Month: September 2014

Over the past months, investment experts and estate agents from the market have been hanging on to the idea that there might be a danger of lack of quality property to buy as a consequence of the recent flooding of the Spanish Reits – Socimis.

This year alone, three of them and a very similar vehicle went public on the Continuous Stock Exchange Market. Grupo Lar, Merlin Properties, Axia Real Estate and Hispania have jointly raised €2.6 billion at their IPOs and each of them promised to intend the funds for benefitting from the greatest bargains on the battered real estate market.

But not only these four investment tools have became listed recently. Also, four more Socimis floated on the MAB (Alterative Stock Market). ‘Spain has become a country where everyone wants to invest but the supply they believe in simply does not exist, neither in terms of quantity nor prices‘ a banker warned some time ago. ‘There are investors who do not even know what they are buying, creating a breeding ground for a collapse at the end of the year‘, he added.

Now, the Lar Group had to admit in front of its investors that these warnings were not trumped-up. At last week‘s presentation, the first Socimi to go public and entrusted by such giants as Pimco (a 12.5% stake) confessed that the competition on the property market has shot up and there are four factors negatively impacting the situation.

The Market Oveheats

First of them is the entrance of the three other Reits on the playground, as well as other large international investors  who often snap up the same assets that Lar is interested in.

This should be added to better access to financing which has improved both in terms of cost and conditions. In turn, this pushes the demand up, even if the supply cannot meet it, Lar complains. ‘The number of assets for sale at the beginning of the year was insufficient, above all in the office segment‘. All these drastically cuts in selection range and fuels the overheating of the prices of emerging opportunities.´

In spite of that, Socimis decided to send a calming-down message to their investors: ‘the tendencies have not influenced the original plan in any manner‘.

Lar explained why it currently trades below the face value of its assets. Yesterday, its shares stood at €9.25 each, giving it a stock value of €370.3 million. And the figure is alarming given the vehicle raised €400 million at its IPO and has already spent €213 million since that time, therefore it underperforms.

The only thing that consolates Lar is that it is not a stranded case as the other Socimis also face this problem. To illustrate, even though Lar trades 8% below its flotation day, so does Merlin Properties (-1%) and Axia Real Estate (-6.5%).

Only Hispania has appreciated since going public (+1.6%).

Original article: Expansión (by Inés Abril)
Translation: AURA REE

Madrid‘s office market shows clear signs of recovery. Knight Frank reports that rental caps rose from 25 to 30 €/m2 in the last 12 months (from June 2013 to June 2014), meaning a 20% jump. These prices were seen in 2005, while in 2008 they reached their peaks. ‘The situation is highly encouraging for the landlords‘, says Raul Vicente, Office director at the international real estate consulting firm.

The increase in prices is mostly observed in the best office buildings in the capital, located in the CBD (Central Business District) area, due to short supply of such good quality properties.

Lastly, noteworthy rental operations have taken place in a building situated at 41 Castellana street and inside the Torre Picasso Tower (white skyscraper pictured on the left). In case of the first, 335 m² were rented for 30 euros/m²/month. In Torre Picasso that enjoys a 100% occupancy rate, there have been six operations involving less than 1.000 m² each, at between 30 and 35 euros, and two of larger scale (i.e. over 1.000 m²) agreed at 29 and 31 euros paid monthly.

Over 380.000 Square Meters Rented

Total office space rented throughout the year 2013 amounted to 380.000 m², meaning 26% more than in 2012. Availability rate of modern office buildings located within the M-30 ring road posts an only 2% availability, lower than in London (3%).

The conclusion drawn by Knight Frank suggests the office market have bottomed-out, especially in the most attractive business areas. Moreover, the company predicts in 2015 the monthly payments will rise even more, above all in case of downtown, modern office spaces. The pricing growth will be more moderate in the suburban areas.

 
Original article: Observatio Inmobiliario
Translation: AURA REE

The purchase of the Spanish business of Barclays allows CaixaBank to take the leading position in the credit ranking and confirm the first place in deposits. Since the beginning of the recession, the Catalonian bank spent nearly €125 billion on five smaller entities and their assets.

Firstly, CaixaBank absorbed Caixa Girona in July 2010. The affiliate gave it €7.8 billion in assets and a stronger position as a leader among banks operating in Catalonia, its motherland. In September the following year, CaixaBank took over Bankpyme, a small entity holding a €1.2 billion worth of assets.

However, the most important purchase for the bank was Banca Cívica in March 2012. La Caixa‘s branch paid €977 million through a swap for assets valued jointly at €72.2 billion.

After this acquistion which did not require any type of bail-out, CaixaBank rested for six months only before it announced a new transaction. In November, it bought Banco de Valencia from the Spanish Fund for Banking Restructuring (or FROB) for only one euro and offering an asset protection scheme in case of future losses. Together with the entity, CaixaBank gained a €22 billion worth of assets.

Now Also First in Credits

The Catalonian bank was one of the sure bets at the tenders of NCG Banco and CatalunyaBanc. However, it was outbidded by Banesco and BBVA, respectively.

CaixaBank‘s craving for growth resulted in the recent acquisition of the Spanish arm of Barclays which included assets valued at €21.6 billion. Once the deal sealed (in December this year), the entity’s credit portfolio will amount to €209 billion. To compare, BBVA holds a €208 billion volume of assets.

Besides, CaixaBank reinforced the lead in the deposits segment with €257 billion, with BBVA and its €237 billion ranking the second.

 
Original article: Expansión (by M. Romani)
Translation: AURA REE

The Repeat-Sales House Price Indice (El Índice de Precio de la Vivienda de Ventas Repetidas in Spanish), based on the Case-Shiller Index and elaborated by the Property Registrars Association in Spain shows an increase of 0.97% in year-or-year terms in the second quarter of 2014. The rise means the first positive development in the past six years, in spite of the fact that sales declined by 5.4% quarter-on-quarter.

