Two stories to emerge over the last couple of days do not help the Spanish property market. The first concerns yet more foreign owned houses to be knocked down because of legal flaws. The second concerns Spanish banks being forced to sell off property portfolios.According to the Mail Spanish police turned up at the doorstep of a dozen or so homes owned by UK ex-pats just before Christmas and handed them demolition notices. The houses are located in South East Spain near Albox in Almeria. The building licences that a local authority had issued for the houses were made null and void by a higher court with the buyers’ saying they were unaware of the position. This issue is not limited to foreigners, even the Spanish themselves fall foul of these flawed planning permissions.

Those involved intend to fight the demolition orders on human rights grounds. There are also many cases of local officials changing the planning goalposts after the fact and there are reports of corrupt Spanish mayors benefitting from these sorts of actions.

Although cases like these are limited to certain relatively small areas of Spain, they do not engender trust in potential buyers. Spain has benefited from a lot of money being brought into country by the many ex-pats. Biting this hand may not help when the good times return (as they always do).

Spain will always attract people with money to retire and live there, but they should take proper legal advice before committing any money and thoroughly research the area for cases such as the one cited above.

The second story from the Wall Street Journal claims that Spanish savings banks are now selling off large property portfolios to raise cash to meet new national liquidity rules. They had previously been holding onto them, just like they did in the 90s, in the hope that they could get a better price when the market stabilises. This could have been a good strategy as prices had jumped 71% then dropped only by 9%. But The Bank of Spain has doubled the amount banks must set aside to 20% of the value of property held.

The upshot if they end up selling at much lower than expected prices, may be further reduction in Spanish house prices and many Spanish banks showing a loss for the first half of 2010 with mergers being the result.

Comment Here!