Month: June 2015

Idealista: Rental Prices Rose By 1.8% In Madrid In Q1

8 May 2015 – El Confidencial

The property crisis; the difficulties faced by thousands of citizens when it comes to buying a home; and the havoc wreaked by evictions have all resulted in a significant boost to the (residential) rental market in Spain. Over the last seven years, many citizens and families have been forced out of the property market and, given their need or desire to become independent or start a family, their only exit has been through the home rental market.

Thus, although owned homes still win by a landslide over rented homes – 78% to 22%, i.e. a very similar level to the one seen at the end of the 1980s – the fact is that in recent years, the balance has tipped a little less towards the property side and although, many experts consider that it is unlikely that we will reach the levels seen in other parts of Europe, where rental properties account for 50% of the residential market in some countries, it is clear that something is changing. “The rental market is here to stay and not just as a lifestyle option, but also as an investment”, says Fernando Encinar, Head of Research at idealista.com.

The rental market in the Community of Madrid is showing the first signs of recovery, as too is the sale and purchase market. Similarly, some areas are sparking greater interest than others in terms of demand, which, in turn, is starting to create a certain amount of tension in terms of prices.

The differences between neighbourhoods are clear. It does not cost the same to rent a flat in the centre of the capital or in the neighbourhoods of Chamberí and Salamanca, where the price per square metre is around €14/m2 (€1,120 for an 80m2 flat) as it does in Villaverde, Carabanchel or Puente de Vallecas, where the price per square metre barely exceeds 8€ (640€ for an 80m2 flat).

These price differences are explained, in part, by the location of the homes – clearly, it does not cost the same to live in the centre of the city as it does in the suburbs – but also due to the excess supply, in places such as Carabanchel and Vallecas, and the strong demand, in areas such as Sanchinarro and Las Tablas, where the experts detect a lot of activity due to the presence of Telefónica and the future arrival of BBVA.

(….)

The tension in terms of rental prices is palpable. Madrid ended the winter with a quarterly increase in rental prices of 1.8%, taking the average price per square metre in the capital to €11.60, however, that represents a cumulative decrease of 15.8% from its record high of €13.80/m2 in 2008.

Moreover, during the first three months of the year, the increase in rental prices was generalised, with rises in almost every district in Madrid, with the exception of Villa de Vallecas and the neighbourhood of Salamanca, according to the data from idealista.com, which also reflects significant increases in the districts of Barajas (5.8%), Retiro (4.7%) and Hortaleza (3.6%).

(….)

Original story: El Confidencial (by Elena Sanz)

Translation: Carmel Drake

Political Uncertainty and Populism Threaten RE Recovery

1 June 2015 – El Economista

The electoral success of Manuela Carmena (Ahora Madrid) in Madrid and Ada Colau (Barcelona En Comú) in Barcelona has started to take its first victims in the real estate sector. Barely a week has passed since the elections and “some investors have already suspended deals to purchase property in Spain”, warn certain sources close to the negotiations.

The uncertainty regarding the possible political agreements has hit the property sector hard, “just when it was starting to recover”. In Madrid and Barcelona alone, large urban projects amounting to €14,000 million have already been called into question.

Major construction companies, financial institutions and large international funds are involved in these developments, including the Chinese magnate Wang Jianlin, who came to Spain with plans to invest around €4,000 million and who now see his real estate plans for the country being endangered.

“Right now, the sector is beginning a process of paralysis in certain segments. All of the investors are waiting for the possible political agreements to be settled so that they can carry out transactions”, explain sources in the sector.

“The is a great deal of uncertainty and considerable ungovernability in many cases, as well as expected increases in taxes and public spending, coupled with the suspension of forecast investments, which may result in the withdrawal of foreign capital”, they warn.

This situation may result in “an important step backwards for the emerging recovery”, given that it comes at a time when the real estate sector was really beginning to take off; record levels of investment were recorded last year. Before the elections, experts predicted that the level of transactions was going to continue (this year), but following recent events, “it is now very difficult to make forecasts”. These warnings coincide with others made this week by several important businessmen, such as the Chairman of OHL, Juan Miguel Villar Mir, who said that (political) groups such as Podemos put Spain’s economic recovery in danger. In a similar way, the markets have penalised the election results and the Ibex 35 recorded a loss of 2.91% last week.

(…)

The urban plans proposed by Carmena and Colau leave most of the major projects, both those already underway as well as those still to be awarded, up in the air. In Madrid, they endanger million-euro developments such as Operación Chamartín, the Madrid Río shopping centre, Operación Mahou-Calderón, the Canalejas complex, Operación Edificio España, la Ciudad de Justicia and even Operación Campamento.

