20 April 2016 – El Confidencial
Land is no longer the ugly duckling of the sector. Regarded as the most toxic real estate asset until just a few years ago, it has now become one of the most desired and sought-after products for investors, and that has started to lead to overheating in terms of prices in specific areas, in particular, in Madrid.
This renewed appetite is now reflected in the official statistics and in the reports prepared by some of the most active players in the sector. Such is the case of Solvia, the real estate servicer arm of Banco Sabadell, which has found that land sales increased by 37% and land prices rose by 11% in 2015, excluding the effect of transactions carried out by financial institutions and including official data, such as that published by the Ministry of Development.
According to Solvia Market View, there were 15,718 transactions involving land in 2015, compared with 14,067 in 2014, which represents an increase of 37%, and not a decrease of 1.1% as reflected in the statistics published by the Ministry of Development, which do include transactions carried out by financial institutions. Those operations were worth €1,789 million – compared with €2,585 million according to the Ministry of Development – which represents a rise of 61% – compared with 4% according to the MoD -. In terms of prices, Solvia’s data indicates an increase of 11% over the last year, taking the average price to €166/m2, still below its peak of €285/m2 in 2007.
The appetite to buy land has resulted in intense competition between the main players in the sector – property developers, cooperatives, investment funds and servicers -. Against the race to acquire land in prime locations in Madrid and Barcelona, many players – especially investment funds, have started to look further afield, where they can often generate higher returns on their investments, such as in certain provincial capitals, including Sevilla, Alicante, Málaga and the Balearic Islands. (…).
The study also reveals the prices that the different players in the sector are willing to pay for this asset. Thus, for example, property developers move in the range of €700/m2 to €1,000/m2 in Madrid and Barcelona…Meanwhile, cooperatives move in the range of €900/m2 to €1,000/m2…and investment funds, with their high yield targets, are not willing to pay more than €800/m2.
According to Solvia’s data, the most active markets, in descending order, are: Madrid and Barcelona and their immediate metropolitan areas. Then Alicante and the Costa del Sol, primarily for the development of properties for non-residents. And finally, other major cities where demand for new builds is high, such as Sevilla, Córdoba, Zaragoza and País Vasco. (…).
Original story: El Confidencial (by E. Sanz)
Translation: Carmel Drake