Monday, 2 April 2012

Reuters 'Bank stampede keeps Spanish real estate on the ropes...'

Top_of_the_rock_and_spain  '(Reuters) - When Jose Morales travelled up from Granada in southern Spain in February to look at a new apartment in the Madrid satellite town of Sesena, he was greeted by long queues of mostly young people outside the sales office.

"When the door opened, there was a stampede to get in, like a department store sale, and some were even injured in the dash," said Morales.

The apartments were selling so fast, unseen by the buyers in many cases, that he missed out on the one he wanted.

Such extraordinary scenes are, paradoxically, evidence of the desperate weakness of Spain's property market after the crash of 2008.

Banks trying to offload billions of euros of property left on their hands by bankrupt developers are selling new apartments at rock-bottom prices with bargain-basement mortgage deals.

Santander, the euro zone's largest bank, was responsible for the frenzy in Sesena. It offered two-bedroom apartments around a communal swimming pool for 65,000 euros ($86,100), with 100 percent mortgages over 40 years, costing as little as 242 euros a month to service, about a sixth of the average Spaniard's monthly income.

At the peak of the decade-long property boom that preceded the crash, similar apartments would have sold for at least twice that, and for properties it isn't selling, a Santander mortgage would cover 80 percent of the property price over 25 years.

NovaCaixaGalicia and Caja de Ahorros del Mediterraneo (CAM), two unlisted savings banks that have both received state funds, also have properties for sale in Sesena.

CAM offers "heavenly discounts" on its own property website, advertising a rent-to-buy option with a 370 euro per month payment for a 107,900 euro two-bedroom apartment.

"What is leading to sales is not so much the price, as the monthly mortgage cost," said Carlos Ferrer-Bonsoms, at real estate agent Jones Lang LaSalle. "Many promotions that we see are advertising what the cost of the mortgage will be per month, not the price of the property."'

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