since it is unable to make some of the payments stipulated in the previous agreement. Under the new proposal, the company highlighted that if it won its claim in the Supreme Court against Manuel Jove, the former chairman of Fadesa, against whom it had filed a multi-million euro lawsuit, then it would allocate the resources to pay its creditors.

Fernando Martín (pictured above) agreed the purchase of Fadesa from Manuel Jose between 2006 and 2007, in a transaction valued at €4,045 million. In 2008, Martinsa Fadesa filed for bankruptcy, the largest ever case in Spain, with debts of approximately €7,000 million. In 2011, the company reached a payment agreement with its creditors and so emerged from bankruptcy. That same year, the company decided, in its shareholders’ meeting, to file a social responsibility claim against Jove and the former CEO of the company, Antonio De la Morena, for €1,576 million. The former Chairman of Fadesa, who is now the Chairman of the Inveravante group, said then that the measure was “absolute nonsense”. The Commercial Court number 1 in La Coruña and the Provincial Court of La Coruña rejected the claim filed by Martinsa Fadesa, and so the company appealed to the Supreme Court. This month, the Supreme Court also rejected Fernando Martín’s claim.

The blow dealt by the Supreme Court to Martinsa Fadesa damages the real estate company’s prospects of avoiding liquidation even further. In addition, the Supreme Court ordered the company to pay all of the legal costs, which will require the immediate disbursement of several million euros (up to €60 million, according to legal sources).

Between January and September 2014, Martinsa generated turnover of €95.2 million, an increase of €24.5 million on the same period in the previous year, and it recorded losses of €201.6 million (vs. losses of €322.9 million during the first three quarters of 2012). In 2013, the group lost €652 million, and recorded negative equity of €4,288 million.

Like many other real estate companies, despite having a negative net equity balance, Martinsa avoided the requirement for dissolution under the Companies’ Act, thanks to Royal Decree Law 10/2008, which removes the requirement to account for impairments relating to real estate investments. Martinsa’s financial position is clearly very delicate and may be further compounded by the fact that the Government may decide not to renew the relevant regulation this year.

Representatives of the creditors met with the company last week and called for the departure of Fernando Martín as owner and shareholder, according to sources. Although liquidation may seem like the most logical course of action for the company, the same sources do not rule out the possibility of a last minute agreement being reached to avoid that measure.

Original story: Cinco Días (by Alberto Ortín Ramón)

Translation: Carmel Drake