Ministry of Development: Real Estate Activity is Non-Existent in 40+ Spanish Municipalities

21 April 2019 – El Confidencial

There is barely any real estate activity in more than 100 Spanish municipalities with more than 10,000 inhabitants. In 42, not a single building permit to construct a new home was issued in 2018. Not one. And in another 100, fewer than five permits were issued, whilst in 200, fewer than ten permits were issued.

That is according to data from the Ministry of Development, which reveals the extent of the disparity between the booming areas of Madrid, Barcelona, the Costa del Sol and the islands, amongst others, and the complete dearth of activity in other parts of the country.

Asturias and Murcia are the autonomous regions that are suffering the most where construction activity has been all but suspended. The driving factors are multiple, but a lack of demand is key. Moreover, even where there is buyer interest, there is not enough buildable land to develop, construction costs are high, financing is hard to come by and qualified labour is scarce.

Even at the national level, although 100,000 new home permits were issued last year, that figure is still eight times lower than it was in 2006, when 865,561 new build permits were awarded. And although the experts agree that a healthy market will never see a return to the pre-crisis figures, the volume of new home construction is still well below the 150,000-200,000 benchmark that property developers consider sustainable.

By contrast, in certain parts of the Community of Madrid, lots more building permits were granted last year than during the height of the boom, for example, in Tres Cantos (657 in 2018 compared with 6 in 2006) and Rivas Vaciamadrid (1,345 compared with 831 twelve years ago). There was also a lot of activity in Boadilla del Monte, San Sebastián de los Reyes and Alcobendas. Beyond the capital, more new build permits were granted last year than in 2006 in Pamplona, Lasarte and Santiago de Compostela, amongst others.

Original story: El Confidencial (by E. Sanz)

Translation/Summary: Carmel Drake

ASG Homes Sets its Sights for Growth on Andalucía

12 March 2019 – ABC Sevilla

ASG Homes, which manages and develops projects for the British fund ActivumSG, owns a stock of land on which it could build 5,000 homes in Spain, making it the seventh or eighth largest property developer in the country by land bank. It largest regional presence is in Andalucía, where it owns land on which to build 1,700 homes, with Sevilla and, specifically, Sevilla Este, accounting for the majority of those plots, where it has capacity for 1,200 homes.

According to the CEO of ASG Homes, Víctor Pérez Arias (pictured above), his firm currently has 600 homes under construction in Sevilla, Estepona and Marbella, whose prices will range between €140,000 and €300,000. Moreover, it is also looking to repeat its activity in Sevilla and so is searching for land to purchase along the coasts of Málaga, Cádiz and Huelva. It is also interested in opening a hotel in Sevilla.

According to Pérez Arias, there is a shortage of buildable land across Spain, which is causing demand to exceed supply, and as such, prices to increase. The delays involved in processing building permits to convert developable land into finalist land is not helping either. In some cases, rather than taking up to 6 months, as permitted by law, those procedures are taking up to 14 or 15 months.

In light of the high level of demand in the rental market, ASG Homes is starting to work on projects in the residential rental market. Besides homes, ASG also promotes shopping centres, student halls, hotels and serviced apartments.

Original story: ABC Sevilla (by María Jesús Pereira)

Translation/Summary: Carmel Drake

Ministry of Development: 100,733 New Build Permits were Granted in 2018

28 February 2019 – Idealista

In 2018, 100,722 building permits were granted to construct new homes, 25% more than a year earlier; a figure not seen since 2009, when 110,849 permits were granted, according to data from the Ministry of Development. Of the total figure, 79,453 were granted to build blocks of flats and 21,254 to build houses.

In this way, building permits have now recorded five consecutive years of increases. In 2013, they hit a historical low (34,288 units), a figure that represented a decline of 96% from the peak year of 2006 when 865,561 permits were granted.

Despite the good results in 2018, the construction sector considers that a healthy market is one that is capable of generating around 150,000 new work permits per year.

Why is it so hard to build 150,000 homes per year?

Daniel Cuervo, Director at Asprima, points to several factors:

– Building permits take a long time to be granted (…). In general, Town Halls take 14 months to grant a licence, on average (…).

– Financing has returned to the real estate sector, but it is not immediate (…).

– Urban planning in Spain is paralysed due to the high level of legal uncertainty (…).

