Friday, October 2, 2009
Spanish banks buying houses in an effort to prop up prices – it’ll just prolong the pain.
Banks bought about 110,000 homes to keep losses off their books as Spainâ€™s property bubble burst, according to real estate researcher RR de Acuna & Asociados in Madrid. Now theyâ€™re using strategies reminiscent of the boom times -- 100 percent mortgages, low interest rates and free cars -- to sell homes, potentially slowing a drop in prices thatâ€™s needed to spur recovery from Spainâ€™s worst recession in 60 years. â€œMaybe you can create some accounting value with all these tricks, but in the end it doesnâ€™t make the situation any better and in the long term makes it worse,â€ said Luis Garicano, a professor of economics and strategy at the London School of Economics, in a phone interview.