Whilst in Barcelona, projects such as La Maquinista and Heron City shopping centres, the refurbishment of the Nou Camp and urban developments in the surrounding area, the ski slope in the free trade zone of Barcelona SnowWorld and the conversion into hotels of iconic buildings such as Torre Agbar, the Deutsche Bank building on Passeig de Gracia or Project Núñez i Navarro are also at risk.

(…)

Original story: El Economista (by Alba Brualla and Javier Mesones)

Translation: Carmel Drake

Sabadell Places €750M 5-Yr Debt Issue At 0.475%

1 June 2015 – Expansión

€750 million debt issue / The bank has placed an issue of 5-year mortgage bonds with a record low yield of 0.475%.

For many financial institutions, the excess liquidity in the market is offsetting the recent increase in volatility that has resulted from the lack of agreement between Brussels and Greece. As a result, debt issues are proving successful.

Friday’s operation by Sabadell is a good example. Just 24 hours after the bank held its AGM, it went to the market in search of financing through the issue of 5-year mortgage bonds, arranged by Barclays, Deutsche Bank, HSBC and Lloyds. It paid a yield of 0.475%, which represents the lowest ever interest rate on a bond issue. Moreover, spreads, or differentials, are returning to pre-crisis levels, given that this yield sits just 12 basis points above the mid-swap rate (the reference rate for fixed rate issues).

“The primary international investors have all taken part in this operation and the participation rate in Germany has been particularly noteworthy. The main investors participating in the issue have been financial institutions, central banks, investment fund managers, insurance companies and pension funds”, said the entity in a statement on Friday.

Balance sheet

Sabadell has been particularly active in the market for this type of issue. Since November last year, it has completed four such transactions, raising €3,100 million in total. “The solvency of Banco Sabadell and its reputation on the international financial markets have undoubtedly been the factors that have contributed to the success of this placement”, it added. The bank wants to take advantage of the decreasing financing costs caused by the recent stimulus measures put in place by the European Central Bank (ECB). “The release of this issue will take place on 10 June and its launch forms part of Banco Sabadell’s non-equity security program, filed with the CNMV”, explain sources at the bank.

In September last year, the financial institution launched a covered bond (the term used for bonds in Europe) purchase program. In total, it has acquired €82,805 million. Moreover, it put in place a securitisation purchase program at the end of last year, and as a result it will close the first transaction involving Spanish mortgages since 2007, with UCI, which is owned by Santander and BNP Paribas. And in March this year, it started to purchase government debt, which has significantly reduced its financing costs.

Improved credit

As a result, credit is being revived once more, which is the main objective of the ECB. In this regard, Josep Oliu, Chairman of Sabadell (pictured above), said at the entity’s AGM last Thursday, that the strong level of competition in the financial markets to secure credit in the context of excess liquidity, represents a threat to the recovery of the banks’ financial results.

Original story: Expansión (by D. Badía)

Translation: Carmel Drake

Deutsche Will Invest €200M In 2015 Through Its RE Fund

1 June 2015 – Expansión

Following the arrival of the first investors, which had a more opportunistic profile, the Spanish real estate market is now starting to show the first signs of stability, with the arrival of more conservative investors. That is the case of the German institutional funds, which manage the savings of wealthy investors and insurance companies in the European country.

These German funds include Ara (Alternative and Real Assets), which is the real estate division of Deutsche Bank. “There is a clear commitment to the recovery of the Spanish real estate sector. In 2014, investment in the non-residential sector amounted to €8,000 million, but we should remember that at the peak of the boom, that volume amounted to €11,000 million. We believe that there are still a lot of good products that have not yet come onto the market”, explains Carlos Manzano, head of Real Estate España at Deutsche Asset & Wealth Management.

For this year, Ara has set a target of investing around €200 million in property in Spain. “We have the capacity to invest twice as much as we (currently) hold (in the portfolio)”, he says.

Change of course

The former Reef has focused its activity in recent years on managing its portfolio, which has included a few divestments. “Pre-2006, we made a lot of investments but then we stopped investing due to the crisis and focused on managing. Now the market has changed and we believe that there is still a lot of good property that has yet to come onto the market”, he explains.

One of their recent major transactions included the purchase of a batch of 1,350 branches from BBVA in the summer of 2009. Those properties, managed by Magic Real Estate, ended up in the hands of the Socimi Merlin Properties. “We decided to sell BBVA’s branches even though there was a business plan (for them) until 2018. But we wanted to take advantage of the opportunity in the market and in the end we obtained a better return than we initially expected. In December, we also sold an office building in Las Rozas (purchased in 2011). But we do not want to be sellers in the Spanish market, but rather buyers. We have now divested everything that we wanted to”.

Currently, Ara is on the look out for good assets. “There are lots of German funds and private clients that are expressing their interest and their preferences have not changed. They are looking for good assets in central locations. It is a product profile that is hard to find”.

Its targets include offices, commercial assets and logistics warehouses; these products are “very much in vogue”, according to the head of the German fund.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake