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Real Estate Worries Mounting In Spain

News Posted On: 26 February 2013

Spanish property news

Banco de Espana recently launched an inquiry into real estate deals completed by the property arm of Bankia – the country’s nationalized lender. The sources did not provide any further information on what kind of investigation was being carried out, but one thing is for certain – Bankia suffers yet another blow! The bank has been struggling in the past few months and was even forced to seek a bailout from the government in 2012 because property losses worth billions of Euros made it very difficult for Bankia to cope independently.

Sources report that the Governor of Banco de Espana, Luis Maria Linde said that the investigation was confirmed to a judge following his testimony of the 2011 listings last week. The governor is said to have confirmed that Banco d Espana will be studying Bankia Habitat’s operations over a period of time, and once conclusions have been reached, Banco de Espana will take necessary actions against Bankia.

Crash of Popular Real Estate Agency

Spain’s recovery from the real estate crash seemed to have been picking up since the turn of the year. However, the country’s real estate market was taken aback as Reyal Urbis, a property giant, filed for insolvency. The firm had been strapped with debt and failed to recover from Spain’s real estate bubble burst. Banks had been funding the company for several years, but lost patience last week as the debt kept mounting.

Insolvency was the last option for Reyal Ubris after the firm could not renegotiate a 3.1 billion GBP debt with its creditors, who seemed to be growing increasingly impatient with all the property firms that have felt the effects of the real estate implosion. Home prices continue to fall even four years past the collapse of the Spanish property market. The stock of new and unsold properties has been rising and banks have now accumulated around one million apartments and homes. As sales haven’t been the highest, the future wears a bleak look for all the other constructors and developers who are laden with debt.

The Second-Biggest Crash of Real Estate Agencies in Spain

The property portfolio of Reyal Urbis was valued at 4.2 billion Euros in June last year. However, its value has been sliding as debt rises. It is now up to a court to decide whether or not to liquidate the firm. The process of liquidation can take several years! Martinsa Fadesa, a real estate agency, was the biggest insolvency in Spain prior to that of Reyal Urbis.

In 2008, Fadesa accumulated a seven billion Euro debt that ensured that its operations would only deliver further losses. The bad bank, meanwhile, which was created to house toxic properties seized from banks, helped Reyal Urbis with a 40 billion Euro credit that makes it the firm’s biggest creditor.

Many of the loans that were refinanced 1-2 years ago were taken with the hope that the market would improve. However, there are no notable improvements to suggest that recovery can be completed any time soon.

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