"Finding affordable housing from banks is becoming increasingly difficult."

The dream of every middle-class Spaniard is to find affordable housing, especially after the sharp rise in prices in recent years, exacerbated by the increase in mortgage costs. Undoubtedly, the advertising that banks do through their intermediaries about the availability of real estate fuels the desire to purchase cheap housing. "Big discounts," "Housing sale," "Housing for less than 100,000 euros," or "Halloween with housing for less than 70,000 euros" - such ads are now being placed by services dealing with residential real estate like CaixaBank, BBVA, Santander, ING, Cajamar, and others, as well as the Asset Management Company that handles assets obtained from the restructuring of the banking system (Sareb), previously known as the "bad bank."

But is it really possible to find good deals among the wide range of properties still owned by banks? It seems quite difficult. Sources from Sareb explain that after the property has been transferred, a multidisciplinary team sets the price and determines the range. "We do not offer discounts, and our housing is not cheap. Our goal is to recover as much money as possible for the state after the bankruptcy of 24 savings banks," they say. A representative from one of these intermediaries (servicers) also claims that the prices of the offered properties are in line with the market.

CEO of Foro Consultores Inmobiliarios, Carlos Smerdu

He sees a clear difference between the current real estate offerings from banks and what was available as a result of the financial crisis in 2008. "At that time, there were many listings and a significant need for banks to sell in order to reduce their portfolios. Moreover, properties were available in all areas, even in good locations, and prices were dropping by up to 50%, selling because there was an urgent need for distressed real estate. The goal was to sell quickly," comments the expert. However, "the situation is different now. There is still supply from servicers, but mainly the assets are located in undesirable areas, usually in poor condition, indicating low demand. These are unattractive assets, whether due to location, the state of the property, or sometimes even because of the presence of illegal occupants. The current real estate (residential buildings, garages...) is a remnant of the crisis or second-hand housing obtained due to current defaults," concludes Smerdu.

The offer of such housing is made through the websites of the service providers themselves, but they also use general portals like Idealista or Fotocasa, where they advertise their properties, premises, garages, offices... For example, Idealista states that they have 22,932 residential homes from banks and 248 new constructions. "By regions, we have the most housing in Barcelona (3,119), Murcia (1,512), Tarragona (1,441), and Almeria (1,324). The least is in Ceuta (2), Melilla (3), Soria (27), and Gipuzkoa (25). New constructions are mainly located in Almeria (16), Murcia (15), Castellon (13), and Alicante (10)," they say. On this portal, 68% of the residential property offerings from banks are related to used housing, while 32% are new constructions. These new constructions were often built many years ago and could not be sold. They are now trying to sell them again.

Fotocasa also sees a clear difference between the current offerings and those from a few years ago. "Historically, the price of housing from banks was one of the main motivations and advantages for acquiring their properties, but now it is no longer the main maneuver. The reason is that these residential buildings have, in many cases, been transferred to funds or to Sareb, and they are not particularly in a hurry to sell, which is why they are offering fewer options on the market. When banks sold them themselves, it was an advantage because they needed to get rid of their active portfolio and offered unique opportunities," Fotocasa concludes.

Sareb

The public joint-stock company Sareb received unpaid loans and real estate resulting from the savings bank crisis, which dealt a blow to half of the Spanish financial system and required a government bailout. Undoubtedly, it is the main owner of the real estate acquired from banks, and although in the early years of the crisis it sold packages of residential properties to large investment funds at significant discounts, its current model is based on the individual sale of residential houses and other properties.

"At Sareb, we operate as a white label, and the buyer only learns that we are the owners at the moment of signing the contract with the notary. Mentioning our name in the ownership of the asset is an invitation for illegal occupation of the property," they claim. However, this state-owned company is currently the largest real estateagency in Spain, selling 9,000 homes a year, with 93% of buyers being private individuals. "This is modest but decent housing offered at market prices," they say. Last year, the average property price was 97,000 euros, and it is expected to decrease in 2023 in line with the development of the real estate market.

His status as a state-owned enterprise also obliges him to fulfill social responsibilities. "We do not sell rental apartments. When we receive an apartment from a bankrupt developer with a lease agreement, we adhere to the term of that agreement, and when it expires, we sell the building," they say. They also do not sell illegally occupied residential buildings. "Since 2022, we have been implementing the Social Support Program. If a person is vulnerable and agrees to work with us to find a job, we enter into a subsidized social rental agreement for illegally occupied housing. If they do not cooperate or are not vulnerable, we go to court for eviction," they conclude.

It is expected that when Sareb disappears, presumably in 2027, the social housing stock will be transferred to government authorities. According to experts from Fotocasa, this social direction of Sareb reduces the housing supply from banks. Sareb, which controls a large portion of these assets, "negotiates with regional governments, such as the Valencian government, for the sale of housing that can be used for social rental," they claim. They also add that "the Spanish government announced some time ago that it plans to provide 50,000 homes from Sareb for affordable rental and for vulnerable families, so the amount of available housing will gradually decrease."

Risky choice

Although the average price for this housing is around 100,000 euros, there are significant differences. There are houses worth 3 million euros, as well as parking spaces for 1,000 euros or numerous residential properties within Spain for less than 40,000 euros. However, what stands out the most in the offers from some service providers are the conditions under which the accommodation is offered: "Currently rented, illegally occupied, or only parts of the property are for sale, confiscated by one of the heirs, or it is impossible to determine the condition of the property, or it is in a state of disrepair." These are literal warnings when applying for many properties offered by banks. Undoubtedly, one of the most curious offers is for the sale of a single-family home, which is listed as "dilapidated," priced at 92,000 euros with a discount of 13,000 euros. In any case, it is noted that this situation is "especially taken into account when determining the price." This is a pattern that appears in many properties with issues.

Especially in the case of occupied residential buildings or those with obvious legal issues, the property may be of interest to professionals who can handle all the difficulties and have the time and money for it, rather than to a private individual looking for a home to live in. Some of these intermediaries also offer clients the opportunity to make an offer on a specific property under the slogan "You name the price." If the owners (banks) agree, the client sets the price themselves, although it is stated that they are not obligated to make a purchase.

The problem with these properties is that there is very little information about them. Usually, there are no plans, and the condition of the utilities is unknown. For a long time, this was an advantage when buying, and the price could be lowered. Now, this is no longer the case, as the housing supply from financial institutions has significantly decreased.

Another important aspect is the control of payments in housing communities. It is advisable to find out how this is managed, especially in buildings that contain multiple units in such a situation. Payments may not be made, and it is necessary to take into account any debts. Additionally, in many cases, the low prices for such housing are due to the need for repairs and significant financial investments in its arrangement.

It seems that the happy times when housing was affordable are over.