Month: October 2015

Aguirre Newman Profiles Madrid’s Newest Homes

26 October 2015 – El Mundo

After seven years of continuous decreases, the prices of new homes for sale in Madrid (capital) are on the rise once again. Specifically, they have increased by 8.96% with respect to last year. Or at least, that is one of the findings of a report prepared by the consultancy Aguirre Newman, which studied homes for sale in 242 (unsubsidised) new developments (excluding cooperatives and homeowner associations) in the capital (149) and the Community of Madrid’s 23 main municipalities (122), between July and September 2015. According to the study, this increase is due to the price rises recorded in the most exclusive areas of the centre and north of the city, where demand is highest.

The capital

The report describes the profile of the average new home for sale in the municipality of Madrid: it has a surface area of 109 m2 and a final price of €320,405, i.e. costs €2,937/m2.

The most expensive developments are located in the neighbourhoods of Almagro (Chamberí), El Viso (Chamartín), La Piovera (Hortaleza), Goya and Castellana (Salamanca) and Justicia (Centro), where average prices currently range between €6,500/m2 and €7,000/m2. At the other end of the scale, the cheapest homes in Madrid are found in the districts of Villaverde, Villa de Vallecas and Carabanchel, with average prices of between €1,600/m2 and €1,800/m2.

Another important statistic reflected in the study is that the volume of new homes purchased in Madrid increased by 3% during the first half of 2015, in comparison with the same period last year. Specifically, 1,411 new homes were sold between January and June 2015. This rate of sales is associated with a significant decrease in the average sales periods, which, for a 60-home development have decreased to 17.2 months from 33.2 months last year. (…).

Other municipalities

In contrast to the capital, in the metropolitan area, the average price per m2 of high-rise homes (flats) decreased by 3.46% to €2,310/m2, well below the peak of 2009 (€3,367/m2). Sales in this area also decreased during H1 2015, by 13% with respect to those recorded during the same period in 2014.

The profile of the average home being sold in these municipalities has an average surface area of 130 m2 and a final price of €300,000. In the case of detached homes, the average price is €1,895/m2 with an average surface area that increases to 275m2.

The municipalities located along the A-1 and A-6 motorways are the most expensive, both in terms of multi-family homes and single family homes. Pozuelo de Alarcón is the most expensive town of all, where the average price of flats reaches €3,944/m2 and of detached homes reaches €3,123/m2. At the other end of the spectrum, the municipalities with the cheapest new homes for sale are Móstoles and Pinto, where flats cost no more than €1,400/m2 and detached homes cost €1,000/m2, almost three times less than in Pozuelo de Alarcón.

Outlook

Aguirre Newman considers that in the areas with the greatest level of activity in the centre and north of the city, where demand is greatest and continuing to grow, prices of new developments will increase by 5% over the next 12 months; whilst in the least popular areas, prices will continue to decrease, although at a more moderate rate than before (by around -5%).

Aguirre Newman also believes that the rate of sales of the new projects that are coming onto the market will continue to be high, “and that most, if not all, homes will be sold off-plan”. (…).

Original story: El Mundo (by Luis M. De Ciria)

Translation: Carmel Drake

Sabadell Awarded Hotel Barceló Cervantes In Oviedo

26 October 2015 – Expansión

Banco Sabadell has just been awarded the Hotel Barceló Cervantes, in Oviedo (Asturias) in exchange for debt it was owed. The hotel used to belong to an individual and has now been transferred to HI Partners, which is continuing to rapidly grow its portfolio of hotel assets.

The hotel in the Asturian capital has 72 rooms and a 5-star rating, and will continue to be managed by Barceló. It is located in the city centre, in a building that was used as a large luxury home at the beginning of the twentieth century; two glass-fronted wings were subsequently added to the property (see picture above). It has a restaurant, bar and 12 meeting rooms with capacity for more than 300 people.

HI Partners’ hotel portfolio includes another hotel managed by Barceló, namely the Barceló Estepona Thalasso, a 4-star establishment located on the coast of Malaga.

