Real Estate slow down in Spain puts Spanish savings banks at risk

American Agency Moody’s detects 5 Spanish savings banks at risk.

Financial analysts at Moody’s believe, like the Spanish government, that property prices in Spain will continue to rise slowly. However, the agency doesn’t rule out other possibilities such as a slight drop in prices in the Spanish property market. It believes that if this situation arises then Spanish banks, above all regional building societies which have lent a lot of money to construction firms, will be hit the hardest.

The American agency thinks that banks and savings banks are more at risk from construction firms defaulting on their payments than families who can’t pay their mortgages. With regards to those who fall behind on their rent the European Association of Arbitration has pointed out that if this occurs then it is almost always during the first few months of the rental contract being signed. Although, the most pessimistic forecast of a property crash occurring in Spain has been ruled out for now, a lot depends on macroeconomics and the healthy evolution of the world economy.

While the number of individuals and families who can’t keep up their mortgage repayments is still very low in Spain, the percentage of mortgage defaulters has been rising steadily. While in March it was just 0.462% this rose to 0.506% in June. This could be a cause for concern for savings banks who have granted loans to construction companies, given that the figure was under 0.3% just two and a half years ago. Moody's has identified 5 Spanish savings banks particularly at risk, although it has declined to name them.

Related: Spanish banks # Spanish savings banks # Ranking of Spanish banks