Tag: CEOE

The RE Kings Are Building Thousands Of Homes In Spain

18 September 2017 – El País

The house building sector in Spain is back after a decade adrift during which many of the large firms went to the wall (…).

But the same crisis (that harmed so many) has also given rise to a new, more institutionalised house building sector, which claims to have learnt from the mistakes of its predecessors (…).

In this new industry, there are some familiar faces, such as Realia, Quabit, Amenabar, Pryconsa, Ferrocarril, and ACR, amongst others (…). But the market now is dominated by new firms. They are the new generation of property developers, or rather, they are real estate giants, and their names include Neinor Homes, Vía Célere, Aelca, Aedas Homes and Kronos, poised to ride the new wave in the residential sector. Ahead, they face some major challenges, such as facilitating housing for young people, cutting costs, the industrialisation of the sector, putting clients first to avoid the errors of the past, and improving the image of the sector by being intolerant to all forms of corruption.

At the helm of these giants are overseas investment funds, which have chosen to back the Spanish residential market, with the economic cycle in full swing – new build permits rose by 29% in 2016. These foreign players are investing thousands of millions of euros in the purchase of large portfolios of land, at still low prices, in strategic locations and they are benefitting from low construction costs, at least for the time being. In this way, the funds have engaged managers with extensive experience in the traditional property developers to lead these firms, such as Juan Antonio Gómez-Pintado (Vía Célere) and David Martínez (Aedas Homes), amongst others (…).

The firms themselves talk about reaching a cruising speed of between 3,000 and 4,000 new homes per year (per firm) over the next three years (…). The largest 50 property developers and managers by volume of homes sold (based on completions due from 2018) “plan to build around 45,000 homes over the next three years”, according to Raúl Templado, at Alimarket Construcción. This figure is low if we consider that various trade associations, such as APCE and CEOE, calculate that Spain needs 150,000 new homes per year to ensure a healthy residential market.

That is why international funds are so interested in doing business in a sector that, despite its sharp decline – the number of housing permits represents less than 10% of the level in 2007 – “continues to carry significant weight: 15% of domestic GDP” (…).

Foreign capital

The arrival of foreign funds, such as Värde Partners, Lone Star and Castlelake, has been like a breath of fresh air. “They have provided strategic vision and they made the decision to invest when we were still in a bearish cycle, identifying opportunities and giving credibility to a sector that was and still is attractive for investment, when nobody else was interested. On the other hand, their way of working with a more financial vision has resulted in structural and organisational changes that before were not considered”, says Gómez-Pintado (…).

The result is a sector in full transformation, where movements are happening non-stop, and so it is hard to know who is leading the market. The Institute of Governance and Applied Economics, an independent research centre, calculates that the largest 20 property developers in the country will build 80,000 homes between now and 2020. Their ranking is led by Metrovacesa, Neinor Homes and Aedas Homes, although family groups, local businesses and cooperative managers also feature (…).

Original story: El País (by Sandra López Letón)

Translation: Carmel Drake

KPMG Surveys 148 Directors In The RE Sector

19 May 2017 – Expansión

Directors and entrepreneurs in the real estate sector have faith in the progress of their industry. Moreover, more than half of them believe that the recovery is not very consolidated yet or is still pending consolidation, according to the conclusions of the Outlook for Spain 2017 report, prepared by KPMG in collaboration with the Spanish Confederation of Business Organisations (CEOE), on the basis of the opinions of 148 directors in the sector.

According to the report, 55% of those surveyed think that the recovery is not very consolidated yet or is still pending consolidation and 63% believe that prices will continue their upward trend.

In terms of the perception of the current situation in the sector, 28% consider it to be good or excellent, compared with 35% who consider it to be ok. The prospects for the next 12 months are more optimistic, given that 45% expect the situation in the sector to improve.

Similarly, 91% of directors confirm that during the course of this year, they are going to continue to maintain their levels of investment and may even increase them, and 27% expect to see an increase in their turnover during 2017.

Risks

Regarding the future challenges facing the sector, more than half of the directors surveyed believe that a weakness in demand is the main threat to their businesses.

The respondents also agree that investment in the sector has already reached a high level of maturity. In this way, 40% of those surveyed believe that there is a risk of a new real estate bubble forming over the next few years and one in five regarded that risk as “high”.

Over the next few months, 32% of the directors think that they will focus on international expansion and 25% consider the digital transformation as a strategic priority.

For Javier López Torres, Partner for Real Estate at KPMG in Spain, the current situation in the sector can be explained by differentiating between three scenarios or speeds: those where asset types and location are combined with liquid demand, in such a way that in “general terms”, the reactivation is already being consolidated; those where players are starting to invest and build certain asset types in specific locations; and finally, those where the absorption of specific products will be very slow, given that it does not respond to a real current demand.

Original story: Expansión (by R.A.)

Translation: Carmel Drake