One of the other key assets owned by Banco Sabadell’s manager is Hotel Prestige Coral Playa, located in Roses (Girona) with 167 rooms. HI Partners also owns hotels in Huesca, Tarragona, Navarra, Tenerife, Cádiz, Almería, Valencia and Barcelona, where it was recently awarded one of Husa’s properties.

Original story: Expansión

Translation: Carmel Drake

Sabadell & Axel To Open 1st Hotel In Madrid Aimed At LGBT Community

26 October 2015 – Expansión

HI Partners, a subsidiary of Banco Sabadell, and Axel Hotels, have joined forces to open the first hotel in Madrid aimed at the LGBT community. The hotel will be located at number 49 on Calle Atocha, in a building owned by the bank that has a surface area of 5,375 m2. The financial institution will invest between €9 million and €10 million to convert the property into a 4-star hotel with 87 rooms.

The hotel chain Axel Hotels, owned by the Julià family, will sign a management contract with HI Partners, and will take care of marketing the establishment, which is expected to open in June 2017, just in time for World Pride Madrid.

The property on Calle Atocha is a historic protected building. It used to contain homes and now Sabadell, which repossessed it during the crisis, will renovate it for use as a hotel. (…).

In May, Sabadell transferred ownership of a portfolio of 22 hotels (1,600 rooms in total) located all over Spain to this company. Moreover, HI Partners manages €800 million of the bank’s hotel debt. The entity’s objective is to actively manage the properties that it has acquired through repossessions and to become one of the leading companies in the Spanish market for hotel management and investment.

The opening of Hotel Axel in Madrid is one example of the type of operations that Sabadell is launching to generate returns from its properties. HI Partners, led by Enric Rovira, is also involved in the improvement and management of hotels in its portfolio. The company is owned jointly by the bank (99%) and the management team (1%), comprising Alejandro Hernández-Puértolas, Sergio Carrascosa and Santiago Fisas. The three businessmen have extensive experience in the hotel sector, having worked for Reig Capital – the company that owns the Mandarin Hotel in Barcelona – and for companies such as MedGroup, Soros Real Estate, Stein Group and Westwing.

A desirable destination

Axel Hotels has been trying to enter the Madrid market for several years, as it sought to build on the success it has had in Barcelona, Berlin and Gran Canaria. (…). According to Juan Julià, the President of the company, Axel Madrid will be the first hotel in the capital directed specifically at the LGBT community. “There are hotels in Chueca that receive LGBT customers due to their locations, but they are gay friendly hotels; we define ourselves as hetero friendly”.

The hotel chain, which opened its first hotel in 2003, operates four establishments, with an average occupancy rate of 97%. “We operate destination hotels and have a very loyal client base”, says the owner of Axel. The company expects to generate turnover of €12.5 million in 2015, up by 20%, thanks to the opening of its second hotel in Barcelona. In the Catalan capital, the prices of Axel’s rooms range between €105 and €120; in Berlin, the average price is €90; and in Playa del Inglés, it is €70. The objective is to market Axel Madrid with average room rates of between €105 and €110, revealed Julià.

Original story: Expansión (by Sergi Saborit)

Translation: Carmel Drake

Spain’s Rental Market Has Gold Mine Potential

26 October 2015 – Expansión

Spain is a country of property owners, in which less than 20% of homes are allocated for rent. That percentage is a far cry from the figures recorded in major European countries such as Switzerland, Austria, Denmark and Germany (where the rental market accounts for at least 35% of all homes). The rental market began to take off in Spain when the crisis forced thousands of families out of the market for buying properties and into the rental market, but it still has a long way to go.

Companies in the sector see this as a great business opportunity in Spain, according to comments made last week at the Barcelona Meeting Point trade fair. Demand exists and is on the rise, but the supply is scattered and lacks professionalism. In Germany, several companies specialise in the sector, with more than 100,000 homes for rent. In Spain, Blackstone has just 10,000 homes.

