Easier to buy bargain property in Spain

While mortgages is the UK are still hard to find, buyers of property in Spain have had it much easier to fund their purchase in the sun, with some recent sales going through on 80% loan to value deals.

The difference can be put down to McBroon himself, both as chancellor of the exchequer and, latterly as prime minister. His was the “light touch” on the banking tiller that allowed the Mad Men to take on toxic assets and venture into hitherto uncharted banking waters. This brought about the taxpayer emergency funding to keep the banks in business and much face saving for the McBroons.

There’s been none of this in Spain, where a single authority, the Bank of Spain regulates with an iron fist, laying down strong lending rules and no venturing into fringe activities. Result, just a single bank bailout of a minor caja in Castilla La Mancha.

As in the UK, the resultant recession has brought about many repossessions, with an estimate 74,000 properties being taken back by the Spanish banks (about 4.7% of total assets). Recent estimates put the value of property repossessed and unsold developer stock being swapped for debt by Spanish banks at about €16bn (£14bn).

Despite that, the Bank of Spain, in a further boost of confidence in the Spanish property market, has relaxed provisioning rules for lenders in a move that could help some banks avoid losses next year and allow others to strengthen their capital ratios.

The Bank of Spain told all banks that they would no longer have to set aside the full value of high-risk mortgage loans - those for more than 80 per cent of a property's value - after two years of arrears.

Instead, they would only have to provision for the difference between the value of the loan and that of 70 per cent of the mortgaged property. In the case of a mortgage for the total cost of a new home, for example, banks would provision for 30 per cent of the property's value.

The central bank also warned banks to "update" their Spanish property valuations, which means the current sales of repossessions will keep prices down for bargain hunting Brits and other north Europeans for about another year.

Banks and their specialist brokers are offering new or newly homes priced at 15% to 50% below current realistic valuations and registering buyers from across Europe and North America on a daily basis. Sometimes there are five bargain hunters chasing the same property – not surprising with such discounts and generous mortgages built-in.