The insanity of European property markets
- Thread starter Ghost of Cutten
- Start date
some more color on Spain and what banks are doing to avoid taking the losses on their real estate exposure...
banks in Spain are currently offering people that cannot pay their mortgage to repossess their house but keep them as tenant and get them to pay a rent according to what they can afford.
For instance, an homeowner in Spain that bought a house for 1 million euros, facing monthly mortgage interest payments only of 5000 euros per month, with an initial down payment of 10% or 100,000, can put back the home to the banks and agree with the bank to pay them a rent of 3000 euros per month.
The banks end up with a property whose real value must be around 600,000 euros and a liability of 900,000 euros funded on the market at a cost maybe of 4000 euros per month for which it earns 3000 euros per month.
Fantastic trade isn't it?
Banks in Spain are losing on every front but are so stuffed with real exposure that the first one to pull the trigger will start a catastrophe.
in the meantime, short Spanish banks with big real estate exposure, it's a no brainer
Eventually, they will need to face the truth and real estate prices will find their true equilibrium
banks in Spain are currently offering people that cannot pay their mortgage to repossess their house but keep them as tenant and get them to pay a rent according to what they can afford.
For instance, an homeowner in Spain that bought a house for 1 million euros, facing monthly mortgage interest payments only of 5000 euros per month, with an initial down payment of 10% or 100,000, can put back the home to the banks and agree with the bank to pay them a rent of 3000 euros per month.
The banks end up with a property whose real value must be around 600,000 euros and a liability of 900,000 euros funded on the market at a cost maybe of 4000 euros per month for which it earns 3000 euros per month.
Fantastic trade isn't it?
Banks in Spain are losing on every front but are so stuffed with real exposure that the first one to pull the trigger will start a catastrophe.
in the meantime, short Spanish banks with big real estate exposure, it's a no brainer
Eventually, they will need to face the truth and real estate prices will find their true equilibrium
Just Today's news/article:
Q
http://www.theage.com.au/victoria/s...lopers-over-toorak-towers-20101126-189r0.html
A report by the federal government's National Housing Supply Council released in April found Melbourne already 22,000 dwellings short of demand.
Addressing this shortfall will not occur quickly on Melbourne's fringe.
Last month Planning Minister Justin Madden unveiled plans for Melbourne's newest suburb Toolern, 39 kilometres north-west of Melbourne's CBD past Melton, on 1700 hectares for housing. Twenty-two thousand homes are planned for the site over the next 25 years â with average house density of less than 13 homes a hectare.
UQ
Would like to add something about Belgium. While in the early 90's the real estate really traded at 10 times yearly rental income. The market was a huge buy than. The average couple here make 3k/ euro a month after taxes,etc. they try to keep their mortgage payment under 1/3. (As is encouraged by most banks here). So average mortgage payment now is 800-900 euro. I find that most people here keep their houses for a long time +- 20 years. (because of high fees when buying (10% registration fee,etc.)) And the monthly payment is important for them. When house prices where at their bottom in the early nineties, interest was higher, and the mortgage still was a typical 25-30% of net income/ month. Conclusion: Price is most important for the investors in real estate, less for an average couple who wants a roof for their kids.
Thanks again for your post GoC.
I bit the bullet and sold some EUR/GBP in the high 0.8450s, because the EUR/USD and $IBEX have fallen by so much in recent days, and a "risk-on" multi-day bounce is possible.
So far I've made a little bit on the EUR/GBP short, but obviously not as much as if I had shorted EUR/USD or $IBEX.
Hopefully there will be a bounce in these in the coming days, to provide me with a lower-risk shorting opportunity.
I bit the bullet and sold some EUR/GBP in the high 0.8450s, because the EUR/USD and $IBEX have fallen by so much in recent days, and a "risk-on" multi-day bounce is possible.
So far I've made a little bit on the EUR/GBP short, but obviously not as much as if I had shorted EUR/USD or $IBEX.
Hopefully there will be a bounce in these in the coming days, to provide me with a lower-risk shorting opportunity.
The UK´s housing market is controlled by a bunch of monopolistic landlord associations and a couple of companies claiming to release "objective" price surveys for the UK market - like Nationwide, Rightmove and Hometrack.
I don´t give the figures they release 0 % credibility.
Mostly, data is reflecting a sellers "dream price" and not actual "deal prices".
But let´s wait until austerity measures kick in. That´s when UK banks will learn another lesson from their reckless lending practices.