Experts Rule Out Risk Of RE Bubble In The Short Term
10 May 2017 – El Confidencial
The fact that the Spanish real estate market is enjoying happier times is more than clear. And all of the players in the sector are aware of the fact: property developers, consultants, construction companies…Nevertheless, the “overheating” that some say is threatening certain segments of the market, is falling well short of a full-blown real estate bubble, for the time being at least. At least that is according to the speakers who participated in the “Real Estate Investment Opportunities” day organised by El Confidencial and Colonial.
Real Estate Market Forum
Indeed, Juan José Brugera, President of Colonial – which is currently evaluating its transformation into a Socimi – stated that the market is “a long way from a bubble. What we are seeing is the launch of projects”. In this sense, he pointed to the German market by way of example. “It is very stable. (…) What you have to do is take a risk and invest. With this stability in terms of value, your investment will be rewarded”.
In his opinion, “a bubble is something else. It is an excessive value, but, one of the characteristics of the European property sector is that financing is very tight in terms of size and type. I don’t see a bubble, what I see is a more professional management of the assets, where the ability to generate value is what will determine prices, provided the markets are not affected by global circumstances”.
The CEO of the consultancy firm JLL in Spain, Enrique Losantos, also rules out the risk of a bubble. “Given current prices, you could be forgiven for thinking that the market is overheating, but the fact is, there is still a long way to go, especially for those investors who know how to extract value from the portfolios of assets that are coming onto the market and which should be invested in and managed to adapt them to the demands of the current market. These players will be able to obtain returns, even in the double digits (…)”.
Who will control the large rental stock?
Meanwhile, Ignacio de la Torre, Chief Economist at Arcano, said that “there is not a bubble at the moment, but if we continue at this rate, there will be one”, especially in the residential market. He highlighted the significant interest that certain assets have sparked in Spain, such as, for example, rental homes, especially amongst institutional investors. “When everything was clogged up, it seemed like Spain was going to go bankrupt, but then investors with large risk appetites entered the market to inject liquidity and the economy started to work again. Now, those hedge funds are starting to recycle the assets they bought and as the market for rental homes increases, so institutional investors are entering the segment, which is what is happening in other countries too. In the future, insurance companies and pension funds are expected to become the owners of the large stock of rental housing in Spain. (…).
Original story: El Confidencial (by E. Sanz)
Translation: Carmel Drake