The property strain in Spain

The G20 circus has left town with a trillion dollar legacy to re-stoke the dying embers of world trade, after failing to achieve this in the earlier multi-trillion dollar “fiscal stimulus”. Useless banks benefitted from the first effort, but did little apart from boosting their own coffers and handing chunks of cash over as a pension to the world’s worst banker, Sir Fred Win-win.

Meanwhile, the property market continues to decline in the UK and elsewhere. That’s the same property market that’s supposed to promotes universal feel good for owners and gets them spending down the High Street or bickering over prices, fixtures and fittings as buyers and sellers struggle to get a deal done and dusted.

We are, of course, in a property crash - the consequences of which are likely to last for some years. Nothing emerging from the G20 summit suggests there will be any direct help to kick-start the market, nor was there any suggestion of when the crash might end.

No sooner had Air Force One left Stansted Airport than the fallen Halifax bank announced a further decline in UK property prices, despite, the previous day, a rival claiming prices nudged upwards. On their recent performance and current credibility, what would they know anyway?

Over in Spain the property crash has hit developers, promoters, agents and businesses in many unrelated industries. Cafes and bars are selling fewer café con leches, restaurants less food, TV/newspapers less advertising and El Corte Inglese less over-priced fresh fruit. Property is at the core of personal wealth and the housing crash is a big strain in Spain

The UK property crisis is due to a lack of market confidence and useless banks hoarding their bail-out billions and refusing to offer a decent mortgage service after driving up the prices for a decade with irresponsible lending practises. They were aided and abetted by the Bank of England and the FSA.

The Bank of Spain kept Spain’s banks away from toxic debt and warned for the last five years property prices were 25 percent too high. The property crash was caused by a range of factors from massive over building, a misunderstanding of what the market wants/needs and the world credit crunch.

There was an element of graft and corruption in some town halls where mayors allowed development where no development should have been allowed. Now the Spanish Government is cleaning out the stables, confidence is already returning to the market where savvy Russians and sun-starved north Europeans are grabbing the bargains that come from Spanish bank repossessions and distressed sales from over-stretched owners.

It may be that the strain in Spain will be over long before the UK market recovers and the magic potion of sun, sand, sangria and safe property bargains will attract more buyers from Easter – traditional start point of the property sales – onwards.

Doubtless, UK buyers will be trying to elbow their way to the front of the queues to grab their share of bargains before prices start to rise again…

More praise for Spanish banking

As American, British and German regulators thrash around in useless unison in a last-ditch effort to save the financial world from its foibles, follies and foolish lending, Spanish bank Santander is poised to make more juicy pickings from the corpses of failing banks.

It has gobbled-up Abbey, Alliance & Leicester and Bradford & Bingley to become the second biggest savings player in the UK with 25 million customers and 10% of the market and has hundreds more High Street branches to welcome savers and from which to dispense a few mortgages.

Santander, stronger than most of its European rivals, seems at the top of its game and is poised for more acquisitions. There have been rumours of a takeover bid for Wachovia, America’s biggest savings bank.

Could this be as good as it gets for this Spanish bank? While Santander basks in the glory of positive press (including earlier blogs from ourselves), the world economy is quietly falling apart, thanks to a bursting property bubble, banking mismanagement and lax Governmental regulation.

Santander has become strong because it was forced to stay away from the dodgy off balance sheet dealings that have caused US and UK banks to dive in the resultant credit crunch. As a result of the higher-than-usual provisions needed to comply with Bank of Spain regulation, they took few risks and have a pot of dosh to buy the weak and infirm among rival banks.

All it needs now is for the Bank of Spain to declare they will guarantee all savings in Spanish banks and Santander could become a mighty magnet for savers in Spain, Britain and Latin America. It happened last week when the Irish Government gave a 100% savings guarantee and now followed confusingly by Germany.

It will not be lost on savers that Spain has regulated its banks better than the rest of the world and that includes the pathetic performance of the UK’s McBroon & Co. A choice between calm, ethical banking and chaotic, catch-up banking regimes is a no-brainer for general savers.

For savers wanting to buy a property in Spain, getting a decent mortgage from an Abbey branch near you might be worth checking-out? Local contact, international banking muscle, stronger currency as the euro outperforms sterling, are factors that provide reassurance – a rare commodity in the current economic climate…

In praise of banks in Spain

The posting in this blog five days ago that suggested Spanish banks were safe from the financial storms raging around the world raised some eyebrows among the so-called “experts”.

We revealed how the Bank of Spain had successful banned Spanish banks from paddling in sub prime toxic waters and how the banks were currently enjoying what we dubbed a “mañana” moment of relaxation.

Indeed, smart Banco Santander even found time to mop-up a couple of UK bargains in the shape of Alliance & Leicester and Bradford & Bingley who had fallen on hard times due to their forays into the US sub-prime market. Santander now has 25 million customers in the UK and long-time customers of Abbey – an earlier acquisition - enjoy improved customer service due to more branches, more staff and fewer “offshore” call centre confusions. The old Abbey creaking data system has been replaced by Santander’s state of the art IT.

Other media have taken up this UK versus Spain theme and some national newspapers have praised the diversification of Santander with low exposure to property loans but good general business in Spain, Britain and Latin America.

One newspaper, the Financial Times has gone further, calling on central banks to ‘take lessons from Spain’. The British newspaper thinks that the Bank of Spain’s conservative policies have contributed to the fact that the Spanish financial system can now avoid the current storm.

That’s a relief for the many British families and investors still determined to buy a property in the land of sunshine, sandy beaches, sangria – and safe banking.