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NEWS By Geoff Hadwick

Spanish property prices are declining at an accelerated rate as home prices continue to plummet at a rate of 22% to 29% a year. Soaring yield bond rates are also

fueling fears that borrowing costs could reach unaffordable levels quickly unless the European Central Bank resumes buying Spanish government bonds in a bid to keep yields down. “We are back in full crisis mode,” Rabobank rate strategist Lynn Graham- Taylor told OPP. “It is looking more and more likely

that Spain is going to have some form of bailout. Assuming there is not an (ECB) intervention, you would not see a cap on Spanish (debt) yields ... they will just keep increasing.” Spain enjoyed a decade-long property

boom prior to 2007 following the 1992 Barcelona Olympics and a strong tourist currency rate. However, the country has since

experienced a major downturn, often referred to as a “balance sheet recession.“ |MAY 2012 Spanish market ‘back in crisis mode’ On the rocks | Spain’s woes have continued as prices keep on crashing down

Many residents now struggle with unwanted assets and rocketing mortgage payments as the rate of infl ation has increased to 3.4%. Also, it was revealed last month that

new rules set out by the conservative government in Spain, requiring all banks to increase their provisions against dangerous real estate loans, has reduced Banesto’s net profi t by 88% year-on- year, to €20.2 million. The bank, which is controlled by Santander, has set aside €475 million to

protect its Spanish property assets and an 8.3% reduction in lending by the bank is also intended to improve the fi nancial institution’s capital ratio. Fitch Ratings predicted that Spain’s major banks, such as Banesto, may report lower earnings as a result of the new requirements imposed by the government ... and smaller banks may report losses if they are unable to generate a profi t from asset sales. Many banks are in a vulnerable

position, holding about €135 billion of doubtful assets, and they are all likely

to require a further bailout. Currently, Spain budgets 14 percent for interest rates, but this may rise if it is required to pay more funds. Economy minister, Luis de Guindos says the gross domestic product is falling in a similar pattern as it did in the last quarter of 2011 when the economy shrank by 0.3%. The banks, and other lenders, currently own nearly 20 percent of the country’s one million empty homes and there was a recent fi resale of properties in Sesena and Toledo at less than half the original asking price. Banesto, however, has sold more units

than it foreclosed in the fi rst quarter of the year and as other banks such as CaixaBank or BBVA do the same, property prices will inevitably continue to fall. Spain’s sovereign debt is now about 70% of GDP and private sector debt is at 200 % of GDP. The nature of the recession means

that any economic growth Spain manages to achieve within the next decade will go toward recovering the property losses experienced during this crisis says Rabobank.

Portugal suffering goes on says new survey

Portugal’s residential property market remains in poor health, according to a new index published by the Royal Institution of Chartered Surveyors (RICS) and Confidencial Imobiliário (CI). The national price balance in the

sales market improved from -64 to -56, however “it remains very negative” states the report. The national confi dence index,

based on price and sales expectations, improved slightly from -53 to -48 but


PERTH’s residential market is about to turn say local agents in the Australian city. Blackburne Property Group managing director Paul Blackburne said that investors “have realised that their shares are not performing, and so they are come back in to property.”

is still very negative, RICS says. The lettings market however continued to benefi t from the fallout, with tenant demand and letting activity expectations remaining positive. Despite this, rents and rental expectations are falling. “This could refl ect an excess

of rental stock in the market, but affordability constraints may also be an issue given the macro environment,” says the report. Ricardo Guimaraes, spokesman


HYDERABAD is poised to see signifi cant growth over the next two quarters after a relatively subdued phase in 2011. Listings site, says the proportion of people likely to buy a home in the next six months has increased to 80% year-on-year.

for CI, said: “Almost all comments from agents mention the critical impact that financial institutions are having on the market at present,” he said. “Not only are credit restrictions limiting transaction volumes; banks are also aggressively trying to run down their distressed property inventory which is being cited as an additional source of downward pressure on residential prices.” Josh Miller, senior economist at RICS, added that the decline in rents


SOTHEBY’s International Realty Affi liates LLC is opening up a new Israel Sotheby’s International Realty agency to serve international home buyers based in Tel Aviv. “Israel is a critical part of our growth plan Michael Good, chief executive, said.

“may be indicative of the current stresses on the household sector reflected in a 15% unemployment rate.”

Unsteady | Portugal confi dence is low DUBAI LEGAL BOUT

A group of property investors have won a legal battle over the stalled development of The Seasons in Dubai. The investors had their case for compensation accepted by the by the courts in Dubai because the project was left unfi nished.

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