By Tom Bill
LONDON, Jan 29 (Reuters) - Sales of European property loanswill rise by about 15 percent to 25 billion euros ($34 billion)this year as Spain and Ireland speed the sale of unwanted andbad loans, confronting the extent of the real estate crash asthey clear their books.
Both countries suffered the worst of Europe's propertycollapse, with prices falling more than 50 percent in some areasfrom the previous peak in 2007. Both have national 'bad banks'to purge lenders of their risky loans and after a slow start,during which better-performing assets were offloaded, bothcountries must now tackle the worst.
Sales will also pick up because of tighter rules governinghow much capital lenders have to hold against risky assets likeproperty and as banks' sales operations set up several years agoget quicker, a report from real estate consultant Cushman &Wakefield said.
"There will be a big ramp up over the next two years", saidMichael Lindsay, head of EMEA corporate finance at Cushman &Wakefield. "There's a possibility we will see the beginnings ofa buyers' market."
Loan and bank-controlled property sales totalled 21.7billion euros in 2012 versus 8.8 billion euros in 2011 with theUK, Germany, Spain and Ireland accounting for 90 percent byvolume, the report said.
Irish bad bank the National Asset Management Agency (NAMA)was set up in 2009 to purge the country's banks of nearly 75billion euros of risky loans.
Early on it sold loans related to better-performing propertyin stronger markets like Britain. But it has sat on those tiedto real estate like rural land for which prices have plunged byas much as 99 percent.
With no sign of a recovery for decades in many areas of thecountry, NAMA will ramp up the sale of loans related to landearmarked for homes and offices at farmland prices over the next18 months, a spokesman told Reuters.
It is also currently teeing up the sale of 1.1 billion eurosof loans relating to undisclosed assets, a source close to theprocess said.
Spain has taken longer to get to grips with its problems asthe country's banks were reluctant to mark down property assetsamid fears about their own solvency. It established a bad bankunder the acronym SAREB at the end of last year as a conditionof Europe's bailout of its banking system.
"We've seen more loan sales than property sales recently inSpain and the bad bank will speed that up," said Humphrey White,head of investment in Spain at property consultant Knight Frank."The market appears to be finding its bottom."
Loans are typically bought at discounts of between 40 and 50percent and investors make returns that can top 20 percent bybuying in bulk to sell on in the manner of a wholesaler. Alternatively, they use development expertise to revampproperties before selling at a profit.
Large North American investors such as Blackstone andLone Star have dominated European loan sales in recent years asmany portfolios were in the 500 million euros-plus bracket.
Deals between 200 and 500 million euros will increase in2013 to meet demand from smaller investors, the report said.
Lloyds topped the list of sellers last year withsix billion euros of loan sales followed by Santander with threebillion euros.