Dec. 12 (Bloomberg) -- Prices of repossessed Spanish homes offloaded by lenders this year tumbled 65 percent as a million new properties remain unsold and buyers find it more difficult to get mortgages, according to Fitch Ratings.
The price decline is relative to the value of the property when the loans were made and is more than double the drop in real estate values recorded in government data. That compares with a 45 percent slump in Portuguese repossessed house values.
Spain’s property market is hampered by the country falling into its second recession in three years and struggling with Europe’s highest unemployment rate of 25 percent. Fitch published its latest study five years after a decade-long real estate bubble burst and just as Spain sets up its so-called bad bank to purge toxic assets from the books of troubled lenders.
“Fitch believes that the factors weighing on the Spanish residential property market will continue to deteriorate,” Madrid-based analysts Carlos Massip and Juan David Garcia wrote in the report. “The gap between original valuation and the sale price is a reflection of a distressed mortgage market, characterized by high borrower indebtedness, constrained affordability” and “falling property prices,” they wrote.
The drop in this year’s sale prices of repossessed Spanish properties is the sharpest since the financial crisis began and compares with an average 50 percent decline since 2007, the analysts wrote.
Repossessed property prices are lower than official real estate values because banks discount houses and apartments to achieve sales and clear their balance sheets. Banks in Spain seized more than 200,000 residential properties, adding to about 1 million newly built homes for sale, Fitch said.
Spanish real estate values fell 25.5 percent from the 2008 peak, according to the country’s Ministry of Public Works.