Tag: economic recovery

Sareb Holds Talks With Cooperatives To Accelerate Land Sales

25 January 2017 – El Independiente

Sareb is exploring ways of selling off millions of square metres of land that are currently sitting on its balance sheet. Whilst sales of properties by Sareb, the largest property developer in Spain, accounted for 97% of its portfolio in 2016, operations involving land accounted for just 3%.

One of the bad bank’s options for changing this trend in 2017 is to meet with cooperatives, one of the groups that most specialises in managing land, according to several institutional sources consulted.

Sareb, whose dissolution is scheduled for 2027, generated €1,500 million from the sale of real estate assets last year, primarily residential properties, but the sale of land by the so-called bad bank was purely symbolic, forming part of larger operations in many cases. For this reason, Sareb and several sector associations have begun a round of contact, confirm both parties. The first meeting was held last Friday.

“Officially, we are not doing anything with Sareb”, responded a spokesperson for Concovi, the cooperatives’ trade association, surprised that details of the meeting had been revealed. “We have not defined a model of cooperation”. The cooperatives point out that they account for approximately 10% of the housing sector and that they provide much more security than traditional housing developments. Sareb is calling for another meeting with the Community of Madrid’s Federation of Housing Cooperatives and Renovations

Sareb, created at the end of 2012, at the request of the Ministry of Finance to group together damaged assets from the banks – whereby avoiding their collapse – with the aim of subsequently selling them at aggressive discounts, owned 13 million m2 of land before its birth. Although this newspaper has not obtained updated data about the stock of land currently owned by this company, it is clear that it still has a lot to get rid of over the next ten years. One example is this website, where Sareb is selling off a huge volume of land.

The cooperatives are starting to get their strength back, one step at a time. Until now, they have had a very limited presence in the property developer sphere, primarily due to a lack of knowledge about their operations and due to the poor image that they are still struggling to shake following the scandals of the 1990s, such as the one involving the PSV cooperative.

Nevertheless, this method of collection development is set to record its first year of growth since 2012, in terms of the number of finished projects. Whilst in 2012, 700 buildings were certified, the following year that figure plummeted to 283. The number of certifications then fell further still to 217 in 2014 and 214 in 2015.

But, with the economic recovery and upturn in employment in 2014, new cooperative projects were launched and it is those that are now starting to bear fruit. 205 buildings were constructed through this method during the ten months to October 2016, a rate that, if maintained until December, would have given rise to around 250 finished buildings in 2016.

In parallel, the budget allocated to the construction of these properties rose by 62%in 2015 to €348 million. The cumulative figure as at October last year (€350 million) had already exceeded that amount. This means that 2016 looks set to be the year in which the cooperatives move the most money since 2011.

Original story: El Independiente (by David García-Maroto)

Translation: Carmel Drake

ST: House Prices Will Rise By 3% In 2017

18 January 2017 – Cinco Días

House prices will grow by 3% on average this year, driven by the improvement in the economy and employment, but also by the pseudo boom that is happening in the rental sector, in particular in large cities. That is according to Sociedad de Tasación, one of the largest appraisal companies in the sector.

The year that has just started will continue to be favourable in general terms for a real estate sector that, in the words of the Director General of Sociedad de Tasación, Juan Fernández-Aceytuno, is “recovering its sense of judgement”.

Thus, the volume of transactions will continue to grow, the rate of construction will intensify and more mortgages will be signed (although that figure will always fall below the number of house sales); and all of that means that house prices will end the year 3% higher, on average. Nevertheless, Sociedad de Tasación warns against certain risks and key factors that will determine the extent of this improvement in the real estate sector.

The first is what is happening in the rental market. Fernández-Aceytuno again highlighted the large group of potential buyers, such as young people aged between 25 and 35 years old, who are unable to buy a home because of their low wages and because of the precariousness associated with the majority of the new jobs that are being created. Since those people are not buying, many are choosing to rent, which has caused demand in the rental market to soar, along with rental prices. Sociedad de Tasación believes that if no response is given to this insolvent demand, rental prices will continue to rise and that will, in turn, drive up the prices of homes up for sale.

