On Thursday, the group of banks in Group 2, composed of CEISS, Liberbank, BMN Box3 will transfer their bad assets, valued at 15,000 million euros, Sareb. The transfer of assets from Group 2 comes after the entity has increased capital by 1,200 million euros and has embraced the entrance as shareholders Iberdrola and Banco Caminos, which contributed 2.5 million euros and 800,000 euros respectively.
On 31st of December Sareb received damaged assets from the nationalized entities, Bankia, Novagalicia Bank, Bank of Valencia and Catalunya Bank, set at a value of 36,695,000 euros. The transfer of these assets and loans associated with property will be exchanged for bonds issued by the Sareb with the guarantee of the Spanish state. The Ministry of Economy expects that Sareb will bring together approximately 55,000 million euro of assets after the completion of the transfer process of two group entities.
The entity for restructuring banks toxic assets (Sareb), the so-called ‘bad bank’, has selected KPMG to draw up a business plan for the company and will take on the task of adjusting the portfolio values to the current economic climate, as reported by financial sources. Sources have confirmed that the new business plan will keep the expected return on equity (RoE) at around 14% and 15% that was contemplated in the initial design for the 15 year life of Sareb. ‘The profitability objectives will remain the same according to guaranteed sources.The re-adjustment of the business plan was presented in the first instance to investors, which sources attribute the speed to which the ‘bad bank’ was established, to update valuations of the ‘toxic assets’.
The first estimates were made from book value on 31 December 2011. There will also be a linking of liabilities to the evolution of the business portfolio. Precisely, the ‘bad bank’ plans to absorb the Feb. 28 damaged assets of entities belonging to group 2 (BMN, Liberbank, and Box3 CEISS Bank), its capital will be raised to 1,200 million euros, following the entry of two new partners: Iberdrola and Banco Caminos.
The Euribor, the indicator that references most Spanish mortgages, has resumed the downward trend that continued in 2012, after the rise experienced in the month of January, which ended with 0.620%. The index yesterday recorded a daily rate of 0.604, compared to 0.622 at the start of the month, noting provisionally a general rate of 0,614. Positioning it at 1,062 points compared to February last year. Last Thursday, the Governing Council of the ECB decided to keep interest rates at 0.75%, which was the minimum set in July 2012.
BBVA ‘Research’ believes that the huge stock of homes for sale in Spain will be reduced “modestly” this year, in the wake of 2012. However, it considers that the adjustment for the supply side has been “significant”, and could be close to an end as a result of the “strong” reduction in the number of new housing projects and employment in this sector. BBVA finds a “strong” dynamics in housing demand by foreigners and believes that it could be further strengthened this year, “once the uncertainty in financial markets has dropped and the will be a greater appetite for risk”.
However, the bank president Francisco Gonzalez adds that these factors do not mean that in the coming years there will be a “vigorous” investment recovery, as the cumulative oversupply remains important “but that adjustment is being corrected”. In fact, residential investment is estimated to contract by around 8.3% in 2013. According to the banks estimates, it will be from 2014 when the market begins to record positive growth rates but moderate (+2.1% for the full year), after seven years of declines and a cumulative contraction of over 50%. BBVA also indicates that the real estate industry will face new circumstances that will add uncertainty such as the restructuring of the financial system, the implementation of the Sareb, eliminating tax breaks for the purchase and the increase in VAT on housing reform tenancies Act and the new regulations for Socimi.
Las Vegas Sands casinos and Madrid officials have chosen the town of Alcorcon on the outskirts of the Spanish capital as the site for the multibillion-dollar “EuroVegas” casino project, which authorities hope will bring much-needed jobs and investment to Spain.
Madrid regional government president Ignacio Gonzalez said that work on the first of three phases would begin at the end of 2013 and would be completed by 2017. The entire project, initially comprising 12 hotels and six casinos, is to be finished by 2023 at an estimated cost of €22 billion. Las Vegas Sands is to fund 35 percent of the project. It is not clear where the remaining 65 percent will come from.
JP Morgan Chase outlined in a report the actual disposition of the authorities and the private sector to negotiate and sell assets at lower prices to satisfy liquidity needs. The investment bank stressed that so far the bank was not willing to part with assets below the level of provisions, thus assuming an additional loss.