“Currently, tenants have to deal with amateurs and individuals; anyone that succeeds in becoming a professional manager of rental housing, with good services, will secured demand in a growing and unsatisfied market”, says Javier García-Carranza, Managing Director of Morgan Stanley in London.

The President of CBRE España, Adolfo Ramírez-Escudero, thinks that now is the right time to develop this segment. “Housing is cheap” for buy-to-let homes. García-Carranza says that the economic incentive to promote this niche in the market is to offer services that increase revenues thanks to their added value. “If we rely only on the appreciation of property prices, we will have a cyclical model, with less recurrent business”, he says.

The percentage of rented homes has risen from 11.4% during the real estate boom to 18% or even 20% according to analysts in the sector, although the Bank of Spain reports a more conservative figure of 15%. Therefore, 3.42 million of the 18 million primary residences in Spain are rental properties. If we also include holiday rentals, that figure increases to 5 million.

Prices, which are now more competitive than ever, have contributed to this situation. The average rental price amounted to €7.02/m2/month in September, i.e. 30% lower than in May 2007, according to the IESE-Fotocasa index. In September, rental prices increased by 1% YoY.

For example, rental prices in Cataluña increased by 2.5% during the first half of the year, for the first time since 2008. In Barcelona, the increase amounted to 6.9%, according to the Generalitat, which notes that the market is beginning to become saturated.

Changing attitudes

The changing mentality is here to stay In 2011, 70% of Spaniards believed that “renting meant throwing money down the drain”, but now 65% regard it as a robust life choice, according to a survey conducted by Fotocasa. “This is partly explained by the crisis and because the younger generations have a much more favourable attitude (towards renting)”, explained Beatriz Toribio, Head of Research for the website.

Another website, Idealista, predicts that the rental market will continue to gain strength over the next few years, to account for around 25% of the total market. “Despite the classic reluctance to rent in Spain, the rental market is now undergoing a period of significant development”, said Fernando Encinar, Head of Research at the company.

Original story: Expansión (by J.M. Lamet and A. Zanón)

Translation: Carmel Drake

ZFV To Invest €75M In Warehouses For PSA

26 October 2015 – Expansión

The Free Trade Zone Consortium (in Vigo, also known as the ZFV or ‘Zona Franca de Vigo’) is throwing itself behind the PSA-Citroën factory, which is gearing up for the production of a new generation of vans, as part of the industrial project known as K9. The Free Trade Zone will invest €75 million between 2014 and 2017 in the Balaídos industrial estate, where the factory is based.

Most of the investment will go into (the construction of) more warehouses and land (€60 million) to enable PSA to get closer to its suppliers and to encourage those suppliers to substitute their stock systems with “tight flow” supply systems. The Director of the factory, Yann Martin, has insisted that the aim is to reduce production costs at the centre itself and between the auxiliary industry and logistics.

The first supplier to move into the industrial estate was the logistics company Azkar. In July, another warehouse measuring 42,000 m2 will become operational, in which the Free Trade Zone will invest €15.7 million. It will employ 500 people during the construction phase.

The forecast investment for 2016 and 2017 will amount to €11 million and will endow the Balaídos industrial estate with services such as a test track, another warehouse and the renovation of existing warehouses.

The Consortium will also construct an electricity sub-station, which will allow the industrial estate to save around €1 million per year on its electricity bill.

Galician suppliers have already been awarded contracts for the new vans amounting to €370 million and this figure is expected to increase to €600 million. PSA Peugeot-Citroën employs 6,000 people in Vigo.

Original story: Expansión (by A. Chas)

Translation: Carmel Drake

Colau Suspends 35 Hotel Projects In Barcelona

26 October 2015 – Expansión

On Friday, the Town Hall of Barcelona revealed the final impact of the hotel moratorium in the Catalan capital. The mayoress Ada Colua’s star initiative has left 35 projects up in the air, although it will not effect some of the most iconic projects, such as the hotel that Amancio Ortega is planning to build in Plaza Catalunya or the project proposed by Meridia Capital for the former Henkel headquarters.