Meanwhile, Daniel del Pozo, Director at Idealista/News, provides some additional explanations:

– Lack of awareness about how the market works and of the real demand by the Public Administration (…).

– The main land portfolios are owned by the banks, Sareb and the funds (…) which are all waiting for prices to rise before releasing the most sought-after plots.

– The political uncertainty, the threats of interventionalism and/or changes in regulation in the real estate market also play their role (…).

Original story: Idealista 

Translation: Carmel Drake

Taylor Wimpey to Invest €70M in 8 Developments in 2019

22 January 2019 – Eje Prime

Taylor Wimpey is setting out its roadmap for 2019. The Spanish subsidiary of the British real estate group is going to launch eight developments with an initial investment of €71 million during the course of this year, according to comments made by Javier Ballester, the CEO of the company, speak to Eje Prime.

The company is planning to build between 350 and 400 homes in several parts of the country. Specifically, Taylor Wimpey has opted for areas where it already has a presence, namely: the Costa del Sol, Alicante, Mallorca and Ibiza. Moreover, according to the executive, “it is possible that, if we obtain the building permits in 2019, the group will launch three more developments, one in Marbella and two more in Mallorca”.

Taylor Wimpey is whereby reaffirming its commitment to the Spanish second home market, where it has been operating for more than seventy years. In fact, the company is currently one of the main property developers in the country that is building assets on beach fronts and overlooking golf courses,

In 2018, the company handed over 342 homes, 14% more than in 2017. It is currently marketing four developments in Alicante, in the municipalities of Torrevieja, Villajoyosa and Elche (…).

Original story: Eje Prime (by Berta Seijo)

Translation: Carmel Drake

Málaga Captures the Attention of Neinor, Aedas & Quabit, Amongst Others

20 January 2019 – La Información

The real estate sector is certain. After Madrid and Barcelona, the city where the property business is going to grow by the most is Málaga. The capital of the Costa del Sol is on everyone’s lips and is forming the focus of the real estate investments being made by many of the leading firms in the sector. Aedas, Neinor and Quabit are just a handful of the property developers that have decided to set up cranes in the Andalucían city, which is seeing how more and more people are choosing to live and spend their summers there.

The experts are not hesitating to point to the capital of the Costa del Sol as the third city in the shadow of the real estate market, behind only Madrid and Barcelona (…).

The attraction of foreign investment is another of the most important factors in Málaga. In this sense, Fernando Ferrero, Director of Merlin Properties, said that in the office sector, there is still “a lot of potential in Madrid” (…), but he highlights Málaga and Palma de Mallorca as the two cities where foreign investment is proving to be very important (…).

The property developers have been wise to it and so, in recent months, have started to launch promotions in Málaga. That is what Neinor Homes has done, which is offering several urbanisations in the capital, as well as some in nearby areas, such as Marbella and Estepona. In the same way, Quabit (…), has launched itself in the province with both single-family homes, and blocks of flats. Aedas Homes is not being left behind and is going to build Vanian Green Village, a housing complex in Estepona, another town that is growing in the capital’s shadow.

The boom in residential properties, both primary residences and holiday homes, has turned Málaga into a reference for the future of real estate. So much so that the data for the granting of new building permits soared in the province by 56.85% in 2018. In total, 7,678 permits were granted compared with 4,895 in 2017, according to data from the Official Architects College of Málaga (…).

Original story: La Información (by Lucía Gómez)

Translation: Carmel Drake

Sareb Searches for an Ally to Develop Land Worth €2.5bn

3 January 2019 – Eje Prime

The bad bank is looking for a partner to increase its profitability through the development of its land. Sareb owns plots throughout Spain worth €5 billion, but almost half (€2.4 billion), lack building permits. For this reason, the company is combing the market to reach agreements with companies that specialise in converting plots into buildable sites.

The company is thus planning to turn the tide in its strategy for the management of its portfolio when the contracts that it has signed with several Spanish real estate servicers come to end, which they will do soon, according to El Economista.

At the end of the first half of 2018, Sareb’s buildable land had a value of €2.15 billion. The rest of the portfolio owned by the publicly owned company comprises rural plots, worth €450 million.

Sareb, with €36 billion on its balance sheet, is also working on the creation of a fund with a residential property developer in which it will own a large stake. By way of consideration (payment for that stake), the bad bank will grant land worth €800 million for the development of new homes. Aelca is currently the favourite in the running to be awarded that contract.

