This could change everything
 

Andalucia will fine banks up to 9k euros for every empty property on their books

http://ccaa.elpais.com/ccaa/2013/04/...30_353114.html

Given that there are millions of empty properties on the books of the banks in Spain - and 100s of thousands in Andalucia, this could change the whole economics of Europe.

The banks will be forced to put them on the market at a price to sell, or rent them out at a price to rent i.e. very low prices

This should drive down the rental and sales market across Spain and at the same time devalue the accounts of Spanish banks

All money raised in fines will go towards providing social housing in Andalucia

I've not heard such brave or positive news for a long time. The question is, how will Rajoy prevent this happening?

Re: This could change everything
 

I like the idea, but if this is really true... I'd have to reckon it has potential to spark yet another banking crisis, requiring another bailout, and cause further depression in the housing market. But some would consider that a good thing.

Would Rajoy want to stop it? Maybe, or maybe not.. First, it would have to actually be true, and if true, I would think it would need to have a positive impact on Spain's condition. Otherwise, what would be the point?

Re: This could change everything
 

Economically this could be terrible (in the short term). Spanish banks are propped up by the inflated prices they have put on these empty properties on their balance sheets. Putting a proper market value on them could make most of Spain's banks technically bankrupt

Spain and Europe does not have enough money for such a bailout

Socially it is absolutely the right thing to do, but given the possible extreme consequencies, Rajoy/Merket/EU/IMF are sure to do all they can to block it

Re: This could change everything
 

Is this not the heart of Spains problems the power that is given to the regional governments.In effect what real authourity does Madrid have when it comes to finding solutions to the crisis.

Re: This could change everything
 

If Madrid had more power then there would be another civil war - and there may be no Spain

Spain is a diverse country. A lot of people feel Basque, Catalan, Andalucian or Asturian before they are Spanish. As my wife says she is Asturian first and foremost, European next and finally Spanish. Lots of people feel this way

But yes, Madrid has limited power because Spain has the most devolved autonomies in the world, even more so than the USA

Re: This could change everything
 

In reading a little of the modern history of Spain I found that Franco rewarded his Generals by giving them the regions as mini kingdoms.
To govern as they pleased when it came to domestic policy. The local goverment structures of today still reflect that and the endemic corruption that resulted with dictatorship being replaced by regional loyalties and rivalries. I am sure that some will say that dictatorship still exists in the way policies are carried out.

Re: This could change everything
 

History has a way of justifying a lot of the things other societies would find unacceptable. It's not unusual - Germany still has a lot of laws that were defined by the Nazis. Some are pretty questionable, but again, history has it's justifications.

Besides, it's always easier to accept or amend an outmoded law or structure than to change it. It usually takes a popular revolution and coup to wipe out the past and start all over again - and even then, it's likely some remnants of the past will remain.

Re: This could change everything
 

Not all at!

The local governments were given so much autonomy to pacify them during the democratic transition, otherwise Spain may not have survived. Almost all the regions (except Valencia) elected a socialist or regionalist government. Their break from Francoism couldnt have been greater

Spain is extremely democratic, in that you elect representatives at local, regional and national level.

The problem is that actually the people at the local level have a lot of power and are not controlled by central government, so they can be as corrupt as they like. So people run to be mayor of a town with the sole purpose of misappropriating funds to get themselves, their friends and family rich. The local people see this but re-elect them because the mayor throws good fiestas and builds a few childrens' parks just before the elections.

Hence all the illegal and pointless building in the South, it was a get rich quick scheme by local "politicians" and developers to take the money from the banks and run. They never needed to sell these buildings, they became rich as soon as the local banks (cajas) gave them the money to build them

Re: This could change everything
 

Putting a roof over the heads of those who would otherwise be on the street, I think is the point.

If a govt or a system can't provide its people with a roof, food and essential healthcare then it's a failure, whatever else it might achieve.

I would not like to be one of those condemned to live on the street in order to guarantee some other definition of economic 'success' or 'recovery'.

Re: This could change everything
 

My thoughts were based on the local infrastructure that was set up under Franco remained even if the politcal leanings of those in power changed.
eg, The local francoist mayor was replaced by a socialist, how they behaved did not change.