The Director General recalled that the average yield on rental properties in large cities stands at around 6.1% at the moment, which means that the increase in real estate prices in the major cities will be higher than the 3% forecast for the country as a whole.

Moderate pace

Other decisive factors, in addition to the improvement in employment, will be everything relating to financing. The new accounting standards, which the banks must comply with this year, together with the cost of recent court rulings, such as the judgement regarding floor clauses, and the forecast increase in interest rates may have an impact on the conditions for accessing credit over the medium term, which will determine the behaviour of much of the demand.

In any case, the good news, according to Socidad de Tasación, is not only that the main indicators in the sector are going to continue to stabilise, but also that they are doing so in a much more balanced way than in the past. In this sense, the firm gave the example that house prices are growing at more moderate rates now than they did during the previous boom, with rises in line with the number of new Social Security members. Moreover, it highlighted that land prices have not soared by more than house prices, which was also common during the early 2000s.

What’s more, property developers have not started to build homes in an uncontrolled way, even despite the expectation that more new homes are going to be sold. A study compiled by the appraisal company shows that the supply of new homes in Madrid and Barcelona is actually scarce, which means that it will run out within 10 months in the capital and within 14 months in Barcelona. Finally, it describes the rate of property construction along the coast as “very reasonable”.

Original story: Cinco Días (Raquel Díaz Guijarro)

Translation: Carmel Drake

Unemployment Rose Slightly In August As Tourism Boom Waned

5 August 2016 – Reuters

Spanish unemployment rose for the first time in five months in August, coinciding with the tail-end of a bumper tourism season, however, the underlying pattern suggests that a long but gradual recovery in the labor market remains on track.

A record summer for tourist arrivals has helped the economy shrug off a prolonged period of political uncertainty and, seasonally-adjusted, the number of people registered as jobless fell by 24,462 people in August, according to Labour Ministry data on Friday.

But compared with July, the jobless number rose by 0.39%, or 14,435 people, leaving 3.7 million out of work.

Increases in unemployment are common in Spain in August, as factories reduce activity in what is the peak holiday season and many private sector teachers fall off the social security registers that track job creation in the lull that precedes the start of the new school term.

Hotels and restaurants, meanwhile, continued to create jobs last month though the services sector as a whole laid off staff, the ministry said.

With the bumper summer for tourism drawing to a close, Spain faces a fresh challenge to keep its economic recovery on track as one of the major drivers of growth and employment wanes.

Two inconclusive elections in the past eight months have left the country unable to form a new government amid a stand-off between parties on the right and left, and the impasse may start to weigh more heavily on the turnaround if it drags on, acting Economy Minister Luis de Guindos said this week.

Later on Friday, Conservative acting Prime Minister Mariano Rajoy faces a second confidence vote in parliament for a second term in office. If he loses, as expected, the countdown would be triggered to a likely third election in December.

A gradual recovery in Spain’s jobs market, which collapsed in 2008 when a real estate bubble burst and the economy sank into a long recession, has so far underpinned a consumer spending rebound.

That in turn has helped economic growth stay robust in the first two quarters of the year, meaning Spain can ill afford any slowdown in job creation.

Compared to August last year, there were just over 519,000 more people in work, up 3%, the ministry said.

But on a month-on-month basis, nearly 145,000 fewer people were registered as working, the biggest drop between July and August since 2008.

Original story: Reuters (by Sarah White)

Edited by: Carmel Drake

C&W: Retail Rents Rise By 2% In MAD & BCN

17 August 2016 – Expansión

The recovery of the Spanish economy is causing demand for retail premises on the main streets of Madrid and Barcelona to increase, according to the latest quarterly Spain Country Snapshots report published yesterday by the advisor Cushman & Wakefield.

The real estate services company indicates that, taking into account the lack of available space in the prime areas of both cities, it is noteworthy that tenants are willing to pay higher rents in order to retain good locations.

The report also states that whilst rental prices have stabilised in the retail sector in general, they have increased by 1.9% in the prime areas of Madrid over the last year.

