Half Price Repossessed Properties In Spain

Date Published 26 April 2012

A new report compiled by Fitch Ratings reveals that achieved sales prices on repossessed properties in Spain are almost half - 48% - lower, on average, than the valuations conducted at the time of loan origination.

The agency has analysed loan-by-loan repossession figures on Fitch-rated Spanish structured finance transactions, the bulk of which relate to homes in Spain. .

Carlos Masip, director in Fitch`s RMBS team in Madrid, told Reuters: `The significant discount of achieved sale prices from initial valuations reflects the distressed property market conditions.`

Senior Masip projects that Spanish property prices will continue to fall, as a result of high unemployment, a lack of mortgage liquidity and a chronic oversupply of properties.

He added: `Downward pressure on values is set to remain as home prices are still high relative to average incomes, credit is in short supply and there is a huge overhang of unsold stock.`

The data analysed by Fitch is made up entirely of property transactions resulting from distressed loans, made up primarily of high loan-to-value ratios at the height of the property market in 2005 and 2006.

"Fitch expects property prices to continue falling, due to the recessionary environment and severe dislocation of the Spanish property market," says Juan David Garcia, senior director and head of Fitch`s Structured Finance team in Spain.