July 18, 2012 / 11:28 AM / 7 years ago

Spanish bank crisis crushes southern Europe's property deals

LONDON, July 18 (Reuters) - Spain’s banking crisis shattered confidence in southern Europe’s property market last quarter, pushing the value of transactions to below half that seen in the aftermath of the collapse of Lehman Brothers, property consultant CBRE said on Wednesday.

A total of 725 million euros ($885 million) of deals for shops, offices and warehouses was done in Italy, Portugal and Spain in the three months to June, compared with 1.6 billion in the first quarter of 2009 when world markets were still reeling from the collapse of the U.S. bank in October 2008.

It was the lowest figure since CBRE began tracking deals on a quarterly basis in 2006. Spain’s banking problems were seen impeding deals within its own borders and increasing the wider malaise in the euro zone to turn real estate investors further off southern Europe.

Spanish deals accounted for 355 million euros, well below the quarterly average of 1.18 billion from 2007. A negligible level of “investment grade” deals were done in Greece, CBRE said.

“The (Spanish bank) problems made it even harder to get debt as a buyer of real estate in Spain,” said Michael Haddock, a director at CBRE. Meanwhile, mounting uncertainty over the future of the euro zone was putting international investors off southern Europe, he said.

“Added to that, the Spanish banks are so focussed on their residential property exposure they tend not to be dealing with offloading commercial real estate,” he said.

After seeking a bank bailout worth up to 100 billion euros last month, Spain is scrambling to avoid a full-blown sovereign rescue like Portugal or Ireland. It is fighting to prop up an ailing banking sector that was badly damaged by profligate real estate lending in the run up to the global crash.

SEEKING STABILITY

Risk-averse investors continued buying in the more stable markets of the UK and France.

A total of 9.2 billion euros of commercial property deals was done in Britain over the quarter, up 20 percent from the same period last year, while the figure in France rose 37 percent to 3.8 billion euros.

Bigger deals included an office block in London’s financial district called Plantation Place, bought by a Brazilian investor for 470 million pounds ($732 million), and a building on Paris’ Champs-Elysees that the Qatar Investment Authority bought for 500 million euros.

The figures do not include the sale of London’s landmark Battersea Power Station, which a Malaysian consortium paid 400 million pounds for this month.

“Far East investors including sovereign wealth funds are interested in large lot sizes and liquid markets,” said Haddock. “In Europe, that essentially means just London and Paris.” ($1 = 0.8188 euro = 0.6422 pound) (Reporting by Tom Bill. Editing by Jeremy Gaunt.)

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