Thursday, June 11, 2009

Spanish house hunters will soon find an unusual location to pick up a new home

Property investors will soon find an unusual location to buy a new home in Spain at a heavy discount as Grupo Santander SA, one of Europe's largest banks, is getting ready to launch a Web site.

At the end of 2008, Santander, including Banesto, its Spanish retail bank, had property valued at some €3.8 billion ($5 billion) on its balance sheet, nearly 1,300 homes it picked up in 2008 when developers to whom it had lent money defaulted on their loans. The bank has as many as 950 new homes to the public at a 20% discount to market prices. That comes after the Spanish bank sold 350 homes to its own employees on the same terms.

"With the economy worsens, property-loan defaults on the rise and many European banks are knee-deep in loan-restructuring plans. The main aim is to overtake the situation and to avoid some of those loans becoming nonperforming loans, avoid lengthy bankruptcy proceedings involving many creditors and to help clients avoid bankruptcy," says a Santander spokeswoman.
Many banks remain hesitant to sell despite the increasing pressure from rising defaults on commercial-property loans. But the longer the recession lasts, the greater the pressure will be on the banks to sell. Mike Birch, a loan-workout specialist and founder of REAM Capital Partners, a real-estate asset-management company said "They may not be able to hold onto the property because of their need for capital". "Ultimately, I don't think the banks will have the luxury of hanging on to the property for long."

However, Philip Cropper, director of CB Richard Ellis' real-estate finance services in London says "The banks on the whole want to avoid selling too cheap and allowing someone else to profit on the recovery."