Recovery rates rise for repossessed Spanish homes

Photo: Catalonia, Spain Scotbot

Recovery rates are rising for repossessed Spanish homes, as the economy and housing market both continue to improve.

New research from credit ratings agency Moody’s shows that the stock of repossessed properties in Spain is declining. Indeed, the market overall is gradually rebounding from bottom, with sales up and a 5.8 per cent increase in hosue prices since 2013.

Moody’s analysed more than 14,000 repossessed and defaulted loans and studied the sale prices of 5,008 repossessed properties. It found that 43 per cent of those included in the study had already been sold, up from 30 per cent two years ago. The sales prices averaged 34 per cent of their original valuation, with the decline in property value (66 per cent) greater than the peak-to-trough fall recorded by the national house price index.

“Given the favourable economic backdrop, we consider that Spanish securitisation vehicles will be able to sell their repossessed properties more easily,” says Carole Bernard, a Vice President and Senior Analyst at Moody’s.

“Spanish mortgage loan defaults increased following the financial crisis, driving a high volume of property repossessions since 2009. When those properties failed to sell at auction, it forced Spanish residential mortgage-backed securities (RMBS) transactions to hold them. So far, losses on repossessed houses remain within our assumptions for defaulted mortgage loans, we will continue to monitor the recoveries on repossessed properties.”

Moody’s research shows that repossessed properties sold in Catalonia, where repossession volumes are large, depreciated the most. Repossessed properties sold in Murcia, Valencia and Castilla-La-Mancha, where unemployment remains high, depreciated by more than 67 per cent of their initial valuation.