Tag: construction companies

What Can We Expect From The Housing Sector?

30 November 2015 – Cinco Días

It goes without saying that the real estate sector was the most vilified during the crisis. Blamed for almost all of the problems that ended the greatest economic boom in recent history, the sector has been striving to rise from the ashes since the end of 2013. International investors returned to Spain first, attracted by the low prices – according to statistics, property prices have now decreased by between 30% and 40% since their peaks.

Next, came a rise in the number of transactions, driven by improvements in the labour market and expectations of an economic recovery. Following this increase in sales, came a moderation in the price decreases and, finally, the cranes returned to the urban landscape of the large cities, albeit in a very piecemeal way. The housing stock, i.e. the huge surplus of new homes (389,00 units in total, according to a recent study from Tinsa), has stopped representing such a problem in certain cities and therefore, the moment to return to property development has arrived.

The problem is that the crisis has practically destroyed the real estate sector along the way. Today, sales represent just one third of their levels in 2006, firms are constructing only 4% of their historical peak volumes and instead of property developers and construction companies, the business has now diversified and is in the hands of the banks, Sareb and new servicers.

Macro-economic figures

The truth is that the key macroeconomic figures are starting to show real signs of the real estate recovery. Employment is growing by more than 3% and the flow of financing is increasing. Mortgage lending continued to increase at rates exceeding 20% in September, which means that it has now been recording double digit increases for 16 consecutive months.

Nevertheless, the experts warns that the “exit from the crisis is not going to be the same for everyone”, says Luis Corral, CEO of Foro Consultores. “There is a dual market. The euphoria being seen in Madrid, and to a lesser extent in Barcelona, contrasts starkly with those places where the surplus has not yet been digested and, therefore, nobody wants to build there”, he says.

The evolution of these two variables, employment and credit, will determine whether the recovery strengthens or stagnates at its current modest figures. Demographics are working against it, since the rate of household creation that was seen at the end of the 1990s, which really spurred on real estate demand, is not expected to be repeated, according to the population projections made by Spain’s National Institute of Statistics. That is why nowadays, almost no-one, except from the sector association Asprima and the appraisal company Tinsa, dares to venture a projection about what demand for homes will be like in the future. Both entities forecast that between 200,000 and 250,000 homes will be constructed over the next few years.

New Projects

Prudence is one of the key words that everyone is talking about in the market at the moment. Prudence in terms of projections, lending, construction etc.

Refurbishments

Moreover, the logical evolution for Spain’s stock of more than 25.5 million homes involves renovations and refurbishments. The vast majority, almost 95% of homes, do not comply with basic energy efficiency criteria and many established neighbourhoods in large cities could be rejuvenated with good urban renovation and renewal projects, with the corresponding boost to activity and employment that such projects would involve.

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

Political Uncertainty and Populism Threaten RE Recovery

1 June 2015 – El Economista

The electoral success of Manuela Carmena (Ahora Madrid) in Madrid and Ada Colau (Barcelona En Comú) in Barcelona has started to take its first victims in the real estate sector. Barely a week has passed since the elections and “some investors have already suspended deals to purchase property in Spain”, warn certain sources close to the negotiations.

The uncertainty regarding the possible political agreements has hit the property sector hard, “just when it was starting to recover”. In Madrid and Barcelona alone, large urban projects amounting to €14,000 million have already been called into question.

Major construction companies, financial institutions and large international funds are involved in these developments, including the Chinese magnate Wang Jianlin, who came to Spain with plans to invest around €4,000 million and who now see his real estate plans for the country being endangered.

“Right now, the sector is beginning a process of paralysis in certain segments. All of the investors are waiting for the possible political agreements to be settled so that they can carry out transactions”, explain sources in the sector.

“The is a great deal of uncertainty and considerable ungovernability in many cases, as well as expected increases in taxes and public spending, coupled with the suspension of forecast investments, which may result in the withdrawal of foreign capital”, they warn.

This situation may result in “an important step backwards for the emerging recovery”, given that it comes at a time when the real estate sector was really beginning to take off; record levels of investment were recorded last year. Before the elections, experts predicted that the level of transactions was going to continue (this year), but following recent events, “it is now very difficult to make forecasts”. These warnings coincide with others made this week by several important businessmen, such as the Chairman of OHL, Juan Miguel Villar Mir, who said that (political) groups such as Podemos put Spain’s economic recovery in danger. In a similar way, the markets have penalised the election results and the Ibex 35 recorded a loss of 2.91% last week.

(…)

The urban plans proposed by Carmena and Colau leave most of the major projects, both those already underway as well as those still to be awarded, up in the air. In Madrid, they endanger million-euro developments such as Operación Chamartín, the Madrid Río shopping centre, Operación Mahou-Calderón, the Canalejas complex, Operación Edificio España, la Ciudad de Justicia and even Operación Campamento.

Whilst in Barcelona, projects such as La Maquinista and Heron City shopping centres, the refurbishment of the Nou Camp and urban developments in the surrounding area, the ski slope in the free trade zone of Barcelona SnowWorld and the conversion into hotels of iconic buildings such as Torre Agbar, the Deutsche Bank building on Passeig de Gracia or Project Núñez i Navarro are also at risk.

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Original story: El Economista (by Alba Brualla and Javier Mesones)

Translation: Carmel Drake