The future of the 35 projects now depends on the special urban plan for tourist accommodation (Peuat or ‘plan especial urbanístico de alojamiento turístico’), the regulatory framework that governs the (tourism) sector in the city. The town hall expects to approve the framework in March, just before the suspension of the licences expires. “We still have time to put in order and regulate tourism”, said the fourth deputy mayoress, Janet Sanz, at a press conference.

The 35 projects affected include 30 hotels, three youth hostels and two halls of residence. Some of the most well known projects include the property that the Hotusa group, owned by Amancio López, plans to build on Avenida Vilanova (close to the Arc del Triomf) and the building that Meliá wants to convert on Calle Casp.

During the press conference, the councillor revealed that 51 projects have run their course unaffected by the moratorium, since they were approved when the previous government was in office, i.e. when CiU led the Town Hall. Those 51 projects include 36 licences, 9 obtained due to non-opposition and 6 that have urban use certificates (a document that allows a licence to be requested during a six-month period).

The opposition, led by CiU, criticised Colau’s policy and accused her of making a lot of fuss and then taking little action. They asked the mayoress to show “rigour and seriousness”.

Original story: Expansión (by Gabriel Trindade)

Translation: Carmel Drake

Sareb To Invest €5.2M On Completion Of 337 New Homes

26 October 2015 – Expansión

During the six months to June, the so-called ‘bad bank’ has completed six real estate developments that were started last year, adding to the total already completed of 24, which means that the company has now completed and put up for sale 618 new homes in the last few years.

Sareb will invest €5.2 million to complete the construction of 11 developments, reactivated during the first half of the year, which will enable it to put 337 new homes on the market. The construction work is expected to begin within the next few months.

At the moment, the company is analysing the feasibility of reviving other suspended projects during the remainder of 2015, according to its activity report for the first half of the year.

Meanwhile, during the first half of the year, the company approved the development of 13 plots of land, involving 780 homes in total, in the autonomous regions of Andalucía, Valencia, Cataluña, Galicia and Madrid. Whilst the pre-sale phase started in September, construction is expected to begin at the end of this year.

To identify the development alternatives, Sareb will have to take into account the ownership of the land, the level of investment required and its own role or level of involvement in each initiative. In this sense, the company has recently signed joint venture agreements with several property developers. Moreover, it is working on a set of plots in Madrid, where it intends to construct developments through similar partnerships.

During the first half of the year, the company sold 5,345 properties to retail clients, at a rate of 30 homes per day, compared with the average rate of 42 recorded in 2014.

Moreover, it has experienced an increase in the level of interest for plots of land, whose sales have increased by 3.6x, “however, the economic volume is not significant yet” in terms of the company’s total turnover.

Original story: Expansión

Translation: Carmel Drake

Madrid Leads Spain’s Property Development Drive

23 October 2015 – Expansión

The Barcelona Meeting Point, which has been held this week and the Autumn edition of SIMA, which starts in Madrid today, are both proving to be of particular interest to the Spanish real estate sector. And it is no wonder, given that those two regions are leading the way in terms of property development at the moment. But the reactivation of the real estate sector is not proving to be homogeneous: it is slow, uneven and focused on certain large urban areas. Investment funds and real estate companies have acquired offices and commercial assets amounting to €10,800 million so far in 2015, already exceeding the total figure invested in 2014 (€10,200 million). And investors’ interest, which began in the tertiary sector, is now extending to the residential sector, at the hands of a winning formula: the partnership of large investment funds and local property developers.

Interest in ‘ready-to-build plots’ (‘suelo finalista’) has been increasing in Madrid since the end of 2013, however, given the shortage of land in the capital, attention is now starting to focus on other development land (‘suelos con gestión de desarrollo previo’), according to findings from CBRE in its latest report Market View Residencial. The lack of property developments to meet future demand is already a concern for the sector, and that perception has only increased since the change in the municipal government, given that the brakes seem to have been put on several projects: Chamartín, Mahou-Calderon and Canalejas.

