Carmena Is Set To Build 1,000 Rental Homes For €60M

19 September 2016 – Voz Populi

The rebirth of the real estate market will soon have a new, unusual, player in its midst: the Town Hall of Madrid. The capital’s Town Hall is getting ready to fire the starting gun for the construction of the first rental homes that it plans to build during its legislature. For the time being, it will put out to tender the construction of almost 1,000 homes, with an initial investment of more than €60 million.

Social housing was one of the key pillars of Ahora Madrid’s election campaign during the municipal elections to govern the largest town hall in Spain, which were held in 2015. For the first few months, the municipality’s new team focused on getting to know the financial circumstances of the ‘Empresa Municipal de la Vivienda y el Suelo’ (EMVS), which starred in spectacular asset sales during Ana Botella’s reign at the Town Hall, all intended to alleviate the city’s economic difficulties.

The Town Hall’s plans now include constructing 4,000 new social housing homes in Madrid before the end of its legislature. Work will begin on a quarter of them within the next few months, once the ten contracts that the mayoress’ team is currently preparing have been awarded (…).

The Town Hall’s property development activity will be launched once the role of the EMVS to contract and put homes on the market has been activated again, following the restrictions imposed on it in recent years. Previously, the company was in a very delicate financial situation due to the collapse in value of the large volumes of land that it had acquired at the end of the real estate bubble and, therefore, at exorbitant prices.

Those circumstances meant that the company had to divest assets, including packages of homes sold to vulture funds, which generated a lot of controversy, which has now been declared void in the courts and by the investigation committee created to try to determine the legal nature of the operation.

In April 2016, the Town Hall injected €17 million into the EMVS, through a capital increase, an amount that was intended to allow it to continue cancelling its debt but which, at the same time, allowed it to relaunch the public company’s construction activity. The developments are located in the district of Vallecas and in the areas of Rosilla and Nuestra Señora de los Ángeles, although the Town Hall’s also plans to construct homes in other areas of the capital too.

This is undoubtedly an unprecedented move and not only in the public sphere, but also in the private. Many real estate companies have cancelled their development plans due to the collapse of the market and the lack of demand, together with the problems generated by the large volume of empty homes in Madrid. The contracts that the Town Hall will put out to tender mean that almost 1,000 new homes will be constructed within two years of them being awarded.

Original story: Voz Populi (by Raúl Pozo)

Translation: Carmel Drake

Only 490 Homes Sold In Exchange For “Express Visas”

17 February 2015 – El Mundo

The Government has raised €369 million in 15 months from its offer to grant residency to those buying property for more than €500,000.

Spain does not attract as many foreigners as Portugal does through its program.

The controversial express visas that the Government introduced through the Entrepreneurs Act, in order to raise foreign capital, have only attracted 530 international investors in the 15 months since the legislation came into effect, according to data provided by the Secretary of State for Trade. The millionaires that have moved to Spain in exchange for a residency permit have invested only €446.8 million, of which only €369.7 million has been spent on house purchases.

These figures are much lower than those recorded in Portugal for its golden visa program. The neighbouring country has managed to secure more than €1,100 million for the 1,649 golden visas that it has granted (figures to November 2014).

Given the limited interest from the very investors that the Government sought to attract by granting them permanent residency in an EU country, and given the suspicion with which the European Parliament views these types of programs, the Government is preparing rules for the enforcement of this legislation which, amongst other things, will give more guarantees to investors.

The so-called golden visas were approved, not without controversy, in the summer of 2013 as part of the Entrepreneurs Act. The idea of the Executive was to attract foreign investment through these permits and whereby reduce the huge stock of housing in Spain. As a result, it was decided that residency permits would be granted to those investors buying properties worth more than €500,000 (excluding taxes) and those deciding to invest significant quantities in Spanish company shares, domestic bank deposits, public debt or any other general interest project.

A year and three months after the Act came into force, the program has only facilitated the sale of 490 properties (out of a total of 830,000 properties sold during this period), according to the National Institute of Statistics (el Instituto Nacional de Estadísticas or INE) and investors have been incentivised to close only 29 transactions to purchase shares and another 12 transactions of general interest, according to data from the Secretariat that reports to the Ministry of the Economy.

Portugal has had more success with these visas and the key reason for this lies in the fine print of the legislation, which is more favourable for investors. “In Spain, we grant residency in exchange for investment, rather than nationality for investment like in other countries. Moreover, in Portugal, it is possible to become a citizen once you are a permanent resident. By contrast, in Spain, permanent residency only lasts for two years, rather than five years, which means that documentation must be renewed and residency justified on a more frequent basis”, explains Pamela Mafuz, Associate in Employment at Baker & McKenzie.

However, Portugal’s first-mover advantage is also behind its success. “Portugal was able to get ahead and be one of the first to implement this policy and that always has a positive influence” says Borja Ortega, Director of Private Wealth at JLL.

Whilst in other countries, such as Malta, there has been a lot of overseas publicity about the existence of the programs to grant visas to rich people, the Spanish Government has barely promoted its initiative, partly for fear of controversy.

Most of the beneficiaries of the visas granted to date are Russian and Chinese citizens. But, Baker & McKenzie report that their office also receives lots of questions from investors interested in these visas from the Persian Gulf, Egypt and Jordan.

“Many Latin-American investors are also interested in purchasing property (in Spain), due to the special bond that they have with the country. But, for them the visa is usually a secondary consideration because they tend to have other means of obtaining residency”, says Margarita Fernández, also an Associate at Baker & McKenzie.

Just like with the large funds, the majority of the investors seeking golden visas want to buy homes in big cities. “Housing is in highest demand. Specifically, single family homes and in terms of location, the region of Madrid is clearly the preferred destination”, says Ortega.

Original story: El Mundo (by María Vega)

Translation: Carmel Drake