Spanish home prices are poised to fall the most on record this year, leaving one in four homeowners owing more than their properties are worth, as the government forces banks to sell real-estate holdings.
Home prices will decline 12 percent to 14 percent, according to research and advisory company R.R. de Acuna & Asociados, after Economy Minister Luis de Guindos in February gave lenders two years to make 50 billion euros ($67 billion) of additional provisions and capital charges for losses linked to real estate. That’s the most since the National Statistics Institute started tracking values in 2007. Standard & Poor’sforecasts borrowers with negative equity may rise to 25 percent this year from 8 percent in 2010, based on an analysis of 800,000 mortgages.
“There will be more serious price drops this year because of the government decree,” said Fernando Rodriguez de Acuna Martinez, a partner at the Madrid-based firm. “Banks are now prepared to incur big losses on real estate to shift all they can.”
Spain’s Prime Minister Mariano Rajoy and his People’s Partyare betting the overhaul will help bolster confidence in the country’s banks without undermining a drive to tackle its budget deficit that’s threatening to reignite Europe’s debt crisis. The move is likely to force banks to sell assets cheaply, accelerating a four-year decline in residential property prices that are already 30 percent below the peak.
Government Decree
The government’s Feb. 2 decree on real-estate provisions is already leading to reduced sales prices. In the week after the plan was announced, more than 10,000 homeowners who use Idealista.com, Spain’s largest property website, lowered their asking prices. That’s 30 percent more than the weekly average during the previous month.
Banco Santander SA (SAN), Spain’s largest lender, and CaixaBank SA (CABK), the fourth-largest, are offering homes at discounts of as much as 50 percent on their Altamira and Servihabitat property websites. Bankia SA (BKIA), the No. 3 bank, went even further on March 15 by announcing that the company aimed to sell 9,000 properties this year at discounts of as much as 60 percent.