According to Servihabitat’s latest report about the residential sector, house sales will have increased by 25.6% by the end of this year, to total more than 400,000 operations. The entity expects the rising trend to continue in 2016, with more than 460,000 house sales, up by 14.5%. As a result, it expects house prices to rise by 2.6% this year and by 6% in 2016. All of the experts agree that the lack of land will end up impacting house prices.

In the centre of the capital, large one-off operations continue to abound, such as the ones closed last year by Domo Gestora, which acquired a plot of land on Raimundo Fernández Villaverde for €111 million; and Ibosa, which was awarded the former Metro depot in Cuatro Caminos. Another highly anticipated operation is the sale of a plot of land on Calle Padre Damián, 52, owned by the Ministry for Foreign Affairs, measuring 15,000 m2, where 200 homes are going to be built. The auction date has not been set yet, but Domo, Larcovi (with Ruiz-Larrea Architects), Comunidades Santa Gema, and the strong partnership between Los Jardines and El Olivar, have created four cooperatives interested in this plot worth around €100 million.

In terms of other future projects, within the M-30 radius, all eyes are focused on Operación Chamartín (17,500 homes), Operación Campamento (10,700 homes) and the smallest project of all Operación Calderón (2,000 homes). For Samuel Población, National Director of Residential Property and Land at CBRE, all three are very interesting projects and, in his opinion, Chamartín is the most necessary. “It will be the vertebral axis between the Castellana and the developments in the North, it has the blessing of the owners and it will take almost 20 years to complete. It doesn’t make any sense, either commercially or development wise, to delay it any longer”. However, the new mayoress of Madrid considers that this urban planning project cannot be resolved “in two months” and has said that no decision will be taken until after the general elections. This uncertainty, which will exist until the final version of the General Plan for Madrid is reviewed and the new Town Hall’s plans are presented in more detail, is not good for the sector, at a time when real estate investment has shot up by 51%, says Samuel Población, who also points out that, the project now known as Distrito Castellana Norte is planned in several phases, which means that its launch is not incompatible with subsequent adjustments.

Scarcity on the horizon

The lack of supply has been felt most notably in the PAUs (‘Proyectos de Arquitectura y Urbanismo’ or Architecture and Urban Planning Projects)  in the north of Madrid: Sanchinarro, Las Tablas, Montecarmelo and Arroyofresno; and is starting to become apparent in Valdebebas. Currently, around 5,000 homes (unsubsidised and subsidised) have been delivered or are about to be in that development alone, out of a total projected number of 13,500. The Junta de Compensación is selling new plots for the construction of social housing, with plans for 1,000 subsidised homes to be built; after that, the supply of protected land in Valdebebas will have run dry.

In the south of the city, the Ensanche de Vallecas area is also showing signs of the shortage: in 2007, there were almost 3,000 homes for sale there, and now there are just 150.

In the southeast, other important developments are planned, such as Valdecarros (48,000 homes), Los Ahijones (15,400 homes) and el Cañaveral (15,000 homes), however there is not yet sufficient demand in those areas to match the vast supply.

Madrid’s residential market is a very polarised and so, despite the fact that there appears to be stock, there are pockets where scarcity is just around the corner.

Luis Corral, the CEO of Foro Consultores, reminds us that  improvisation does not work in the housing sector: “To develop homes, land needs to be created and that takes time, which means developers need to have developable land in their portfolios”.

Original story: Expansión Special ‘Casas’ Supplement (Loreta Ruiz-Ocaña)

Translation: Carmel Drake

Experts Recommend Structuring The Rental Market

23 October 2015 – Expansión

The rental market is on the rise in Spain – compared with the market for house sales and purchases, which is only just beginning to recover – but there is no structured supply. Covering this gap would make for an interesting business opportunity over the next few years, according to views shared yesterday by experts at Barcelona Meeting Point (BMP).

