As sellers of embattled Spanish properties try to sell a two tier market is emerging. On the one hand there are private sellers who for whatever reason need to sell their property. On the other are the banks who are being pressured by their regulator, the Bank of Spain, to dispose of toxic real estate assets, balance their books and provide liquidity to the Spanish economy as a whole.
Distressed developers are being forced to offer discounts of up to 40% or original asking price and the banks are offering generous mortgage packages in order to assist quick sales. One bank is offering an 80% fixed rate mortgage with a three year repayment holiday. This financing is available on thousands of key-ready beachside and golf side apartments and villas.
The strategy is definitely working and the banks have managed to sell off more properties than at any time since the recession hit. However, private sellers are unable to compete with the combination of massive discounts and generous mortgage packages. Private sellers usually need to charge more and there is no access to cheap mortgages for their properties. Even after successful viewings with potential buyers showing interest, deals are not completing as cheaper homes with better mortgages are winning the battle for new buyers.
Leading Spanish property specialists www.propertyinspain.net have over 16,000 properties, both private and bank owned on their books. They say that there is a two tier market emerging and that it is likely to continue for at least another eighteen months until the banks and developers have cleared problem properties from their books.
The firm emphasises that the private properties are offered at reasonable prices and are often in superior condition to bank repossessions. They are advising private sellers that they need to either reduce their asking price or remove their property from the market if they are getting little or no viewings. In one area of the Costa Blanca over 100 private sellers have reduced their total asking price by over €3 million in a campaign known as “Super Sale 2011.”
The firm’s sales manager, Ben Walker said that there is definitely a two tier market in Spain right now and that private sellers are losing out despite their properties usually being a much better offer than repossessions. He said that his firm offers on-line showcases to make it easier for buyers to compare locations, prices, mortgages and value for money. He also said that the firm’s Fly-to-Buy packages include privately owned properties as well as those belonging to banks.
An example of the buyer’s dilemma is this:
Private Sale
- One bedroom, walk to beach apartment
- Fully furnished with communal pool
- 60% mortgage
- €43,000
Bank Repossession
- Two bedroom, drive to beach apartment
- Unfurnished and no pool
- Guaranteed 90% mortgage
- €46,300