In addition, the report forecasts the opening of approximately 340,000 sqm of space dedicated to retail during the second half of the year across Spain. The new space will mainly be concentrated in three new shopping centres.

Good figures

Meanwhile, in the logistics market, Barcelona has reported some “outstanding” figures in terms of the leasing of space thanks, primarily, to the long-term project involving the implementation of Amazon’s logistics plant in Prat de Llobregat.

With this space, which measures 60,000 sqm, the city saw 161,000 sqm of space leased during the second quarter of 2016. The figure is similar to that reported in the same period in 2015 but contrasts with the 34,000 sqm of space leased in Madrid, according to data from the agency.

Cushman & Wakefield said that the forecast growth of the economy will have a positive impact on occupancy rates over the coming months.

In addition, it expects several operations to be signed before year end, after they were delayed from Q2.

Original story: Expansión

Translation: Carmel Drake

Bank Of Spain: Loans To Families Rose In H1 2016

2 August 2016 – Expansión

First increase since 2010 / The appeal of consumer loans and lower mortgage repayments is leading to a change in the decreasing loan balance trend. However, business financing decreased due to the political uncertainty.

(…) The latest figures from the Bank of Spain and the financial institutions show that the trend in terms of credit is changing, which could make 2016 the year of recovery in the credit sector.

In this sense, loans to families across the sector grew by 1.04% in June and recorded a half year increase, of 0.02%, for the first time since the start of the crisis. In addition, eight of the eleven Spanish entities that have now presented their results, reported increases in gross loans to clients during the first six months of the year.

These figures show that for the first time, the volume of new loans granted by the entities exceed the volume of repayments, thanks to the liquidity measures led by the European Central Bank (ECB) and the need for entities to grow volumes to offset their decreasing margins.

The last time that Spanish financial entities increased their total loan balance to families was during the first half of 2010, when the international financial crisis had not yet reached the Spanish sector.

In this way, families then held financial debt with Spanish banks amounting to €724,100 million, i.e. €117 million higher than the €723,993 million balance at the end of 2015.

Boost from consumption

This rise comes mainly due a boost from consumer credit in recent months, thanks to the economic recovery and the gradual reduction in unemployment. In this way, the outstanding consumer loan balance increased from €162,000 million at the end of 2015 to €171,00 million at the end of June 2016.

This €9,000 million growth offset the incessant deleveraging of households away from mortgages, which have decreased from more than €549,000 million in December last year to almost €541,000 million at the end of the first half of this year. In other words, a difference of €8,000 million, below the growth in consumption.

These figures reflect a deceleration in the decrease of the outstanding mortgage balance, which has been falling at a rate of more than €25,000 million in recent years. In 2016, repayments have slowed and the granting of new mortgages has increased, as reflected by the new credit data.

The change in the trend of loans to households has not affected financing for companies. That decreased by 1.6% during the first 6 months of the year – from €918,199 million to €903,378 million – due to the opening of other alternatives such as MARG and the issue of bonds, and the deceleration in demand caused by the political uncertainty. That was one of the main concerns expressed by Spanish bankers during the presentations of their half year results. (…).

By entity

(…)The increase in Bankinter’s loan balance (13.7%) was noteworthy, although that figure was impacted by the acquisition of Barclays Portugal, given that the entity does not segregate those numbers. It was followed by Abanca,which reported that its financing balance grew by 4.1%; CaixaBank, with a rise of 1%; and Santander España, with an increase of 0.8%. (…).

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

Tinsa: House Prices Rise By Most In Madrid & Barcelona

18 July 2016 – Expansión

The Balearic and Canary Islands are featuring in the housing recovery, but Madrid and Barcelona are leading the way; there, the number of transactions has picked up pace and prices are growing strongly once again. Most of these increases are due to the economic recovery, but the savings factor is also playing a major part.

In fact, the influence of private investors is still playing a crucial role in the strengthening of the two major real estate regions, whose central districts are the most sought-after by companies and individuals, both Spanish and foreign.

It is precisely the influence of these investors that boosted property prices in both capitals in the first place, firing the starting gun for the reactivation of the sector, as they committed to the prime areas before anyone else. These central districts, which are well-connected and offer good services, used to offer a certain degree of security for investors, and a great deal of potential for appreciation, even when everyone in the market was still searching for land.