Looking towards Europe is not the solution, given the differences, for example, between Spain and Germany. For example, in the largest European economy, at least three companies have packages of more than 100,000 homes for rent. By contrast, in Spain, after two years of operations, (the largest player) Blackstone has accumulated just 10,000 homes.

“There is no volume”, said the CFO of Servihabitat, Feliu Formosa, who thinks that “rental housing that does exist is scattered, in such a way that makes its more difficult to manage”.

The decline in interest rates and the fact that house prices are low means that now is an ideal time for companies to buy properties to them lease out.

“Homes are cheap for executing this strategy”, said the President of CBRE España, Adolfo Ramírez-Escudero, who argued that there are economic, social, labour and entry cost reasons to believe that the rental segment is no longer going to be just a token market in comparison with the market for house sales and purchases.

More profitability

There are more incentives for companies to develop this segment of the market. The main one is the improvement in yields.

According to the Director General of Morgan Stanley in London, Javier García-Carranza, the greatest returns should not come from the appreciation (of property prices) in the market – that would make the rental market a “cyclical business” – but rather from the provision of more value added services and improvements in capital costs.

According to the sources consulted, between 15% and 17% of the population are now chosing to rent (rather than buy), whilst at the beginning of the century, that figure amounted to just 10%.

Original story: Expansión (by A. Zanón)

Translation: Carmel Drake

Bank Of Spain: Residential Yields Rise to 8.6%

23 October 2015 – Expansión

Now is the most profitable time since the burst of the real estate bubble to buy a home. At least that is according to official figures: the average gross annual yield of homes currently amounts to 8.6%, a level not seen since 2007, the year when prices and sales peaked in the residential market. That is the latest data published by the Bank of Spain relating to the first half of the year.

The total gross yield on a residential property “is calculated as the estimated gross income from rental plus any capital gain”. In other words, it takes into account not only the amount an investor would obtain each year from renting out a property, but also the gain that he would make by selling it after twelve months.

This indicator, which is key for buyers looking to acquire homes as safe investments, soared during the second quarter of 2015. In March, the gross annual return on homes increased to 6.180% and in June, it rose again, by 2.41 points to the aforementioned figure of 8.6%.

That means the residential yield is five times greater than the return currently offered on 10-year debt (1.75%). Bank deposits offer a return of 0.5%, according to the body headed by Luis María Linde.

What does this mean? Put simply, it means that now is an ideal time to invest in rental property, for both small and large investors. (…).

We are living in an impasse of high returns with minimal risk. House prices are beginning to rise (by 2.6% in 2015, according to Servihabitat) and so are rental prices, although at a more moderate rate (by 1%, according to the IESE index and Fotocasa).

Moreover, the percentage of citizens choosing to rent rather than buy has increased significantly, from 9.6% during the real estate boom to its current rate of 15.4%, according to data from the Bank of Spain. Over the last three years, the rental market has welcomed one million new homes and as such has grown by 42.5%. For this reason, investors looking for higher returns have launched searches for properties in areas that are well established and have high demand, to lease them out.

Eight year high

8.6% is the highest figure seen since September 2007, when the return on buying a home reached 12.1% per year. At that time (eight years ago), the residential sector was immersed in a spiral of hyperinflation and credit. The bubble was about to burst, but politicians and businessman alike were in denial, as they tried to sustain the over-heating of the real estate sector. In other words, to mislead buyers.

It was then that the residential market started to decelerate, in other words, to deflate. During the next quarter, the return on homes decreased to 8.5% and from then on, the figure did not stop falling; it entered negative territory in the third quarter of 2008 and reached its negative low (a return of -11%) in September 2012.

Now the situation is radically different. After years of depression, stigmatisation and hangovers, the recovery of the residential sector has finally begun. Gradually and in a moderate way, homes are getting more expensive, sales are recovering and the mortgage market is reactivatin. (…).

The phenomenon happening right now is something that rarely happens, even during changes in the cycle because investors are finding find bubble-like returns, but without the bubble itself.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake