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Last Updated on 11/03/2023 by STEPHANE
Are distressed sales back to Spain due to Covid-19?
Is 2008 back?
In 2008, there was an overwhelming supply of homes because many homeowners had borrowed 100% of the purchase price, while their mortgage balance was often above the home value. The mortgage foreclosure moratorium then allowed many homeowners to seek short sale options while others simply walked away from their homes.
Banks were left with too many foreclosed homes leading them to desperately sell to clear their books. Today, we are in a much different situation. We had 27.055 bank repossessed properties in Spain in 2019
Unless sellers are in urgent need, most homeowners may decide to not sell their homes until the market recovers.
A lot of supply coming to the market?
The situation will be different depending on:
- Who the owner is (local or foreigner?)?
- What is the financial situation of the owner?
- Where is the property located?
As we wrote in our earlier papers: the taste of buyers will change due to Coronavirus:
Unlike in the 2000s, the housing market in Spain is not oversupplied by empty new build making it less likely that a large swath of vacant properties will crater the home values for homeowners.
So, the quick answer to the question is no!
The current situation is completely different than after the financial crisis:
- The supply and demand situation is not the same: the current real estate market is much more in equilibrium after a nice rebound over the last 6 years
- There is less financial leverage in the system
- Financial institutions are less exposed and better capitalized: Banks’ balance sheets are much stronger
- Properties acquisitions are financed by mortgage for less than 65% of all the transactions
- Real estate prices are increasing since 2014 in Spain and remain reasonable, in terms of price per square meter, in terms of yield for investors
- Rising home values and stricter lending standards have also meant that homeowners are sitting on historically high amounts of home equity.
- The market is not too much ‘oversupplied’ by thousands of properties
- The number of real estate transactions of last year is not excessive vs a few years ago
- Real estate developers are more prudent with their developments and are stronger financially: The promoters are not over-leveraged
- Mortgages financing is less aggressive: only 14% of them have a value higher than 80% of the price of the property and on average, they have a loan to value of 65%.
Don’t misunderstand us:
Prices should decrease and opportunities should be easier to spot than in 2019
We think that the economic situation will have a big impact: this is the main point to keep in mind to know if we will get a recovery.
A backlog of bank properties remain on the market in Spain
We found at least one institutional buying bank properties in Spain for more than 10 years… Here is our article on that: “Are bank properties in Spain a nice investment opportunity?”
How to proceed as a foreigner and benefit from the Spanish real estate opportunities?
Don’t miss our easy to read guide, you will learn as well what are “The ideal Spanish property for foreigners in a post-Covid-19 world“
How to find a bank repossessed property in Spain?
Don’t miss our last articles on that subject: we give you all the bank websites:
- Spanish bank repossessions: Your ultimate guide to 120.000 properties
- The last bargain on the Costa Blanca? 12.000€ for a Spanish Bank repossession
Don’t forget that as those properties are from bank: you have to pay attention to the legal and technical due diligence. Don’t worry our local partners are there for help if needed.
This concludes our report on: Are distressed sales back to Spain due to Covid-19?
To end our series on the impact of the Coronavirus on the Spanish real estate, we will cover those topics:
Last but not least, don’t miss the core of our research: our in-depth analysis of the Spanish Housing Market post-Covid-19.
Don’t neglect the basic recommendations to keep yourself and others safe:
- maintaining a social distance of 2 m,
- regular hand washing,
- cover your mouth when you cough or sneeze,
- avoid touching your face after touching hard surfaces where the virus can live.