The number of foreclosed homes for
sale in Spain may triple next year as new accounting rules
prompt lenders to dump their depreciating assets, according to
the co-founder of a website that advertises repossessed
properties.

About 100,000 houses and apartments owned by banks are now
on the market, Fernando Acuna said in an interview. A quarter of
them are listed on the website operated by his Madrid-based
company, Pisos Embargados de Bancos, on behalf of 25 banks.

Spanish lenders have a total of 181 billion euros ($242
billion) in “troubled” construction and real estate loans, the
Bank of Spain said last month. Since Sept. 30, the banks have
been required to account for falling property values more
quickly, encouraging them to shed assets without waiting for the
market to recover from a three-year decline.

“Lenders took on an immense amount of property from
developers and homeowners and now they’re being forced to
offload the deadwood,” Acuna said.

About 2,600 real-estate and construction companies have
gone out of business in the past two years, according to credit
insurer Credito y Caucion, while unemployment has more than
doubled to almost 20 percent since 2007. The cost of cleaning up
the banking industry’s books has so far been about 70 billion
euros in the form of government bailout funds, asset writedowns
and use of reserves, according to the Bank of Spain.

Price Reductions

“By changing the rules on provisions, the central bank has
really put a shotgun to their heads,” said Fernando Rodriguez y Rodriguez de Acuna, founder of Madrid-based property adviser
R.R. de Acuna Asociados. “The banks will have to cut their
price expectations more aggressively to reduce their stock of
homes.”

Property values will fall 20 percent over the next five
years, Rodriguez y Rodriguez de Acuna estimates. Most of the
declines will come in 2011, he said. Since the Spanish market’s
peak in April 2007, home prices have dropped 22.5 percent,
according to a survey by real-estate website Fotocasa.es and
IESE Business School.

Under the changes introduced by the Bank of Spain in
September, lenders must take account of a drop in value of at
least 30 percent if they keep the assets for more than two
years. They must also make provisions for bad loans after 12
months, rather than as long as 72 months.

The new rules will lead to an average increase in
provisions for 2010 of 2 percent, the central bank said in May.

Missed Target

Banco Santander SA, the biggest Spanish bank, said on Oct.
28 that it set aside 472 million euros to account for impaired
assets and will miss its 2010 earnings goal because of the
changes.

“Banks are in a delicate position,” said Fernando
Encinar, co-founder of Idealista.com, Spain’s largest property
website. “They’ve realized that it’s probably better to get rid
of their real estate rather than prolong the problem.”

Idealista currently advertises 29,334 bank-owned homes in
Spain. In 2008 it didn’t list any.

About 280,000 people in Spain will lose their homes this
year, according to Spanish consumer protection association
ADICAE.

To contact the reporter on this story:
Sharon Smyth in Madrid at
ssmyth2@bloomberg.net.

To contact the editor responsible for this story:
Andrew Blackman at ablackman@bloomberg.net.