BBVA: FDI Rose By 13% In H1 2016 & Focused On RE Sector

16 September 2016 – Expansión

According to a report from the BBVA Foundation – Ivie, until 2015, growth in foreign investment focused more on the purchase of debt instruments and share capital (portfolio investments) than on direct investments (involving the purchase of more than 10% of the capital of a company). “By contrast, during the first half of the year, portfolio investments have decreased and direct investment has recovered (by 13%)”, according to the document.

In general, foreign investment has a high correlation with the economic environment and in Spain (investment decreased from €58,128 million in 2009 to -€44,900 million and -€32,455 million in 2011 and 2012, respectively) there was a slight recovery as the economy emerged from the recession. Thus, in 2015, foreign investment was 2.6 times higher than at the start of the crisis, in 2008.

Composition of investment

By type of investment, direct foreign investment has varied significantly in terms of its sector composition. In this way, it is worth highlighting “the increase in investment in real estate activities since 2012, which accounted for 12.9% of total foreign investment in 2012 and had increased to 27.1% by March 2016”. The recovery in terms of investment in the construction sector is also noteworthy, above all in 2015, when it accounted for 20.2% of the total, although that figure had decreased to 16.1% by March 2016. “Based on the data for 2015, real estate investment (in the broadest sense) accounted for a third of the total (€7,700 million), up by 62% compared with a year earlier and 4.4 times higher than in 2008”.

According to the BBVA Foundation-Ivie, the fact that the increase has taken place in H1 2016 is good news, “although the growing orientation towards real estate activities weakens the contribution to productivity gains that the Spanish economy (so desparately) needs”.

It is important to take into account that portfolio investments are more volatile and sensitive to the economic cycle. Meanwhile, although direct investment is less important in terms of the productive investment of a country, it has significant qualitative features: it helps stimulate certain production sectors, increasing internationalisation and technological levels; it focuses on sectors with more human capital and it is very important for increasing productivity.

Original story: Expansión (by M.G.M.)

Translation: Carmel Drake

The RE Sector Attracts Overseas Investors Once More

12 April 2016 – Cinco Días

(…) Overseas capital is focusing on the property market once again. And Spain is one of the main European markets for offices, hotels and logistics. Madrid and Barcelona are leading the charge and the Socimis at the forefront of the revitalisation of the market. (…)

According to data from the Foreign Investment Register, published by the Ministry of Finance, the construction sector and real estate-related activities secured almost €7,700 million of direct foreign investment in 2015, i.e. 34.5% of the total. As such, one out of every three euros of international funds received by the Spanish economy last year was invested in the property sector.

Productive foreign investment (that which generates activity and employment) grew for the third consecutive year, to close 2015 with an increase of 11%, to €21,724 million. Of that amount, €4,706 million, i.e. 21.7%, was allocated to the construction of residential buildings and property development, compared with €1,762 million in 2014….Meanwhile, real estate-related activities (sales, purchases and rentals) accounted for 13.8% of the total, i.e. €2,992 million. (…).

In the context of this new activity, the Socimis have emerged as the main supporters of the market. The large Socimis experienced a real boom in 2015, when they flooded the MAB with their stock exchange debuts and came close to tripling their profits, which rose from €89.5 million in 2014 to €251.2 million last year, according to data from the CNMV.

Within the last year, the four largest Socimis (Merlin Properties – which has been listed on the Ibex 35 since December -, Hispania – thanks to its partnership with Barceló -, Lar España and Axiare Patrimonio) have doubled the value of the properties they own, to more than €9,200 million in total. (…).

The Socimis accounted for 41% of all funds invested in the purchase of real estate assets in 2015 – they spent €5,237 million on asset transactions. In this way, the increase in the volume of their investments amounted to 129%, in particular due to Merlin’s purchase of Testa for almost €1,800 million.

Wealthy individuals and several international funds have invested fully in these investment vehicles, attracted by the low prices in the sector and the tax advantages on offer (Socimis are exempt from paying corporation tax). The Qatar sovereign fund is trying to become the largest shareholder in Colonial; it now owns almost 30% of the Catalan real estate company.

George Soros has strengthened his commitment to Hispania, in which the millionaire John Paulson holds a stake of almost 10%. Carlos Slim controls Realia…Amancio Ortega, with his investment arm Pontegadea, now manages a very interesting and diverse asset portfolio.

The experts agree that the sector has left behind the turbulent times that it experienced following the burst of the real estate bubble. It is undergoing a period of normalisation and stabilisation – albeit a long way from its pre-crisis levels – and it is facing a new environment, with sustainable growth, in a market that is more mature and more professional.

Original story: Cinco Días (by Pablo Pico)

Translation: Carmel Drake