In comparison with the previous quarter, housing values creeped up by 1.53% and ‘made it to the third consecutive quarter of uninterrupted turnaround in tendency‘, the report states. Since the golden times peak, cumulated adjustment post 32%, falling to the 2003 pricing levels.

Existing Homes Lift The Market Up 

If it comes to the sales performance, in the second quarter they declined 5.49% over the first quarter figure. In total, from April to June, there have been 78.464 closed transactions, which is above the depressive number of 72.560 units sold at the end of 2013.

Blame for the slump in operations number should be principally put on the new construction segment which unpretentiously hit the rock bottom level with mere 30.605 houses sold each quarter, representing 39.01% of the total. The number is by 18.89% lower than at the beginning of 2014. On the other hand, the market of existing houses celebrated sealing of 47.859 deals, performing by 5.67% better than a quarter earlier. In regard to subsidized housing, this type of dwelling accounted for only 3.24% of the sales total.

By regions, Andalusia saw the most contracts signed during the said period of time (15.583 transactions), followed by Catalonia (11.980), the Valencian Community (11.591) and the Community of Madrid (10.522).

In this way, the total of sales registered over the past 12 months mark a new record low with 310.864 operations, mainly as a consequence of the poor Q2 2013 performance (149.378 deals). In the first half of 2014, already161.486 home purchases were closed.

Sales to Foreigners Going Through The Roof

The positive perception of the Spanish real estate among foreign investors progressively evokes a terrific demand from their part. In the second quarter of 2014, buyers from outside of Spain accounted for 13.03% of the total home purchases in the country, marking a new quarterly record high. Britons – unsurprisingly – bought most, accounting for 15.77% of all sales to foreigners, followed by the French (10.11%), Russians (8.08%), Germans (7.53%), Belgians (7.26%) and the Swedish (5.93%).

In regard to loans granted to acquire these properties, an average mortgage amounted to €101.553, falling 2.40% over the previous quarter. In 13 Spanish regions, the loan averaged at below €100.000. Thus, the monthly payment of a mortgage post €561.43 in the second quarter of 2014, meaning a 3.76% q-o-q decline. The percentage of the installment to the cost of salary equalled to 29.82% with a 1.15 bps decrease in comparison with the Q1 2014.

Cheaper Financing

Interest rates accelerated their way downwards, sitting at an average of 3.80% for new loans, compared with the 3.97% from the first quarter. Fixed rate contracts represented 4.27% of all signed in the Q2, while the variable rate (basing on Euribor) type started to come back on the right track, finally accounting for 91.54% of the total. The payment terms go stable, showing a slight fall of 0.37% over the previous quarter and fixing at 22 years and 5 months on average (a month less than in the Q1).

On the other side, the Default on Mortgages Report by the same Registrars proves that the number of eviction notices issued due to lack of payment in the second quarter of the ongoing year post 18.921 cases, by 2.39% more than in the first quarter (18.480). Around 64.38% of the warnings corresponded to natural persons, whereas 35.63% to legal persons. Moreover, Spaniards accounted for 88.42% of all delinquent mortgages, while foreigners for 11.58%.

 
Original article: El Mundo
Translation: AURA REE

According to the European Real Estate Market 2014 report drawn by PwC and Urband Land Institute, investment in the property market is close to reach the pre-recession levels thanks to the equity flowing from Asia and the United States. Madrid and Barcelona enjoy the greatest popularity among the targeted Spanish cities.

The crisis and high maintenance costs pushed many owners to put their venerable historic buildings up for sale, especially prompted to international investors. Financing in Spain is still a big conundrum and probably a simple mortgage would not be enough for acquisition of one of the following edifices with a board ‘for sale‘ hanging on them:

1. Edificio España. The building, situated in the very center of Madrid (pictured centrally on the right), has been standing empty for plenty of time. In 2005, Banco Santander bought it for €389 million and ran refurbishment works which completed in 2007. In June this year, the property was sold to Chinese hotel group Dalian Wanda for €265 million. Since its construction in 1953, the iconic building was the first skyscraper in Spain, standing there, 117 meters tall.

2. Palacio de la Música. The 6.600 square meter property is located at 35 Gran Via street. Since 2008, it has been owned by Bankia. On announcing the sale, the bank rceived a bid from clothing brand Mango, currently under review. Protection constitutes a pitfall for the transfer and, additionally, a campaign has been launched to convert the valuable property into a cultural interest unit instead of a fashion store.

3. The Building at 1 Alcala Street. Emblematic edifice due to its location – adjacently to Madrid‘s Puerta del Sol square – is presently up for sale by the Community of Madrid at an asking price of €10.7 million. Currently, it houses local Economy and Treasury Departments that will rent it until 2016. Great potential invoking great interest.

4. Torre de Madrid Tower. Building situated on the Plaza de España square in Madrid (pictured centrally on the left), belonging to property manager Metrovacesa. In 2005, the company tried to sell it as a whole for €250 – 300 million but after refurbishing the property and transforming it into luxury apartments, it changed its mind. Now, the unit will be sold in pieces.

5. Dracula‘s Castle. Outside of Spain, in Romania, a famous and authentic jewel has been put up for sale. The Castle of the legendary count Dracula, or the Bran Castle to be nearer to the reality, is one of the most attractive touristic destinations in the country and it may be acquired for only $64 million (about €48.8 million).

Apart from these, the Community of Madrid auctions 45 public properties.

 
Original article: Cinco Días (by María Valero)
Translation: AURA REE