Spanish economy hampered empty houses and "dead" mortgages





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20.09.2010 15:44
Experts believe that the restoration of the national economy prevents oversupply in the order of 1.5 million housing units. Another deterrent - overdue mortgage loans on the books of Spanish banks.

The economy of Spain, is the fourth largest in the euro area, is going through hard times. This year, the country`s budget was reduced by billions of euros, and in 2011, analysts expect it will be even smaller. Suffers from a crisis, even the Spanish crown: this week, representatives of the royal family was informed that the government cut spending on its content, writes The Wall Street Journal.

In the pre-crisis years of economic growth contributed to the rapid development of the Spanish construction industry. Now on the market, a large number of "excess" housing for the implementation of which at the current pace of sales will need three to four years. Until then, until the oversupply is reduced, construction activity will decline.

In recent months, however, home sales in the country intensified. However, this was due primarily to the fact that financial institutions have rushed to dispose of property that was previously withheld for debts. At auctions of alienated objects discounts often exceed 30%.

In addition, banks have different promotions and subsidize the purchase of housing for its employees. Because of this, the second largest Spanish savings bank Caja Madrid managed this year to sell seven times more objects than a year earlier.

On the other hand, there are fears that the Spanish banks may start buying up troubled mortgage debt to raise capital, as it did in Japan. In the late 90`s in the Land of the Rising Sun appeared "zombie banks" that were the holders of mortgage loans, which do not actually make the payments, said Luis Garikano from the London School of Economics.

In Spain, the share of problem loans is currently 5.4% of total lending. For comparison, three years ago the figure was less than 1%. It is estimated the Spanish Central Bank, about 37% of total loans in construction and real estate could become problematic.

Oversupply and mortgage auctions lead to lower prices for residential real estate in Spain, which ultimately prevents the return of the market to pre-crisis positions. Suffering from it and the Spanish economy as a whole. Among positive trends noted steady demand from foreign real estate. According to the research portal Prian.ru, Spain continues to occupy a leading position in the ranking of countries, the most interesting for Russian property buyers abroad.
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Content tags: Overseas property
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