Understanding Banco Malo

December this year will see the creation and opening of SAREB (La Sociedad de Gestion de Activos procedentes de la Reestructuracion Bancaria), thank goodness for abbreviations !. more commonly known across the Spanish press as the Banco Malo. 

This ‘Bank’ will be soaking up a large amount of bad debt held by several of the Spanish banks in the form of property portfolios. The incentive for SAREB is the fact that they will be purchasing these properties with a 63.1% discount from the banks in question. 

Of course every investor wants a slice of this action, but will they be able too ?. 

I have attempted to summarise all the information I have read recently and translated. 

Basically SAREB will have the capacity to hold bad debt of up to 90 Billion Euros (that’s a lot of noughts !) and will be in existence for 15 years. During this time the properties (or assets as they term them) will, in general be bundled into packages to be purchased by pension funds, financial entities and investment groups as a long term investment. Funding will be used to maintain the properties and the prices will be set dependant on location and condition, as well as how long SAREB hold the ‘assets’ before selling them on. 

On the back of this my own view is that I can see it being virtually impossible for the public to purchase a property for a rock, rock bottom price. Possibly the investors with a large budget looking for the villa of their dreams may be lucky, which may explain how the market on the Costa Del Sol is currently performing, selling mulit million euro villas for a fraction of their original price. However, for the Costa Blanca, Costa Calida and Murcia regions this is not the case. 

It is interesting to note that a similar society was formed in Sweden in the 90’s following their market crash and more recently inIreland. 

I hope this has been interesting and explains the situation regarding the current property market here inSpain. 

My advise, if you are waiting for a flood of ridiculously cheap property on the market you are going to be waiting a long time as we are seeing the real bargains being snapped up