Original story: Eje Prime

Translation: Carmel Drake

Ghost Towns Still Haunt Spain in Property Rebound a Decade After

25 November 2018 – Bloomberg

Juan Velayos’s biggest headache these days is getting licenses fast enough to hand over new homes such as the upscale condos his company is building in the northern suburbs of Madrid.

Less than 60 miles away, Ricardo Alba’s neighborhood tells a different story about Spain’s property market. The fencing instructor is one of only two occupants at a block of apartments whose development was frozen in its tracks when banks pulled the plug on credit.

“The real estate sector’s recovery in Spain is developing at two clearly different speeds,” said Fernando Rodriguez de Acuna, director of Madrid-based real-estate consultancy R.R. de Acuna & Asociados. “While one part of the country is consolidating the recovery of the sector and even expanding, another part of the country is stagnating and is showing few signs of returning to pre-crisis levels in the medium- and long-term.”

A decade after the financial crisis hit, Spain’s real estate recovery is a tale of two markets. Key cities and tourism hot spots are enjoying a fresh boom, fueled by interest rates that are still near historic lows, an economic recovery and a banking system that’s finally cleaning up its act. Private equity firms such as Blackstone Group LP are picking up once-toxic assets worth tens of billions of dollars and parsing out what’s still of value, often using their playbook from the U.S. real estate recovery to convert properties into rentals.

But travel a little beyond the bustling centers, to the outskirts of smaller villages, and ghost towns still litter the landscape — once ambitious developments, often started on agricultural land that was converted into building lots just before the crisis hit. They still stand half-finished, unable to find a buyer.

The “Bioclimatic City La Encina” where Alba began renting an apartment two months ago is one such development. Situated on the edge of the village of Bernuy de Porreros, about 10 kilometers (6 miles) from Segovia, it promised to be Spain’s first environmentally-friendly town, providing solar energy and recycled water for 267 homes, comprised of two-, three-, and four-bedroom chalets and apartments. A faded billboard speaks of the dreams that were sold, including communal swimming pools and gardens for residents who would “live… naturally.”

Today, only about a dozen of the homes are occupied. One street has finished homes but half have their windows bricked up to discourage break-ins, locals said. Alba does have solar panels heating his water, but his electricity comes from the local network. On the far side of the development, trees sprout out of the middle of a street that was never paved. Brightly-colored pipes and cables protrude from the ground. Bags of plaster on a pallet have long hardened.

Spain’s housing crash was fueled by a speculative frenzy combined with loose restrictions and corruption that allowed plots of farmland in rural villages to be converted to feed a demand for homes that never truly existed, said Velayos, who is chief executive officer of Neinor Homes. At the height of the boom in 2006, authorities approved 865,561 new home licenses when even in an economic boom demand is no greater than 250,000 homes, he says.

Banks were handing out loans to developers who had little to lose if a project didn’t find a buyer because the money wasn’t theirs. The result was an almost total collapse of the market and close to $200 billion of soured assets.

About half of them were bought in 2012 by Sareb, a bad bank set up by the government to help lenders. Sareb spent about 50 billion euros to acquire assets that were once valued at twice that amount, mostly loans to developers and real estate. Among the latter are also 97 of the 267 properties at La Encina. None of them are currently for sale as Sareb works through legal issues and construction of many isn’t finished.

Other assets were picked up by deep-pocketed investors such as Blackstone, which has 25 billion euros invested in Spain, according to Claudio Boada, a senior adviser at the firm. The New York-based company — the world’s largest private markets investor — is doing what it did at home after the financial crisis: renting out homes instead of selling them in a bid that fewer people can afford to own. Spain had a relatively high home ownership rate before the crisis but it has since come down.

Blackstone’s Bet

“We’re holding most of what we own and looking to rent it out for the foreseeable future,” said James Seppala, head of real estate for Europe at Blackstone. “There’s a meaningful increase in demand for rental residential around the world, including in Spain, driven by home ownership rates coming down.”

Private equity investors also backed a new breed of real estate developers that are bringing a different rigor to the industry. Companies such as Neinor and Aedas Homes S.A.U. are more tech-savvy when assessing markets, and emphasize industrial production techniques to improve efficiency. They’re behind a surge in licenses for new homes to 12,172 new homes in July, the highest monthly total in a decade.