Re: This could change everything
 

That doesn't make it democratic and many spaniards would argue with you on that one.

Re: This could change everything
 

I can see this as a perfectly reasonable solution if a country was in dire need of housing for its citizens, but I'm not aware of that kind of need in Spain despite the recent repossessions.

Such a measure will certainly drive down property prices, but again, is that what Spain really needs? All by themselves, property prices have fallen for years now, and unemployed citizens can't buy houses at whatever level they fall to.

Will it attract foreign buyers? It might, but what kind of buyers? They're not going to buy holiday homes if they can't leave them empty when they're not able to visit.

And do they want to become residents and have to declare their foreign assets?

And if the banks are in a poor state now, this new law could push them right over the edge. I haven't seen much common sense come out of Sevilla for many years now.

Re: This could change everything
 

It doesnt make is "representative", but it is democratic

The problem in Spain is that you vote for parties not individuals, and the parties and closed cliques with their own vested interests

However, I dont see the UK or US as being any more democratic or representative

Re: This could change everything
 

There is a dire need for AFFORDABLE rented housing for the unemployed and low paid, many of whom are living in cramped conditions with their parents or even grandparents. And there are millions of properties standing empty, owned by the banks who have very little chance of selling them.

So using this housing stock to solve the problem seems like a no-brainer to me. Good for Andalucia! :thumbsup:

Re: This could change everything
 

Yes, very kind indeed! And making this excess of empty housing available to those who have none, sure appears to make sense on the surface. The problem is that how do you reverse it once you've started it? It WILL end up being just a handout. You can't ever take it away - you think there's a potential for a revolt now? Wait till you give somebody a house and then try to take it back. That's about as unfair as it gets (in most people's eyes).

It can be argued that public spending beyond means has a little something to do with public debt. But maybe I'm just silly.

Spending more, and going farther into debt, pushing an already nearly collapsing economy into an irrecoverable abyss somehow doesn't strike me as a rational solution, regardless of how "fair" it is. It's self-defeating, at best.

Seems to me that economic development creating jobs and prosperity should be the focus, not further deficit spending resulting in more and more impoverishment.

You can hand out fish forever, but until you give them a lake and a fishing rod, you'll forever be handing out fish.

Re: This could change everything
 

Right, and what have the UK, US and Spain done to the banks?

They've bailed them out to the tune of billions of tax payers pounds/dollars/euros

So people should be allowed to fail, wither and die, but banks should not

What on Earth have we become? :frown:

Re: This could change everything
 

But as and when their economic situation improves these families will be able to pay higher rents and maybe buy the properties they live in, so the banks will benefit in the long term. In the meantime they will at least maintain them and stop squatters moving in. It has to be better than having properties standing empty and falling into decay, surely?

Re: This could change everything
 

I agree with everything you've said. Unfortunately, history can attest to the fact that once you give something to the public, you can't get it back without doing really, really unpopular things, even if it's the only way to survive.

I think the newly reborn debate about Thatcher is a great example. Britain was well on it's way to a socialist state and headed into poverty. Social unrest, increasing vindictiveness against the very entity providing social welfare, full of massive waste and social spending far beyond its means. The social system was (and still is, although less so now) very generous. But then Thatcher's government came along and did the responsible thing (not the popular thing), blasted way the waste, and completely revitalised Britain, putting it back on the track of prosperity - arguably, saving it from near certain implosion. And yet, she is perhaps the most scorned leader in British history, simply because she had little choice but to reverse much of what had been generously and irresponsibly granted to the public.

Once you give it, you just can't take it back. I'd strongly suspect the banks would end up having to write all of them off anyway, leading only to yet another crisis.

But yes, I otherwise think it's a nice idea. You just have to do it with the knowledge that in the end, these properties would likely have to be written off.

Re: This could change everything
 

I certainly don't harbour any naive notions that the banks have not been (and to a large degree still are) run blatantly irresponsibly and with self-interest. I think that's rather indisputable, and we needn't argue that.

