jdr

They are not lending cos they are the ones that got stung, lending out money for over inflated priced houses.
They have had them slung back at them and are struggling to sell them at vastly reduced prices to recoup their investment.

cricketman

If they have handed back the keys then they are stupid. Doing this does not cancel your debt with the bank. So basically they will still owe the bank the value of the mortgage PLUS the bank has control over their house. And the bank will probably start adding management and auction fees etc to the amount of debt owned

Some people never cease to amaze me, does noone have any financial sense?

Tele Addict

Of course they haven't been stung; this has just been a minor down spike on a highly profitable trend that has been making them money year on year. All they are doing is waiting to see who can make it through the downturn and still be a good borrower and who goes bankrupt. Overall though the banks are still making huge profits out of their mortgage slaves who are still able to pay and those that are struggling but are managing to pay the majority, or at least the interest, if not the repayment.

SaritaBarcelona

One particular example is a Spanish/Argentine couple I know who were getting divorced (he had done the dirty on his missus and nipped back to Arg., happy to let her deal with it all), she is still paying the mortgage on a property that she does not live in, cannot afford to live in, and cannot sell (perhaps the biggest problem here). She had invested all her savings in costs etc, all down the drain. I obviously don't know all the ins and outs of their situation but there are countless tales of this. I have to say in many cases I agree with you Cricketman, and people (including those "in the know") must have seen what was coming, surely? You say they were daft to hand back the keys, but surely that is basically voluntary repossession, right? A "jump or be pushed scenario".

HBG

Handing back the keys may have been an option in earlier recessions, but not any more, especially if you are staying within the EU. EU laws can now be enforced anywhere within its borders and people are leaving such a trail on the internet and elsewhere that they can be easily found.

Whether it makes economic sense for a Spanish bank to pursue an expat debtor who has fled back to the UK owing a smallish amount is another matter, it might not make sense if the sale of the repossessed property clears the debt or most of it.

cricketman

They'd be two options
1. Negotiate the terms of reposession with the bank to make sure they would leave you debt free
2. Sell the property quickly at a discounted rate as this is still likely to be much better than the bank repossesing the property

It's handing the keys in and running away from the problem that is stupid. Its fine to let the bank reposses as long as you are sure of the terms, they have been agreed and signed.

littlelambfound

Like JDR, I am a would be cash buyer. But in the present climate of falling prices, I always use a little sum. If I can invest well (OK...very well) maybe I can see a return on my saving of around 10%. (Average stock market growth since 1977 is around 9.5%). That's my profit. I see that as the same % as a monthly rental income if I had my monies tied up in a property. So...my landlady here in Gandia wants 160,000E to sell the flat that we rent for 500E per month. But if I take my yearly rent as the 10% profit, then you can see that the flat is more than twice over valued. If the rental yield remains low, monies will naturally move into other investments and property prices will fall to their natural level. I guess! And that's one of the main reasons why I shall wait to buy.
As an example of what I'm waiting for: Over the last 10 years, we bought a number of small flats in Budapest, where, purchased for the princely sum of around 14,000E one can then rent out for around 200E per month. A nice ratio (Oh, and my pension to boot!).

JLFS

Rent or buy, everyone can be wise after the event, but other thinkgs need to be considered too. ie age and health.

I know a number of people who are retired , they sold up in the UK and bought a small property not so long ago, which is now really impossible to sell.

The problem is now that they need to move back to the UK for health reasons.

I know that after posting this I will get the comments comparing the NHS to the Spanish system. We all know that the Spanish system does look after (in a lot of cases) give a better service than the NHS, but the "aftercare" a lot less, and if that is what you need, it can be very difficult.

Some have spent less than 5 years in Spain having bought for a higher price than what they would have to sell for, but still cannot move the properties.

Having a pension and being on the wrong side of 60, most of these folk are regretting buying, they are "trapped" in a way, and when they do eventually die, the legalities for inheriting a Spanish property will be a hassle for the family concered.

Rent or buy is like everything else in life, a decision has to be made based on the wider picture, and buying in a foreign country is a lot more complicated than in the UK.
People do get blinded by the sun and views over the olive groves and tranquility, but for a non-driving, getting on a bit, renctly widowed woman, with no other family around, then they ideal location suddenly becomes a prison cell.

Rotor

This makes a lot of sense to me, what do you think of buy to let in Gib? bottom end flats appear to be cheap compared with the high rent and they also seem to be in demand.

jdr

Mmmm right, Costa Esuri is a prime example of the shite they are in.

So all he stories of the banks being bailed out are myths ?

littlelambfound

Hi Rotor,
I'm afraid that I know nothing about Gib. I do have a few buying points that differ 180 degrees to the usual overseas investor (well at least for Budapest). Most foreign investors/speculators are kinda short term. Nothing to do there. They tend to look for the type of place THEY would like to rent, instead of thinking what the local demand is. So, the typical investor has a huge flat, in a prime location, lots of upkeep costs, that he needs to rent for an arm and a leg to a foreigner.
Now, with respect that this is an expat board....but.....foreigners are horrible renters!
My rule of thumb is to buy small (you'll always have the local market), in an upcoming area, (signs can be new shopping mall, planned metro line etc), rent to locals (you cannot chase a foreigner) and rent relatively cheaply (tenants are happier and stay for longer). Rinse and repeat. Lots of win all round!
Though Central Europe is looking good right now, (and will be even better when they can't roll over their impossible debts, and will have play the lucky card of weakening their own currencies...they can certainly count themselves lucky not being in the Euro zone) you'll need to have a trustworthy connection in place there.

Lynn R

I will not be looking to sell my Spanish house (which is mortgage free) for at least another 5 or 6 years - unless something completely unexpected crops up. Although previously I had always felt it was better to buy as rent was wasted money, now I think that when I do sell I will rent rather than buy, for several reasons. Looking around now at rental properties, it seems I could certainly afford to rent somewhere far nicer than I could afford to buy (as I will have a lot more income in 6 years' time when my pensions become payable). Also I just do not want to pay another 10% of the purchase price in legal fees, taxes etc., having already done it once. That money alone could pay a few years' rent, and from what we have seen in the last couple of years there is no kind of guarantee that the price of property would appreciate enough to cover the initial outlay on taxes, etc.

I also feel it would be less complicated for my family who will inherit my estate if they do not have to deal with the added stress of selling a property in another country.

Provided I was able to rent somewhere unfurnished and thus have my own things that I had chosen around me, I think I could live quite happily in rented accommodation.

cricketman

Very sensible

The 10% tax is a huge issue. On the flat I rent just the taxes would cover 4 years of rent!

Rotor

Check this out.

http://www.allagents.co.uk/calculator/mortgage-rent/

SaritaBarcelona

Thanks for this useful link Rotor, I will now ask for words from previous comments on my financial "nous" to be eaten... it turns out to be cheaper to buy my property!!! Admittedly if the interest rate goes sky high it would be cheaper to rent for the first 16 years...