11 May 2015 – Expansión
Property development / The large financial institutions are constructing homes once again in light of the improved macroeconomic outlook, demand in certain areas and the aim of generating profits.
Real estate development is no longer a forbidden phrase in the world of banking. Several major banks have decided to resume the construction of new homes in light of the macroeconomic improvement and the need to capitalise on property inherited from the crisis.
Entities such as Santander, BBVA, Sabadell and Popular are now not only focusing on selling the homes that were foreclosed during the crisis, they have also started to construct new developments over the last few months. Most of these developments are located in Madrid, Barcelona and to a lesser extent, on the coast, where there is still a large stock of homes to sell.
Another catalyst of this new trend has been the reduction in the losses recorded by the real estate arms of these banks. During the first quarter, Santander’s real estate division lost €95 million, the smallest loss since it was created three years ago; and BBVA recorded a loss of €154 million, 37% lower than during the same period in 2014.
Thanks to this, the group chaired by Francisco González announced on Friday that it is studying 25 developments to construct 2,000 homes, and that it has already started another 12 developments to construct 630 million. This statement was made by Lorenzo Castilla, Commercial Director at BBVA Real Estate-Anida: “This is not about filling Spain with cranes, but rather about projects that make sense”, who spoke during Madrid’s International Real Estate Fair (Salón Inmobiliario Internacional de Madrid or SIMA).
Full balance sheets
As the BBVA director indicates, financial institutions still had more than €83,000 million foreclosed assets (on their balance sheets) at the end of 2014, of which more than €31,000 million related to land and €4,000 million to buildings under construction.
To reduce this burden, the entities are nowadopting two strategies: the sale of homes through their commercial networks, a channel that has accelerated over the last year; and the transfer of portfolios and joint ventures with institutional investors.
For the time being, the entity that has announced the most ambitious housing development plan has been Santander, which reported that it is developing 300 real estate developments, at its most recent results presentation.
Banco Sabadell is also stepping on the accelerator in this sense. Its real estate arm, Solvia, currently has 1,400 homes under construction, primarily in Madrid, Andalucía and Valencia.
Aliseda, the real estate company that renders services to Popular, has also announced an ambitious plan to enter the market for real estate development.
Original story: Expansión (by J. Zuloaga)
Translation: Carmel Drake