Spanish Hot
Properties believe that the time has come fro the
government to help the local housing market and their Managing
Director Nick Stuart believes he has come up with a plan to that would help the local market. Nick explains “firstly you have to understand that at this moment in time we have two distinct markets, the International property market in Spain and the Local market for Spanish residents. The International market is actually having a lot of interest with buyers cherry picking the best deals, Spanish bank repossession and distressed sales and then you have the local market that shows absolutely no sign of life and very many needs a kick start to help get house sales moving again. However there is one major problem for the local market and that are the banks lending policy. Spanish banks used to lend 70% of purchase price but in some cases that could be up to 100% of purchase price but that policy has now changed to a maximum of 70% of purchase price and when you add the costs involved in buying in Spain at being around 10% this means that a new buyer must have €40,0000 Euros cash for every €100,000 of the purchase price and that is if the bank are lending at 70% because the majority of banks have cut back their lending to 60%”.
So what is the solution to this problem and is their one. Nick reckons that the
government have to come in with a scheme to help banks lend and that could take the form of an insurance guarantee scheme. “Basically people just don’t have 40% cash in the local housing market and the only
properties they can buy are heavily discounted new properties from a developer who has existing mortgages on the properties of about 85% to 90% and the buyer can just take those mortgages over and in these cases the buyer only has to find between 20% to 25% cash. So for me the solution is pretty simple is a loan guarantee scheme where the banks lend up to 90% of purchase price but the first 20% is guaranteed by the government. The banks would still underwrite the mortgage case on its own merit but the Government would protect them against the first 20% of any loss. For this service the government could charge 1% of the total loan and add that to the loan so in fact 21% would be guaranteed by the Government. In reality as we are as close to the bottom of the cycle as your going to get the Government would probably make money as for them to lose money more than 1 in 20 Mortgages would have to go into repossession which is very unlikely in my opinion. Will the Government act, I doubt it very much but if they think about it they would realize that it would actually make them money because they would be getting all the 7% property transfer taxes on all the extra properties that would be sold. After all we are in a buyers market” explained Nick.
Do you think Nick is talking sense or not and if you have a view on this why not visit the Spanish Hot Properties blog and have your say.
Anyone wishing to find more about property in Spain from Spanish Hot Properties should either call or email Spanish Hot Properties.
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Spanish Hot Properties SL
Gerald Brennan 46
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Malaga
Espana
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