The situation on the Spanish housing market gets more and more precarious. Over 400,000 families already faced eviction since the outbreak of the economic crisis five years ago and the same number is acutely endangered to suffer a similar fate. The implosion of the credit-financed boom reached Spain´s moribund housing market at full tilt. With an unemployment rate of 25% and one of the strictest mortgage laws in Europe, most Spanish citizens have all reason to call themselves “inddoignas”.
As in the US, banks issued loans to customers who had not much more to offer besides their modest income, allowing 83(!)% of Spanish residents home ownership (the highest rate in Europe and on a par with the US). But there is one significant difference: Whereas American house owners, who are unable to service their credit, get freed from their mortgage debts by delivering their keys to the house-owning bank, Spaniards have no such simple opportunity for a second chance.
Spanish law allows the banks in cases of a customer´s inability to service his or her debt to overtake their homes, estimate its pecuniary value and reduce the debt claim by this sum – not more. Since the value of most of the real estate in Spain has fallen tremendously, this means that the credit is often higher than the actual value of the house.
An example: A bank estimates the value of a property at 100,000€, yet the credit sums up to 150,000€. The difference of 50,000€ needs to be paid back by the former mortgage owner, even though the house is gone. In addition, penalty interest and thousands of Euros in court fees are coming on top at foreclosure. Declaring bankruptcy is no solution, either, since mortgage debt is excluded. At the same time, an estimated 1,3 million of empty flats are on the market – a Kafkaesque situation.
Rising protests and a series of suicides by evicted persons put pressure on Premier Rajoy and its conservative cabinet, but besides cosmetic corrections for the very poor nothing has changed so far. A petition that calls for a fundamental change of debtor law towards a US-like approach has been signed by over 600,000 people. Just half a year ago, the ailing Spanish banking sector needed a capital injection of 60 billion Euro, urgently provided by the Eurozone and its financial fire brigades EFSF (now ESM). Too bad that evicted families constitute no “systemic risk” – yet.