Pain in Spain grows as evictions spark new wave of protests
Perhaps more tellingly, the AEB warned that reforming the housing law could not only restrict Spaniards’ access to housing, but also spook international investors who have substantial holdings in the covered bond market. It cited the examples of Mexico and Brazil where, it said, steps to protect people struggling to pay mortgages had hurt those countries’ economies.
Reports that Brussels has firmly expressed similar concerns as it seeks to keep a tight rein on Spain’s financial sector would help explain the government’s resistance so far to a sweeping mortgage law.
Mortgage law In Spain and other countries
Spain’s mortgage laws are harsher than most others in the EU. Foreclosure procedures can start three months after a homeowner’s failure to make monthly payments.
Even after repossession, homeowners often remain saddled with debt because of interest, legal fees and the property’s alleged loss of market value.
Spanish campaigners often cite the example of the U S, where all debts are cleared after the evictee hands over the keys to the property.
Despite sharing many of Spain’s financial problems, Ireland avoided a major evictions crisis by making legislative changes and introducing a code of good practice.
Those who cannot pay their mortgage are able to negotiate with their bank in an attempt to reach an agreement.
It is also common for Irish banks to clear a client’s debt on receiving the key to a property following repossession.
The crisis In numbers
Since Spain’s economic crisis began in 2008, an estimated 350,000 evictions have taken place due to failure to pay mortgages. Anti-eviction activists say around 500 repossessions were taking place each day across Spain in the first quarter of 2012.
Recent data show that the country’s bad loan rate hit a new high in September, at 10.7 per cent. Paula Papp, a consultant at AFI in Madrid expects that to rise to 15 per cent in 2013, although the figure should be somewhat lower if toxic assets are swiftly transferred to Sareb, Spain’s new bad bank.
An unemployment rate of 25.1 per cent, the highest in Europe, shoulders much of the blame for Spaniards’ difficulty in paying their mortgages. That will climb to 26.9 per cent in 2013 and remain thereabouts in 2014, according to the OECD.
Since 2008, Spanish property prices have fallen by around 30 per cent and continue to drop, according to real estate appraiser Tinsa. That’s the most dramatic fall in Europe after Ireland.
