11 May 2015 – Expansión
Markets / Colonial is the clearest bet for experts with a medium or long-term outlook
Seven years after the start of the crisis, almost twenty real estate companies are still trading on the stock exchange on a daily basis. A depleted army of survivors from the burst of the huge property bubble, which have now been joined by the Socimis – the newly created companies that specialise in real estate and enjoy significant tax benefits. They are revitalising a sector that has made an unprecedented journey across the desert, resulting in a loss in value of more than €40,000 million in stock exchange terms.
Together, the listed real estate companies (excluding those that have been suspended from trading, such as Martinsa Fadesa and Reyal Urbis), currently have a market value of around €9,000 million. That figure is light years away from the record figure of more than €50,000 million recorded in 2007. Today, the companies in the sector are smaller, their shares are much less liquid and their prices are more volatile.
After a long, tough period of adjustment, which is still underway in many cases, the sector has started to recover in 2015. The share price of every real estate company has increased this year (from minimal lows), with the exception of the smallest Socimi in the market (Promorent) and they have accumulated an average gain of 25%. Is this increase in share prices convincing? Is it time to allow real estate companies back into (our investment) portfolios?
Experts agree that it is too soon to bet heavily on the real estate companies, since they still represent risky investments, due to their high degree of indebtedness, plus their results do not entice investors to take positions. Nevertheless, they believe that the option of incorporating property companies into (investment) portfolios on a step-by-step basis is appealing, to take advantage of the potential reactivation of the real estate business in the heat of the economic recovery.
“It is not yet the best time to invest in a significant way in real estate. That ideal time will come during the final phase of the growth cycle of the Spanish economy, which is still in a process of recovery”, says Jaime Díez, from XTB, who says, nevertheless that “now may be a good time to start entering the sector, but in a moderate way, with portfolios investing 5% to 10% of their total funds in such companies. Over the long term, it will be interesting but we should always bear in mind that it is a high risk bet”.
Depending on the profile of the investor, Victoria Torre, from Self Bank, recommends investing no more than 5% to 20% of a portfolio in real estate assets. “If we consider an investment in the sector, we would do it from a medium-long term perspective”, she says, noting that there are “various factors that point to the recovery of the business, such as the slight increase in mortgage lending, the recovery in sales, the reduction in the housing stock and the increase in house prices”. In any case, analysts are very selective. Díez believes that the real estate company Colonial is the clearest bet amongst the traditional real estate companies, which have accumulated significant increases so far this year. Quabit’s share price has increased by almost 100%; Inmobiliaria del Sur (which has just signed an agreement with Anida, the real estate arm of BBVA, to develop a large housing development project in Sevilla) has increased its share price by almost 60%; Urbas by 53%; Realia by 41%; and Renta Corporación by 34%. Moreover, Colonial itself and Testa (which is contemplating a full/partial IPO) have both accumulated double-digit gains.
Original story: Expansión (by E. G.)
Translation: Carmel Drake