They also predict that the authorities, entities and individuals will successfully sell assets in the coming months purely because vendors “are clearly willing to accept lower prices to close deals.” They see banks more realistic about the future value of these assets, after the impact of tax increases and an end to tax deductions.
The report also notes that JP Morgan product will hit the market at below cost of construction values, which in their opinion will make Spain “a country with opportunities for bargain property hunters.” Although the U.S. entity believes the Spanish property market recovery will come from exterior sources given the current difficulties with accessing credit in Spain.
The Spanish housing stock has depreciated 1.1 billion euros in the last four years, from 5,713 billion euros to 4,600.9 billion euros, or 19.5% less, and, according to a study by the appraiser Euroval, in this period the net balance of housing has increased by one million units. The report reveals that in this period the housing stock has increased by 4% and its value has been reduced by 20%, with Madrid being the region where housing has depreciated most (by 25%), and Extremadura where it has depreciated least (by 7.4 %).
According to the study, between 2011 and 2012, Spanish properties as a whole have depreciated by 7.42%. “Housing wealth is very relevant to economic decision-making and affects the capacity for borrowing, saving and consumption,” the report says. The equity increase in Spain is not mainly due to the number of dwellings, but the prices, because the value grew annually at rates in excess of 20%, while the number of dwellings grew at a similar figure (24%) for the entire decade. The sale of homes was down 11.3% in 2012. However, this figure rose year on year in December after three consecutive months of falls. According to figures from the National Statistics Institute (INE), achieved sales transactions in the last month of the year reached 23,523 units which was up 2.3% on the same period last year. Records are based on statistics from the Property Registry Office.
The sale of homes was down 11.3% in 2012. However, this figure rose year on year in December after three consecutive months of falls. According to figures from the National Statistics Institute (INE), achieved sales transactions in the last month of the year reached 23,523 units which was up 2.3% on the same period last year. Records are based on statistics from the Property Registry Office. With respect to December 2012, the volume of property sales was recorded at 8.3%. Relating this to the types of property 89.7% of homes were open market and 10.3% state housing. In annual terms the number of homes sold on the open market was up by 5.7%, while state housing had a decrease of 19.9%. In addition, 48% of properties sold in December 2012 were new builds and 52% were second hand. The number of sales operations on new homes was up by 3.8% and that of second hand property increased by 0.9% compared to December 2011
The Diputación de Málaga, the equivalent of a provincial council, is to file a constitutional challenge against the coastal protection law passed last November by the Junta de Andalucía, which temporarily halted all planned construction projects within half a kilometre of the shoreline in 11 Málaga towns. The ruling Partido Popular at the Diputación last week approved the motion to file an appeal to the Constitutional Court against Articles 2 and 3 of Decreto Ley 5/2012, on the basis that the law is an attack on the autonomy of local town halls and does not meet the ‘extraordinary and urgent necessity’ requirement for the Junta to pass laws by decree. Among other things the law establishes a temporary freeze – lasting up to two years – on building projects within 500 metres of the shoreline in towns that have not brought their local development plans (PGOUs) into compliance with the 2006 POTA regional planning ordinance.
The number of mortgages in November on housing in Spain fell by 31.6% (annually) to 19,115 units. According to the National Statistics Institute (INE), the figure is similar to that of the previous month and continues in the ‘minimums zone’ since statistics started. The data refers to dates when property sales increased confirming the idea that more and more property is being bought in cash. There was a time when the number of monthly mortgages far exceeded the number of property sales. This occurred because mortgage activity was even higher than the buyer, as there were numerous mortgage transactions that were linked to a purchase (refinancing, for example).
However for some months now the data from the National Institute of Statistics (INE) shows a turnaround. According to the latest data from INE the number of sales was 25% higher than mortgages. In 2007 the situation was reversed, as the number of mortgages was 50% higher sales. The fall in house prices coupled with the increase in spreads on mortgages is prompting more homes to be purchased with cash. This phenomenon is occurring especially in the affordable housing sector, where some buyers may get to purchase without availing of a mortgage (average interest rates grew up to 4.39% in November). This has also allowed the average amount per mortgage is falling less than the price of housing. Thus, the average mortgage fell only by 4% year on year, when property is down over 10%.