But the fact remains that the banks are demonstrably teetering on the edge of collapse. I can't help but question whether pushing them over the abyss and causing widespread panic and ultimately, widespread poverty would be the best way to fix it.

But then again, it often takes events of that magnitude to inspire change...

Re: This could change everything
 

I haven't seen any evidence yet that these properties won't have to be written off eventually. As it stands, the banks are not receiving one euro in income from them, they aren't paying community fees for them in the case of ones that have been repossessed, leading to many problems for other owners, and they aren't paying IBI. This proposal has to be better than letting them stand empty.

Re: This could change everything
 

I have a very hard time believing that Spanish real estate will never again have demand, but if Europe does indeed implode, that may well be the case.

It's better than letting them stand empty. Agreed. But it's not so simple. Really.

Again, I see a lot of possibility for it turning out to be "not what was intended" at the end of the day. If I were a bank in possession of these properties, I'd want to have pretty damned good assurances that I can indeed legally sell the properties when possible. Somehow I have a doubts that a sale would ever be possible after many would become "sitting tenants" with "rights" to these nice gifts, whether they pay the rent or not. There's also the likelihood that many tenants would destroy the properties.

Then there's the black market - the competition to get into all these low-cost lovely foreclosed properties that are (by law) supposed to be allocated to those that "qualify" as "impoverished". The black economy in Spain isn't exactly a secret. I'd have to believe a lot of under-the-table money would exchange hands there - and the truly impoverished ones would likely be the losers. And government regulation would ultimately be complicit in it, as it usually is.

It's a great idea, but not simple to execute. If there were a realistic way to do it, the beneficiaries would actually be those who need it, and those benefiting realised that it's not an "entitlement", I think it would be great.

Re: This could change everything
 

Proof that you can't read the Spanish article ;)

The idea is that the banks must either sell or rent out their properties on the free market. They are not going to be given to the unempoyed or needy

The banks will be fined for the empty properties they have by the junta de andalucia - up to 9k euros per property per year. This money will be set aside by the junta to provide social housing for the most needy

Re: This could change everything
 

Presumably by renting it from the banks that own it?

Re: This could change everything
 

That is one presumption, it didnt say in the article

Re: This could change everything
 

Well, I reckon my poor Spanish explains why I am unable to grasp the notion Spain is the world's #1 at everything. At least it seems to be your best explanation for everything you otherwise have no explanation for.

Here's what I don't understand: If the banks are refusing to make these properties available for sale or rent, then what is the logic of the bank? They hold an asset capable of generating liquidity or revenue through sale or lease, but refuse to leverage it in their favour, as their balance sheets decline?

What could possibly be the logic in that? Could it be that nobody can afford it? Why not? Oh, it's because they should be offering them for €100/mo or €25K sale price? No, I think it's because most people just can't afford much of anything, unless it's "almost free".

And so the answer is a government regulation requiring they sell or rent at any price they can get, subject to large fines for non-compliance, and that would constitute a "free" market, wouldn't it?

And I'd reckon the first bidders in line would be the big developers who'd turn around and offer them for double or triple what the government required the banks to sell them for.

Right, then. That'll solve our problems.

Re: This could change everything
 

On the bank balance sheets they must write the value fo their assetts. For unsold property they write the value that their valuers have given it e.g. 2 bed flats on the CDS for 250k. This makes their balance sheet look healthy

In reality, they would only get 80k for that flat so the bank has 170k less assets than they are declaring. Multiply this by 100,000 properties or more, and it is easy to see that many banks will go bankrupt if they declare the true sales value of their assets

Re: This could change everything
 

So, justification for the bailouts they need are by appearing healthy.

OK, I get it.

By the way, several banks around here are selling foreclosed apartments and even a few houses for €25K - €50K. We were thinking of trying to buy one, but we found out they all get bought up very quickly by those that have cash, not by those who don't.

Re: This could change everything
 

No. I am telling you want the banks are doing currently. Only a few banks have been bailed out so far because the other ones are doing creative accounting on their balance sheets through keeping 100,000s of properties empty rather than selling them at current market value

Re: This could change everything
 

Solvia is now offering up to 40% discounts on parts of their stock.