Both cities were amongst the leaders of the increase in house prices during the second quarter of the year, according to data from the appraisal company Tinsa, published recently. Nevertheless, these increases were concentrated in some of the most expensive areas, as shown by the analysis by district of the local markets. Specifically, many of the neighbourhoods where prices stand at around €3,000/sqm in Madrid and Barcelona are also those where prices have risen by the most in the last year, whereas prices in those neighbourhoods that fall below the average have grown more moderately.

For example, prices in the Madrilenian neighbourhood of Salamanca have risen by 9.8% in the last year, whilst in Chamberí they have increased by 8.9%. Meanwhile, in Barcelona, the following districts stand out: Gràcia (where prices have risen by 12.7%), El Eixample (10.9%) and Les Corts (8.1%). These statistics show that the prime areas are recovering better than the rest. They are central, well-connected areas with very solvent demand, where returns are high and there is significant retail activity, which means they have significant potential for appreciation both for those buying to invest as well as those looking to put their properties up for rent. As with everything, there are notable exceptions, such as the Retiro area in Madrid and Sarrià-Sant Gervasi in Barcelona, which are increasing by below the average.

Other areas

Nevertheless, the real estate expert José Luis Ruiz Bartolomé indicates that the real estate market has now entered a new phase, in which the recovery is spreading to more and more areas. “Before, properties were only being sold in the best districts, but now the increases have spread to the most popular areas, as supply is limited and there are increasingly more buyers looking for homes to live in, rather than to buy as investments”, he explains.

For this reason, the most popular neighbourhoods have become more attractive with the recovery of the labour market and the opening of the bank financing tap. In this way, house prices in the Madrilenian neighbourhood of San Blas have risen by 9.9%, making it the second highest price rise district in the capital; meanwhile, Sant Andreu is also boosting prices in Cataluña, with an increase of 8.2%. Similarly, prices in all of the districts of Madrid that cost less than €2,000/sqm have increased by more than the average, with the exception of Villaverde, the cheapest of all, where prices have remained stable. Something similar is happening in Barcelona where the most popular areas, such as Nou Barris and Sants-Montjuïc, also grew by more than average. (…).

Moreover, Tasaciones CBRE indicates that the profile of investments funds “has evolved rapidly from being opportunistic to value-added, choosing instead to back development, the renovation of properties and, given that they have perceived the potential for refurbishments, they will gradually start managing plots of land in urban areas, with the aim of obtaining higher returns”. With this, the increase in demand and prices will increasingly move to more remote areas. (…).

Original story: Expansión (by Pablo Cerezal)

Translation: Carmel Drake

Knight Frank Sees Significant Growth Potential In Spain

30 June 2016 – Expansión

According to Humphrey White, the CEO of Knight Frank in Spain, the country has sufficient structures in place to be able to grow at a good pace over the coming years and to be one of the driving forces in Europe.

Brexit led to a general fall in European stock markets, an increase in the risk premium and the devaluation of the single currency, but since Monday, all of those indicators have been gradually returning to normal.

According to Humphrey White, Spain may benefit from this situation following the Partido Popular’s victory in the general elections, because it has the ideal space for the development of the economy.

The stable outlook for the Spanish economy is based on the following arguments: Spain has some of the best infrastructure in the European Union in terms of ports, airports and railway networks. In addition, unitary labour costs in Spain are amongst the lowest in the EU – which benefits companies wishing to transfer their company headquarters to Madrid or Barcelona.

In this sense, it is also necessary to point out that the real estate market in the Spanish capital is below those of other European capitals, such as Dublin. Furthermore, Madrid has become an indisputed hotbed for companies in the Information Technology and Communication sectors.

Not only that, financing is becoming accessible for individuals and companies once again and there is real movement in the labour market – although there is still a long way to go.

Original story: Expansión (by Alex Lázaro)

Translation: Carmel Drake

BBVA Reorganises Its “Bad Bank” After Key Director Leaves

6 June 2016 – Expansión

BBVA has put a new spin on the organisation of its bad bank. The entity chaired by Francisco González recently announced the disappearance of its problem assets division – Non Performing Assets – after agreeing the departure of its main Director and dividing up its functions between two other divisions, according to financial sources.

