Can property buyers bank on Spanish galleon?

With all front pages of the national press covered in “international banking crisis” stories and wall to wall coverage on the TV news, would-be property buyers thinking of a house move in the UK or even a place in the sun to get away from it all, may be as puzzled as the rest of us?

“Unsinkable” Lehman  Brothers sank at Titanic speed because of their own greediness – the boss’s pay topped 22 million – and forays in derivatives uncharted waters without a life raft. Other banks doing business with them could go down with similar Titanic timing, while others can pick up the juiciest remains. Regulators in the US and UK seemingly failed to stop what was going on and merely moved the deck-chairs around…

Not in Spain though, where it appears their banking galleons are in smoother waters . This is because the central Bank of Spain cracks down on uncharted and risky speculative investment, so Spanish banks have minimal exposure – in fact “practically non-existent” - to Lehman Brothers. Spain's banking system also has some of the world's strictest reserve requirements.

While Spanish banks remain in a fairly healthy state, the worsening global financial market conditions will have an impact on Spain's economy and smaller Spanish banks could be forced to seek fresh capital if the crisis drags on and bankruptcies continue to soar in the property markets.

Bank of Spain Director General of Research Studies, Jose Luis Malo de Molina said: "The direct impact of the Lehman bankruptcy for Spanish banks will be minimal, given their exposure is practically non-existent. The Spanish banking system is facing the international crisis from a healthy position, with good levels of solvency and profitability,"

 "However, it is necessary to recognise this episode signals an intensification of the serious international financial crisis, that also has consequences for the Spanish economy," Malo de Molina added. Spain was the only one of the euro zone's four biggest economies not to contract in the second quarter after the government drew on its budget surplus to launch a 38 billion euro economic stimulus package.

The Bank’s proactive statement contrasts with the wall of silence from the British Government – busy scrambling for the political lifeboats - and from the Bank of England that reported high inflation, but failed to change course again.

Buy a property in Britain? Only if you really need to and can get a half decent mortgage. Buy a property in Spain?  Plenty of bargains, good mortgages, a better managed economy, oh, and the sun shines for 300 days a year along the Costas.