Categorized | International

Banks in Spain Struggle with Unsellable Real Estate

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The real estate market continues to plague banks in Spain, as many are now struggling with real estate properties that simply cannot be sold. Unsellable properties currently make up more than forty billion dollars in debt for the affected Spanish banks.

The vast amount of unsellable real estate assets has caused great concern among analysts regarding the overall health and stability of small to medium sized banks. Many believe that many of those banks will not be able to sustain themselves due to the enormity of the debts, and in the end, Spain may only have four banks left in existence.

The Spanish real estate market has faced enormous struggles over the past year, and with yet another European debt crisis looming, there is not much hope that things will improve. Much of unsellable real estate lies in land that is now considered worthless, or in unfinished projects that will likely never again be resumed. The majority of both are in areas that are a large distance away from major cities. Others are in the nation’s coastal areas.

Residential real estate prices have dropped nearly thirty percent in the last four years, with some regions experiencing drops as high as seventy percent. As the debts associated with the unsellable properties continue to grow, it is unlikely that any bank aside from the major four will be able to cover the losses.

Unless there is major reform or legislation, it is unlikely that the banks will be able to recover from their current state. With unemployment higher in Spain than any other nation in Europe, property transactions continue to drop, and the outlook looks very dim for smaller and mid-sized banks that are struggling to remain afloat.

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About Nancy Raven

Nancy is the main writer for the International section of the website. Sometimes she also helps Drew out on the Finance/Mortgage section as well.

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