But demand is uneven: Madrid is enjoying its most robust year of home construction since 2008 with an average of 2,151 licenses awarded per month in the first seven months of the year. In Segovia, just 27 minutes from Madrid on the state-run bullet train, an average of 25 homes licenses have been approved per month in 2018, compared with an average of 180 homes a decade earlier.

The volume of residential mortgages sold in Spain peaked in late 2005 before hitting a low in 2013. Since then they have gradually picked up, with 28,755 sold in August, a seven percent annual increase.

Velayos, chief executive officer at Neinor, said business is starting to pick up beyond Madrid and Barcelona to smaller cities and the coast. His company plans to hand over 4,000 homes by 2021, more than 12 times as many as in 2017. The biggest challenge has been getting licenses approved on time. Velayos had to cut his delivery target for 2019 by a third as often understaffed local councils cause bottlenecks in the production process.

More significantly, Spain’s real estate is now funded by investor’s equity and not credit, said Velayos. Neinor was bought by private equity firm Lonestar Capital Management LLC from Kutxabank SA in 2014 and went public in March 2017. Aedas is backed by Castlelake, another private equity investor, and was floated the same year. Metrovacesa SA, owned by Spain’s biggest banks, held an initial public offering earlier this year.

Shares of all three developers have declined this year at more than twice the rate of the local stock index, a reminder that the market’s recovery remains fragile, with higher interest rates and an economic slowdown on the horizon.

For the Bioclimatic City La Encina, that means it may take longer still until Alba gets new neighbors. Prices for half-finished chalets were slashed by half, according to residents. Some now sell for as little as 16,700 euros, half the cost of a mid-range car.

Alba doubts such cuts will lure buyers. Then again, that may not be a bad thing, he says in summing up the development’s advantages: “It’s very peaceful.”

Original story: Bloomberg (by Charlie Devereux)

Edited by: Carmel Drake

BBVA Research: Building Permits for New Homes Double in 3 Years

12 November 2018 – Cinco Días

The recovery is being boosted by construction activity in the real estate sector. 2018 is going to close with the granting of more than 100,000 permits for the construction of new homes, which represents twice the number of permits granted in 2015, according to estimates from BBVA Research. During that year, activity in the sector started to recover, after years in free fall. The real estate construction segment is whereby returning to six-digit figures, something that has not been seen for eight years.

Until August, the most recent data available from the Ministry of Development, just over 68,000 permits had been granted, up by 26% compared to the same period last year. The data from that month reflects that it was the best August on record since 2008.

The sector may be recovering but it is still light years away from the property fever experienced a decade ago. To give some perspective, the 100,000 new build permits that are going to be granted this year are eight times fewer than the figure recorded in 2006, when the highest ever number of permits was issued (865,561). In April of that year alone, 126,753 permits were granted, a figure that comfortably exceeded the number expected to be issued during 2018 as a whole.

The exact opposite was seen in 2013, when the number of permits hit rock bottom: during that year, just 34,288 permits were granted, the absolute minimum in the whole historical series (whose data goes back to 1992). The following year, there was a slight increase in permits (of 2%) but it was not really until 2015 when the figures started to recover with any strength, up by 43% that year. Since then, the number of construction permits granted has followed a stable growth path, with YoY increases of around 25%.

According to the research from BBVA, the increase in permits forms part of the favourable context in which the market is developing. During the third quarter of the year, employment in the construction sector grew by 1.3%, loans for home purchases increased by 16.8% YoY and house sales in August were almost 10% higher than during the same month last year.

A large part of the still moderate and stepped growth in terms of construction permits is due to the fact that the number of leftover homes constructed during the bubble, which still have not been sold, is still “high and disproportionate for the levels of demand in six out of every ten provinces”. There are 1.2 million leftover homes in total, according to the statistical yearbook for the real estate market compiled by the consultancy firm Acuña & Asociados.

Nevertheless, that stock of homes is very dispersed throughout the country: the consultancy firm calculates that one third of those homes are located in areas with zero or very low demand, whereas in the main cities, new build homes are needed, something that is being confirmed by the significant increases in house prices.

