The Spanish Real Estate Sector Is Getting Ready For A “Digestion” Of The Investment Made In 2016

12 February 2016 – Expansion

After a record year in asset transactions, the Spanish real estate sector is getting ready for a “digestion” of the investment made in 2016, according to the the forecasts of the consulting company Irea, which considers that, despite the total volume of investments will decrease at around 15% -as it already happened in 2015-, the sector will maintain the pulse thanks to the strong activity in residential land and hotels.

Residential land and hotels shall lead the real estate sector

“It is not that the party is over but that, rather than a race for the massive investment, it will be a year of “digesting what was purchased “explains Irea CEO, Mikel Echavarren to EXPANSION.

Record year

By business segments, Echavarren emphasizes activity in hotels and residential land, which will remain as supports of the sector. The hotel investment volume reached 2,614 million euros in 2015, 142% more than in 2014. “It is not expected to be so high, but it will still be awesome, after consecutive years of tourists entry record, due to the euro devaluation, the instability of North African rivals and the price of oil hitting rock-bottom,” he explains .

Regarding residential land, Echavarren remarks that there are areas in Spain where demand is “undeniable” and prices are even rising. “Investment in construction, finalist and well located land at last has a controllable risk,” he added.

However, all in all, this year Irea foresees a reduction in assests investment (residential property, offices, shopping centers and hotels, among others). In 2015, the total investment volume of assets was 12.848 million euros, representing an increase of a 33%. “This year could be between 8,000 million and 9,000 million euros,” he anticipates. 
As for the sale of debt portfolios, which started strongly in 2013, the number of transactions is expected to be reduced, as well as its volume, following last year’s trend. Thus, if the volume of debt transactions decreased by 36% up to 8.117 million euros in 2015, for next year forecasts are that the figure does not to exceed 6,000 million. 
Echavarren explains that the reason for this reduction is that the assets backing the debt held by banks and SAREB are more fragmented so, to place homogeneous packages, these should be smaller.

Political concern

Regarding the political situation, Echavarren recognizes that some Spanish funds are already more reluctant to invest in some segments, such as city councils of “uncertain political management or high urban risk”. “They are not considering leaving Spain, but certainly being more selective,” he adds. In contrast, international investors are more concerned about the situation of the global economy, but “they are certainly not happy “with the current situation. 
With regard to the involvement of certain political decisions, such as the hotel moratorium, both in investment and real estate, Irea CEO recalls that in Barcelona, hotels prices have increased significantly. “Buying a five star hotel knowing you’re not going to have new competition for several years increases the interest of investors.” He says. 
As for similar measures in Madrid, “it makes no sense” to Echavarren, since the problem in the capital is not the  excess of offer but the demand attraction. “In Madrid we do have cruises coming in by the Manzanares” he jokes.

Original story: Expansion (by Rebeca Arroyo)

Translation: Aura Ree