subject: Where is the pain in Spain? [print this page] Where is the pain in Spain? Where is the pain in Spain?
Spain is a very beautiful country and it had one of the biggest real estate booms ever seen. I get asked about it all the time by investors who like the idea of purchasing a great value property there.
I tell them all the exact same thing - if you want a pure holiday home there are some acceptable deals, but if you want to make any money continue waiting because prices have not fallen enough and rental yields are still way too low and unpredictable.
Nobody in Spain (including the Central Bank) trusts official goverment estimates of an 11% decline in property prices over the past two years. The ministry of housing also refuses to release data on actual sales prices rather than the asking prices, which, as you can imagine, would be quite useful to people considering an investment there.
In contrast to the deluded government numbers, privately held property portals like idealista.com publish much more reliable estimates of a peak to trough decline in the real estate market of 24%.
My problem with Spain is that it should be a 60% decline considering the rampant speculation and house building that went on, not 24% and certainly not 11%.
Most importantly, the Spanish banks are still not telling us how many bad loans they have. The Bank of Spain estimates that there are potentially 181 billion in "problematic" real estate loans. In other words, loans worth 10% of GDP could be bad but this isnt reflected in their accounts and theyd rather not talk about it.
Its a recipe for disaster and huge amounts of bank owned property may get dumped on the market in the next two years. It isnt going to be pretty, but Ill be keeping a very close look out for bargains when it happens.
