Spanish banks may be forced to build or sell

I have just read an article on spanishpropertyinsight talking about how Town halls have come up a with a controversial but apparently legal way to raise money; by forcing banks to develop land acquired in debt-for-property swaps and charging them for the privilege.

Over the last decade of so many town halls did really on the building boom to top up their coffers (charging for building licences, etc…). The global recession combined with a building slump has hit quite a few town halls and has left them penniless.

Quite a few towns and village along the Costa del Sol, Costa Blanca, etc… grew quite dramatically over the last decade due to the influx of buyers from Spain and abroad looking at second homes near the beach.

Interesting though it appears that land laws in Spain allow for compulsory purchases by town councils if certain types of land are not developed within a set period. The councils can buy the land at rural land values, often around 10% of the book value. So the choice they give banks is ‘develop the land, or we will take it from you and pay you 10% of what it’s worth on your books’. That’s not much of a choice for banks, who can’t afford to take a 90% write down. It’s often cheaper to build.

Now the one thing that many people would say that we do not need more Spanish properties on the market and the land should not be developed. I disagree. More properties are needed, but they should not be holiday homes catering to second home buyers. Many towns have large demand for government subsidised housing. There is also a lack of commercial zones is several areas. It should also be noted that the land could be used for the public good, either parks or such or as municipal buildings.

Potentially this sort of situation could lead many towns developing in a more sustainable way to the benefit of stakeholders

Andrew Bellés

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