A recent article in Spain’s Expansión Newspaper states – ‘Spain’s banks still need to get rid of €350,000 million of problem assets from their balance sheets, despite having already divested €65,000 million over the last five years. Experts indicate that divestment of toxic loans and foreclosed assets may take another ten more years. “After ten years in this market, I think that we still have another ten years’ worth of divestments ahead. This market is here to stay”, said Joel Grau yesterday, Partner and Co-founder of N+1’s Corporate Portfolio Advisors’
The banks have been selling mainly to funds and also selling the management of the problem assets they own. ‘Funds are already managing 80% of the banks’ problem assets, through platforms that they have been buying up in recent years.’
Many of these ‘assets’ are in the form of bad debts, which will be linked to property assets. With some, the asset will be delinked from the debt and offered for sale clear of debt, whilst the debtor will still be liable for whatever amount they borrowed. And after 10 years, all the portfolios will have been raked through with the best properties and prospects long gone. We must be getting to the dross now, but there is so much of it.
So when one reads of banks disposing of their bad assets, it’s really that they are just being passed to somebody else, but the problem or property is still there. Where it’s a property, it only really comes off the market when it’s bought by an occupier or someone who is actively seeking tenants. When it’s a debt, it only disappears when it’s paid by the debtor or the debt holder writes it off as a bad debt that won’t be recovered and releases the debtor from their obligation.
The property market and the economy still has a long way to go.
On the other hand, apart from a slight delay while Brits wait for the Brexit decision, the property market in the international Costas, Madrid, Bilbao and Barcelona is getting stronger for the better properties in the better locations.