The Spanish group already reconfigured the division just over two years ago. Then, it handed over the task of accelerating the sale of problem assets to Pedro Urresti (pictured above), the Director who has now just left the entity as part of the reorganisation.

Urresti joined BBVA in 2006 from JPMorgan, where he had been responsible for Capital Markets in Spain and Portugal. At BBVA, where he replaced Carlos Pertego – the current Director of Goldman Sachs – he led the Financial Management and Investor Relations department until 2011, when González put him in charge of problem assets.

Following the dissolution of that area and the departure of Urresti, BBVA has chosen to divide its functions and share them out between two divisions. On the one hand, everything relating to real estate assets will be transferred to BBVA Real Estate – the unit in which Anida sits – led by Agustín Vidal-Aragón. On the other hand, the activity relating to the sale of debt portfolios will be transferred to Javier Rodríguez Soler, the bank’s Director of Strategy and M&A.

Reinforcement

Rodríguez Soler was one of the Directors who’s profile increased following the reorganisation of the management team performed by González last year, when he appointed Carlos Torres as the new CEO, to replace Ángel Cano. The Head of M&A, who until then had reported to the Finance Director, Jaime Sáenz de Tejada, went on to lead his own division, reporting directly to the President.

As a result of the new changes, BBVA hopes to accelerate the sale of its real estate assets, whose balance barely decreased last year, due to the takeover of Catalunya Banc.

During the two and a half years that Urresti has been in charge of the problem assets division, BBVA has been one of the least active large Spanish entities in the sale of portfolios, and has barely transferred any portfolios of loans or homes.

Meanwhile, other financial groups such as CaixaBank, Sabadell and Bankia have taken advantage of the improvement in the market to sell €17,000 million worth of non-strategic assets.

Furthermore, the entity has not sought to make any alliances in the sector through the sale of part or all of its real estate arm, like other entities did, including Santander, CaixaBank, Bankia, Sabadell and Popular, amongst others. It did consider selling off its collections business and it appointed KPMG to coordinate that sale, but it ended up pulling out.

According to financial sources, this strategy means that the sales rate of its real estate assets is slower, but the bank would benefit in the event of a faster than expected economic recovery, as it would obtain more in return for its properties and real estate collateral. Nevertheless, the risk still exists that the opposite may happen.

Original story: Expansión (by Jorge Zuloaga)

Translation: Carmel Drake

ST: Its Still Too “Early” To Talk About A “Complete Recovery”

21 April 2016 – El Economista

The CEO of ST Sociedad de Tasación, Juan Fernández-Aceytuno (pictured above), said on Tuesday that, despite the clear stability that we are seeing in terms of house prices, it is still “early” to talk about the “complete recovery and normalisation” of the market, and he warned that the recovery will only be an “objective” for as long as the net mortgage volume balance continues to decrease.

Those were the words of Fernández-Aceytuno during the opening session of the XXIII Meeting of the Finance Sector, an event organised by Deloitte, ABC and ST Sociedad de Tasación, at which he presented the five key indicators of the real estate sector.

Fernández-Aceytuno indicated that although there has been a double-digit increase in the number of appraisals commissioned by financial entities to support mortgage requests, the volume of mortgages granted in 2015 was “similar to the volume granted in 1998”, i.e. the lowest level in the series detailing mortgage activity prepared by the Spanish Mortgage Association.

Moreover, he said that in 2015, cement consumption amounted to 11.5 million tons, “similar to the levels seen in the 1930s and almost six times lower than the historical peak”.

“It would be interesting to validate and understand that real estate cycles in Spain are 16 years long, eight years of price and activity decreases, followed by eight years of rises”, said Fernández-Aceytuno, before going on to list the five key indicators for determining at which point we are in the cycle.