However, how many Spaniards can get a mortgage - if they wanted one.
:confused:

Re: This could change everything
 

The real problem is many of the properties are built in areas the Spanish don't wish to buy in.

Re: This could change everything
 

It's amazing what you can learn if you just know a bit of Spanish.

Re: This could change everything
 

Unfortunately the problem is that anyone who has invested in property in Spain, be they Expats, Spaniards or businesses now have no value whatsoever.
Previously there was a little hope in realising a reasonable, realistic value.
Now there is no hope of realising any value.
Not a great problem for someone who is settled for the remainder of their life, but for others a disaster.

Re: This could change everything
 

From the article:

So there will soon be a new job available: house sitter. The worker will be responsible for picking up the mail (mainly bills from the bank), turning on the lights and running a shower every day in a dozen or two houses. That will run up the bills showing that the properties aren't empty. In return for paying these bills, the worker gets to live for free.

... where do I sign?

Re: This could change everything
 

What do you call a realistic value?

My ex-landlord in Benalmadena bought his flat for 50k euros in the 90s, he had it up for sale for 3 years at 400k and 1 year ago brought that down to 350k

It is a nice-ish flat, maybe for a slightly above average family in terms of income

An average family may earn 18,000 euros per year in the Benalmadena. An above average one may earn 30,000 euros per year

A multiple of four is considered healthy in relation to annual income and property value, so that flat should be up for sale for 120k euros, not 350k euros

An increase from 50k to 120k in 20 years would be considered reasonable

It's the same here in Oviedo. A decent large 3 bed flat costs 350k euros or more. Now 5 years ago these were up for sale at 500k euros. Looking at salaries in this area, ther real value should be around 150k-200k euros

We still have not seen property values fall by anywhere near enough in the areas where Spanish people actually live. Some of the expat areas are a bit different as in some of these areas there are not actually any jobs or industry, so the value of their properties can be argued to be neglible

Re: This could change everything
 

I think you have answered the question yourself.

Re: This could change everything
 

Sigh. I don't know where to begin with the irony list in this discussion.

I reckon it speaks for itself, though.

(another sigh)...

Re: This could change everything
 

So you agree that properties are still vastly overvalued in Spain. Good

Your previous post made me think otherwise

Re: This could change everything
 

One way (though one that produces results most people don't want to hear) is to look at the rental cost of places that are actually being rented successfully.
You'd reckon that the rent an occupant pays would be roughly the same as the cost of a mortgage, plus a little more for overheads and profits.
For the sake of argument, let's assume a mortgage rate of a nice round 5% (that actual number doesn't matter to illustrate the principle). Let's also assume that the occupant is paying 1000€ per month, and that this covers a 100% mortgage, costs and profit - which between them needs an 8% return on the value of the property.
In that case, the 12,000€ annual cost represents 8% of the value of the property. If the rent was too high, more people would pile in to the buy-to-let market and push rents down. If it was too low, more people would stop renting and buy instead (assuming they could get a mortgage).

So if 12,000€ is 8% of a property's value, then it follows that the true value of the property would be 150,000€. The only question that remains is: how much are people paying in rent?

Re: This could change everything
 

Yes, properties are overvalued relative to the economy (IMHO) - but that's a matter of what sellers are asking (arguably "market value"), not because the banks are attempting to look healthy.

But I reckon the same logic would apply to your previous notion that all of it is just a big negative propaganda campaign waged by those who are jealous of Spain's sunshine.

Re: This could change everything
 

I meet different expats, and incoming expats on a daily basis. I met two prospective incomers today, a nice couple around ten years under retirement age.

We had a decent conversation about normal things, mostly Spain related, until one of them said they were on an inspection trip to buy a property in Spain. They obviously wanted me to say something, but I couldn't.

They had a fancy iPad and I should have referred them to this thread, and a trillion others. I didn't, I made my excuses and left. I didn't have much time anyway and it would have taken too long, and I'm a bit fed up explaining why buying property in Spain at this time is not a good idea. They don't listen anyway.