Madrid is the city that accounts for the most building permits (both for new construction and renovation or refurbishment). So far this year, work has started to build or renovate 7,000 homes in the Spanish capital. It is followed, at a distance, by Barcelona, with just over 2,200 homes. Next in the ranking are Valencia (1,640), Málaga (1,400), Zaragoza (1,060), and Sevilla ( 830). Those six cities – which account for almost 20% of the population – account for 17% of all of the permits granted so far this year (…).

Original story: Cinco Días

Translation: Carmel Drake

Zaragoza Leads the Sale of New Build Homes in Spain

5 November 2018 – El Periódico de Aragón

Zaragoza is still leading the sales of new build homes in Spain. Last year, it was the third-ranked city in the country, after Madrid and Barcelona, in terms of sales volumes, with 800 transactions, and in 2018, it is maintaining that trend. In fact, during the second quarter of the year, the Aragonese capital recorded the sale of 305 new homes, exceeded only by Madrid. That is according to the latest report compiled by the real estate consultancy firm CBRE, which shows that the evolution of Zaragoza this year is even better than last year: 537 new build house sales were recorded during the first half of this year, and so all indications are that they will exceed the 800 units recorded in 2017.

According to the experts, pent-up demand during the years of the crisis, which forced many citizens to postpone their decision to buy a home due to the economic uncertainty, and the current supply of high-quality homes for sale at reasonable prices, are the main causes behind Zaragoza’s leadership of the sector.

Of course, the data is still light years away from the figures recorded before the crisis. “There is still a long way to go in the new build construction market”, said the Director of CBRE in Zaragoza, Miguel Ángel Gómez. During the peak of the real estate boom, 4,000 sales were recorded per quarter in Aragón, and 45% of those were in the new build segment, but that percentage has now dropped to 12%. The figures confirm that the reactivation of the sector is based almost exclusively on second-hand homes. “The supply of second-hand homes is enormous, for that reason, as property developers we have to offer a differentiated, high-quality product if we want to attract customers”, said the President of the Confederation of Construction Companies of Aragón (CEAC) and the Director General of the Lobe group, Juan Carlos Bandrés.

Data relating to the number of building permits that the Town Hall of Zaragoza is granting confirms the new build recovery: last year, 1,526 permits were granted, compared with 1,040 in 2015. This year, it seems that the number of permits granted is decreasing although we still have two months of the year left to run. Either way, the figure is well below the 3,150 recorded in 2009 and light years away from the 8,940 registered in 2006.

The experts also attribute the better performance of Zaragoza compared to other major cities in Spain to the fact that the community has managed to maintain “its own financial system” (Ibercaja), which continues to back the projects of property developers. “Here, there are more possibilities to take projects forward”, highlights Bandrés (…).

Original story: El Periódico de Aragón (by Rubén López)

Translation: Carmel Drake

Ministry of Development: Housing Permits Rose by 12% in August

2 November 2018 – Eje Prime

The residential sector is driving the new build segment in Spain. In August, a total of 1,620 permits were granted to build homes across the country, 7.8% more than during the same month in 2017. Of those, 1,389 were allocated to assets for residential use, which saw an increase of 12%, according to the latest data published by the Ministry of Development.

In August, the bulk of the new build permits granted for residential use were made for the construction of 1,387 family homes, specifically: 938 detached single-family units, 205 terraced single-family units and 244 flats in apartment blocks.

So far this year, a total of 17,151 permits have been processed for the construction of residential use assets, up by 10.2% compared to the first eight months of 2017, when those types of permits amounted to 15,562.

Meanwhile, during the eighth month of 2017, 231 permits were granted for the construction of non-residential use buildings, down by 1.5% compared to the same period last year. In that caption, there were three new permits for the construction of offices, another 21 for the development of industrial spaces and 83 more for assets dedicated to commercial services and warehouses.

Licences and budgets also recover

In terms of the concession of licences, last Wednesday, the Ministry of Development published figures corresponding to May. According to the body, 4,449 new permits for residential buildings dedicated to family homes were registered during the fifth month of the year (1,606 single-family units and 2,843 multi-family units), down by 0.8% compared to the same period in 2017.

Similarly, the number of licences processed for rehabilitation works doubled in May in YoY terms, to reach 825 concessions. The budget dedicated to the execution of labour also rose during the fifth month of the year, up from €493,095 in 2017 to €4989,264 in 2018.

Original story: Eje Prime (by B. Seijo)

Translation: Carmel Drake