Spanish banks are now being forced to reduce the price of distressed property even further. According to a recent report in Quartz, financial institutions are desperately trying to get bad loans off their books, but are only able to sell depressed property if they do so cheaply.

Real estate in Spain has already experienced a year of consecutive quarterly price drops, with the market not expected to recover until 2017.  This situation in Spain has been stimulated by both the financial crisis and an excess of property. Between 1997 and 2006, there were 675,000 new homes constructed each year, which is more than France, Germany and the UK combined, according to the newsportal.

Fitch analysts Carlos Masip and Juan David Garcia told Quartz: "There are currently approximately one million newly built homes for sale, in addition to over 200,000 repossessed properties; furthermore, there are an unknown number of exchanges of debt for property agreements in place, as used by financial institutions. It will take many years to absorb the stock of properties, even if sales volumes return to 2003/4 levels of 250,000/300,000 units a year."

With the market full to the brim with real estate, demand cannot meet supply and Spanish homes are worth less than 27 per cent than they were in 2007. Although 10.7 per cent of bank loans in the country are now "non-performing", these low prices are creating a wealth of opportunities for overseas investors. Since the price crash, more and more people are able to afford Spanish property and figures have shown that foreign buyers continue to be active in the market.

Marc Pritchard, sales and marketing manager of Taylor Wimpey Espana, has noted that in the first two weeks of December alone there has been a 116 per cent increase in sales compared with last year, following a record sales increase of 145 per cent in November. This equates to a 17 per cent increase overall from January to November 2012, which is good news for the market as a whole.



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