Tag: Asian capital

Savills: “Investors Have 18 Months Left To Buy In Spain”

3 August 2015 – Expansión

The CEO of the British real estate consultancy Savills says that he expects the Spanish market to attract a lot of capital from Asian investors over the next 18 months.

In 1980, Jeremy Helsby started work at the real estate consultancy firm Savills, renowned for selling some of the most exclusive properties in the world. The company, which is 155 years old, first made a name for itself selling homes in the English countryside, but soon expanded its focus. At the end of 2014, Savills advised on the sale of the Gherkin, the cucumber shaped skyscraper in the City of London, which was sold to the Brazilian millionaire Joseph Safra for GBP 726 million.

Helsby…has been CEO at Savills since 2008 and was the architect of the international expansion of the firm, which has become one of the largest in the world, competing alongside US firms, such as CBRE and JLL…The company now has 20,000 employees around the world and more than half of its sales are generated outside of the UK.

Spain

According to Helsby, the modus operandi of international investors has changed. Their priority now is to diversify their investments and they are generally expanding beyond their own local markets.

In this context, Spain is one of the three or four most interesting markets in the world for major international investors, after the UK, Germany and France. “Investors come to Spain because they consider that the market here offers good opportunities and because assets are cheap”, explains the CEO, whilst noting that the first investors to arrive were the opportunistic funds, above all the US giants, including Apollo and Blackstone. “Investors have 18 months left to buy in Spain and we expect to see a lot of money arriving from Asia during this period”.

In his opinion, Spain’s two largest cities – Madrid and Barcelona – will be the key targets for investment, since they have “attractive properties, strong businesses and low prices following the economic crisis”.

These price reductions, which were as high as 40% in certain parts of Spain, have attracted a lot of investors. “Investors are buying because they think assets are cheap and because they expect there to be an increase in demand. The economy is growing. If we take a 5-year view, these assets may be sold a good prices”, he says. The question is who will buy the assets in the next round. “That is the million dollar question”, acknowledges Helsby. “Most of the recent investments have been made by opportunistic funds, but in three years time, they are going to want to sell their assets and it is not clear yet who will take them over”.

This flood of foreign investment in Spain has led Savills to reopen its office in Barcelona. “Our customers are asking us to help them buy properties there”, says Helsby, who took the decision to close the office in the Cataluñan capital in 2007 because “the market was dead”, he recalls. “It is a sign of confidence in the Spanish market and we hope to earn a lot of money there”.

Savills recorded turnover of GBP 1,000 million in 2014, up 19% and its profit before tax grew by 21% to €84.7 million. Last year, Helsby earned GBP 2.2 million (€2.8 million) for his work as the head of the firm, up by 33% from the previous year. (…).

Original story: Expansión

Translation: Carmel Drake

Chinese Investors Seek Large Housing Developments

27 January 2015 – El Economista

Spain is now very attractive for Asian capital. And so, investors are looking to build authentic Chinese cities in our country. Several Asian funds and companies have been looking for large developments of up to 2,000 homes in Spain, which they will then market in their own countries.

The aim of these investors is to create a genuine Chinatown with a complete set of services, including schools for Chinese children, restaurants, beauty salons and shops run by Chinese businessmen, which would sell products from their own country.

Spain has not traditionally been one of the main destinations for Asian investment, their money has typically ended up in countries such as Canada, USA, Australia, UK and France. Nevertheless, the collapse of housing prices, which have fallen by up to 40%, caused Chinese investment in Spain to double in 2014 over the previous year. It is estimated that Chinese investors purchased 6.5% of all of the homes sold in Spain last year.

Their interest in Spain is growing and although their aims are clear, it is nevertheless almost impossible for them to find developments of the size that they are looking for that are entirely for sale.

According to industry experts, these investors will have to understand that their “city” will have to be smaller. “What they are looking for, in a best case scenario, are developments containing between 200 and 500 homes”, they say.

Undoubtedly, this could represent a very good opportunity for the clean-up of the banks, which are accumulating thousands of residential assets and developments in their portfolios, which have been half completed and foreclosed. Investors are aware that these financial institutions need to offload properties and therefore they hope to acquire properties a bargain prices and then resell them, grouped in packs, to other Chinese citizens.

The Golden Visa

This is where the Golden Visa comes into play. The concept originates from the Entrepreneurs Law, which was approved in September 2013 and which puts a price on Spanish residency. This legislation allows non-EU buyers who purchase property for an amount that exceeds half a million euros to obtain Spanish residency. Although it is worth noting that the law does require them to have that amount of money in cash and does not allow them to resort to any kind of financing.

Moreover, the new investors cannot have a criminal record in Spain, or be present illegally in the country. They must also have private health insurance and sufficient financial resources to support the members of their family for the duration of their residence in Spain.

Thus, the intention of these Chinese companies is to sell groups of homes so that their price reaches the €500,000 threshold. In this way, buyers will be able to acquire a residence permit and therefore do business across the European Union.

The real estate sector looked forward to the arrival of the Golden Visa with baited breath as a means of stimulating activity in the market, however, for the moment, it does not seem that this visa has resulted in the entry of much capital into Spain. One of the main reasons is the failure by the Chinese Government to market the initiative, something which it is doing for some of our neighbouring countries. Portugal is ahead of us in this regard, since its Government has taken steps in China to sell the advantages of investment in its country. Thus, during the first hald of 2014, Chinese investment in Portugal amounted to €33 million, but following President Aníbal Cavaco Silva’s visit to China, investment increased to €760 million during the second half of the year.

Patricio Palomar, Head of Alternative Investment at CBRE stresses, however, that it is important not to loose sight of two aspects when drawing comparisons. “In Portugal, the measure was introduced much earlier, and the two countries have traditionally had strong ties, primarily due to the Portuguese colony of Macao”.

Indeed, one of the richest people in Hong Kong and Macao is Stanley Ho Hung Sun, the largest casino owner, who purchased the Casino Estoril many years ago and has other significant businesses in Portugal. Stanley Ho has Portuguese citizenship and makes investments across Europe through his company in Portugal.

Regarding the arrival of investors such as Wang Jianlin, who plans to invest €3,000 million in the development of a macro-residential project in Madrid, Palomar says that “over the medium term, it is likely that we will see some of the developments being designed and constructed to suit the taste of the great Asian fortunes, and that the most luxurious units will be sold in Asia, and so capital inflows from there will be boosted significantly”.

Original story: El Economista (by Alba Brualla and Virginia Martínez)

Translation: Carmel Drake