Sareb set up as the “bad bank” in Spain to absorb properties from the banks has reported accelertated sales this year. 5000 properties have been sold to the end of April, an annualised rate of 15,000, a 66% increase on the 9,000 homes sold in the whole of 2013. It follows figures on mortgage lending which reported their first increase in four years last quarter. “It’s time to invest in the property market because it is stabilizing in terms of price,” Belen Romana, chairwoman of Sareb, said at an event in Madrid on Wednesday. La Vida Spain has a stock of property from the Sareb at Terrazas de la Torre resort in Murcia where prices start at just €53,000 for a two bedroom apartment.
The last bank to be issuing 110% mortgages to non resident buyers in Spain has now reduced their maximum offer on their bank repossession properties to 90%. They claim a higher default rate as reason to offer international buyers less.
Banco Popular were the only major Spanish bank left offering 110% but only on properties that they had repossessed. Most of the other banks in Spain have joined the government bailout programme known as Sareb. This meant the government “bought” their properties or in some cases such as Sabadell bank, assumed most of the loss. It left those banks with no incentive to offer higher, riskier mortgages so any loans for properties were at “arms length”. These days that means risk avoidance by the banks and hence in most cases offers of 60% – 70% for overseas buyers. The bank properties in Spain are selling steadily and Sareb which is now ultimately responsible for the losses on the properties has no means in itself to offer financing. So finally we are back to more realistic levels of borrowing where the loan is detached from the purchase.
Our free buying guide for Spain is now available. Please follow this link to our website. You’ll also receive details on the best bank repossessions Spain has to offer. La Vida Spain works with all the major Spanish banks and as the largest international seller of Spanish bank property we can help you achieve the same bargains that local Spanish customers get access to. With the brochure you will receive details on two of the best options right now for international buyers looking for lifestyle. That is quality resorts with security and facilities suitable for a holiday home where you can still pick up Spanish bank properties at a fraction of their original price.
La Vida Spain picked up an award for best international agent last week from Banco Sabadell. We were presented with the award at Banco Sabadell’s offices in Alicante where the real estate arm Solvia is now based. Banco Sabadell have led the way in the Spanish market in pricing their bank repossessions and La Vida Spain has been selling on behalf of Sabadell and the previous CAM bank since 2009. La Vida Spain sells on behalf of a number of banks including Bankia, Banco Popular and the government run SAREB. Most importantly for our UK customers we have offices in Spain and the UK to assist customers make the most of the opportunities available.
We are finding the Spanish banks far less willing to grant high loan to value mortgages on bank properties than 12-18 months ago. Many websites are still advertising 100% finance but the reality is very different in Spain especially for non resident buyers as very little is available at this level. The Bank of Spain introduced new rules last year restricting lending to 80% of the property’s value. In 2011 and 2012 banks were desperate to offload their repossessions and were willing to lend 80%, 90% even 100% to buyers from abroad. But in 2013 SAREB, the Spanish government bailout bank finally got into its stride. They “bought” the stock of repossessed properties from certain banks such as Bankia, Banco de Valencia and La Caixa. Although the properties are still sold through agents like ourselves via the trading banks’ system, the liability of the asset does not lie with the bank. So suddenly the bank has no incentive to lend high amounts on the property. It’s the SAREB’s problem not the banks’. Meanwhile a number of the banks have sold off their property arms retaining minority stakes as the banks ease out of the real estate market. And bank repossessions have been selling well in Spain, so stock is reducing. All of this means less scope, less urgency and less incentive for the banks to lend. Our advice when buying in 2014 is to work on a maximum of 60% finance as an overseas buyer of property in Spain (higher if resident). Bank properties still attract a better response from the related bank to finance than resales (when it really is arms length) but the days of choice of the 100% mortgage are behind us. There are still one or two deals available that we can point clients to but it’s always best to buy for the property and not the mortgage.
2014 looks set to be a bumper year for bank repossessions in Spain. Repossessed bank properties continue to lead the way in terms of value with many below half their original price buyers can pick up some superb bargains. But if you are looking to buy make sure you do your homework first. Check that developments are complete and established, that properties are legal(not usually a problem with bank properties) and always use a solicitor. There’s very little new bank stock coming onto the market now. What needed to be done by the banks in the last few years has been done. Now it’s a race for the best stock that’s left. A lot sold in 2012 and 2013 at very low prices. We predict 2014 as the last year to pick the prime product from the remaining bank property then 2015, 2016 onwards the remaining stock sells as the market continues to improve. Check our repossessions website for the best bargains around Spain or give our experienced staff a call in the UK on 0208 429 7115. Happy New Year to all our readers!
Something for anybody to consider when buying bank property in Spain at a knockdown price is the potential for MMV tax. This is meant more as a rant than tax advice and we advise always discussing such matters with lawyers and tax advisors. Meanwhile….
MMV or Minimum Market Value tax is an attempt by the regional tax authorities in Spain to squeeze a little bit more out of your property purchase. You are required by law to pay 8% IVA (VAT) on a property purchase. In the past in Spain there was a problem with cash sales being under declared, connected sales to family members etc and hence avoidance of paying 8% on the actual purchase price declared in the deeds. MMV was introduced to stop this. Hence the tax authorities could claim that the three bedroom villa you had just sold to your first cousin for 20,000 Euros was in fact worth a little more than you declared.
In recent times MMV has been abused by the Spanish tax authorities. They have used it to claim that the property you are now buying, perhaps as a distressed bank sale, is in fact worth more. Typically they may use the Catastral value (similar to rateable value) to justify this. Although the amount they claim is unlikely to be too high, perhaps 10% or 20% higher, so perhaps €10,000 or €20,000 more on the valuation resulting in 8% tax of €800 or €1600 extra. Fairly typical figures of what we have seen.
They can take up to 4 years to claim this and you do have the right to dispute the valuation. We would encourage anyone to do this and some lawyers I spoke to recently admitted they had successfully defended nearly all cases so far. Mainly due to incompetence by the under staffed authorities it seems.
The fact is that the properties sold in any open market are at market valuation. By definition. So a case can be put forward by your lawyers and hopefully it will be successful. Or you can choose to pay up and they’ll go away. Perhaps the EU will catch up with this practice by regional tax authorities, as they did with the Valencia land grab. We would certainly like to see it if there is a case for this. But in the meantime MMV needs to be considered by clients as a potential extra “tax” if the tax authorities decide to “try it on”.