“This plan, far from solving or alleviating the problem, is likely to make it a whole lot worse.”
Spain’s second biggest bank, BBVA, just announced that it’s resurrecting the 100% mortgage, a high-risk loan instrument that notoriously helped fuel Spain’s madcap property boom. For the first time in almost a decade, property buyers will be able to receive credit equivalent to the total value of the property they wish to purchase. As before, no down payment will be needed. But this time, interest rates will be even lower.
Despite boasting the largest stock of empty housing in Europe — 1.36 million units at last count, almost a quarter of them belonging to banks and investment funds — Spain’s economy is being primed for another property boom. Real estate developers and builders want it and banks need it, not only to fatten their NIRP-eroded margins but also to dispose of some of the real estate assets still lingering on their books from the last crisis.
The government will do just about anything it can to help out. For the coming years, real estate developers want to build around 120,000-150,000 new housing units. It’s a mere fraction of the 700,000 new homes a year being built at the apogee of the last bubble — more than in France, Germany, Italy and the UK combined — but still a lot higher than current production levels…