Posted by: Dirk | May 10, 2007

Spain reacts to real estate crisis

Just read this in El Pais:

Según el profesor del Centro Garrigues José Barta, muchas entidades han comprado suelos rurales en municipios que están revisando su plan general, y su cotización bursátil está inflada por las expectativas de ganancias futuras. Con la nueva legislación en la mano, en caso de expropiaciones estos terrenos se considerarán como lo que son -rurales- y no por lo que podrían llegar a ser. Estos activos inmobiliarios, por tanto, tendrán que valorarse a la baja.

So the Spanish real estate firms cannot just buy rural property, and then declare it urban because they think it will be sold after a re-zoning. Urban property is more expensive, so this wishful thinking blows up the balance sheet. However, this kind of government intervention will not be of much influence, I suppose. Real estate companies already saw their share prices falling. The real reasons lie somewhat deeper, as I explained yesterday.

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