Bloomberg News

Spain Banks Face 43% Price Fall on Repossessed Homes, Fitch Says

December 16, 2011

Dec. 15 (Bloomberg) -- Repossessed houses in Spain are worth 43 percent less on average than the valuations assigned on the mortgages for the properties, according to Fitch Ratings.

Price declines range from 20 percent to 58 percent, analysts Juan David Garcia and Carlos Masip in Madrid wrote in a report analyzing 8,235 properties funded by loans from banks including Banco Santander SA and Bankia SA. The mortgages are in asset-backed securities with high loan-to-value ratios.

“Fitch does not expect lending to recover in 2012, as financial institutions are more focused on optimising their balance sheets, while their access to funding is limited,” the analyst wrote. “Lending is likely to remain concentrated on existing high-quality borrowers and on potential buyers of banks’ repossessed properties.”

The impact of falling house prices on mortgage-backed securities has been cushioned by some banks that bought defaulted loans from the deals at above-market prices, Fitch said. That support will wane as lender liquidity dries up.

Spanish home prices fell for the 14th consecutive quarter as unemployment surged and a drop in mortgage lending crimped demand for property. The average price of houses and apartments dropped 7.4 percent in three months ended Sept. 30 from the same period a year earlier, according to the National Statistics Institute in Madrid.

--Editors: Andrew Reierson, Michael Shanahan

To contact the reporter on this story: Esteban Duarte in Madrid at eduarterubia@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net


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