The five key indicators of the real estate sector

The first is the relationship between mortgages and transactions, regarding which he noted that during times of growth and recovery, the number of mortgages exceeds the number of transactions. “In Spain, that relationship was reversed in 2011; the good news is that since 2015, the number of mortgages granted has grown more quickly than the volume of house purchases”, he said.

Similarly, he indicated that the relationship between the percentage of appraisals commissioned by financial institutions for own assets and loan collateral has varied “significantly” from those commissioned by end clients to support new mortgage applications.

In terms of the creation of new households, Fernández-Aceytuno highlighted that, according to sources at La Caixa, almost 75,000 new households were created in Spain last year, which represents just 20% of the historical maximum. According to the Bank of Spain, the reference figure should amount to around 250,000 new households per year.

Similarly, he said that the New Home Census for 2016 compiled by ST-Sociedad de Tasación reported around 5,400 new homes for sale, compared with the 45,000 resulting from the calculations published by the Ministry of Development.

The variables that determine this difference are: the age of the home, its rental yield and the preference of property developers and banks to sell their homes in more favourable economic environments.

Finally, in terms of the evolution of outstanding mortgage balance, he said that currently the figure for the volume of loans being repaid exceeds the figure for the granting of new mortgages. “Although the latter increased at a higher rate in 2015, for as long as the net mortgage volume continues to decline, the recovery will just be a goal”.

Original story: El Economista

Translation: Carmel Drake

Developers & Funds Team Up To Construct Homes

7 March 2016 – Finanzas

The crisis that has affected the real estate sector since 2007 has given rise to new alliances between the main players in the market, such as the unions between international funds and domestic property developers that have proliferated, particularly in last two years.

With the return of credit to the real estate sector….alliances have started form between international funds who want to expand beyond the tertiary sector and move their money into the segment for residential development, in the hope that the economic recovery will consolidate and demand will increase, and traditional developers, which have the know-how about the residential sector.

The President of the trade association for construction developers in Spain (APCE), Juan Antonio Gómez-Pintado, admits that the information available about these alliances is vague because the sector is still “not very transparent” and figures are scarce.

Data from the Ministry of Development indicates that the number of permits requested for the construction of new homes shot up by 42.5% last year, to reach 49,695 certificates in November. Nevertheless, although the data from 2015 is the best figure in the last five year, it still falls well short of the maximum reached in 2006, when 865,561 permits were requested.

In the midst of this opacity, Gómez-Pintado explains that all of this began when the funds, which manage “a lot money but have few employees”, decided to construct homes and “sought out developers with extensive knowledge of the area where they wanted to invest and with sophisticated (internal) structures”, to allow them to report on the status of expense accounts and construction work on a weekly basis and, above all, to work with players that display good practices and regulatory compliance.

Medium-sized and large developers

Thus, Gómez-Pintado says that the funds are interested in medium-sized and large development companies, whilst the CEO of Aelca, José Juan Martín, says that they are also keeping their eyes on those developers that have knowledge of micro-markets.

When it comes to launching an operation, the funds prefer to invest in new developments with their partner, right from the start. Again, the aversion to risk is there and so they prefer to team up with a developer from the get-go, i.e. to buy the plot of land. (…).

In terms of location, Mikel Echavarren, CEO of the financial consulting firm Irea, points to destinations such as Madrid, the Costa del Sol and the city of Málaga, the Balearic Islands, Barcelona and the surrounding area, and the Mediterranean Coast, as the most attractive areas for this type of partnership.

Great opportunity

The sources consulted agree that these partnerships represent a good opportunity for developers, especially those players that decreased in size during the crisis and now want to grow again.

To this end, the President of APCE believes that this is “a model that is here to stay”. “The funds have a time horizon of 5 to 7 years, over which they have to recover their investment, and if things go well then they will stay”, he adds.

In Martín’s opinion, “there are no long-term relationships at the moment, but that is something that is improving every day” because “bank financing is continuing to provide support, but there is an initial investment for projects that the banks will never finance”.

Henceforth, the CEO of Aleca believes that “long-lasting relationships” will also arise between property developers and funds, but he thinks that they will only happen in the case of those developers that have a vision of all or almost all of the domestic market. (…).

Original story: Finanzas

Translation: Carmel Drake