As America and Britain struggle to solve their banking greed-induced financial woes, Spain’s Government, having dropped a EUR 3 billion life-raft to the property sector, is taking a quiet “mañana” moment - because the country’s banks have zero exposure to US subprime debt…
The Bank of Spain has long banned risky stuff for the banks under its control and their reserves and bad debt provision would have to plunge by 50 percent before they felt any stress. If the current level of loan defaults increases and the world banking paralysis continues, then Spain, like the rest of the western world could be in deep trouble. However, at the moment the country is better placed than Britain or America.
Spain needs foreign cash to service a current account gap of EUR 100 billion, on the same levels as the US and Britain. Much of that is tied up in the one-time property boom that has seen many developers crash, leaving surplus stock to be sold off on the cheap. Spanish banks too, are drip-dripping repossessions into the market as can be seen daily on the www.PropertyInSpain.Net website.
There are bargains to be had in most second home areas of Spain and prices have generally dropped below the benchmark EUR 2,000 a square metre level that means a typical 2-bed, 2-bath apartment with communal pool can be picked up for around EUR 124,000 – well within the £100,000 sterling buying band.
The other big earner for Spain is its world-class tourism industry, which generates huge revenues and maintains millions of jobs. Tourist arrivals this summer have held up well, despite higher flights costs, lower disposable income and the strength of the Euro as northern European and Spanish families insist on their annual breaks on the playa. As many families prefer rental apartments or villas to hotels, the property rental market is also holding up.
So it could be the Spanish Government can continue to take a relaxed mañana moment as less well managed economies continue to battle it out.
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