Tag: financing conditions

Stoneweg Will Construct 2,000 Homes During 2017

22 May 2017 – El Mundo

(…) In line with the strong performance of the Spanish economy and, more specifically, the residential market, the real estate investment platform Stoneweg, a company that manages funds on behalf of institutional investors and family offices in Europe and Latin America, has just made its official presentation, confirming that it has €750 million to invest in property development in Spain during 2017.

Although headquartered in Switzerland, the company was founded in 2015 by two Spaniards, Jaume Sabater and Joaquín Castellví, who both previously worked in the Real Estate area at the investment bank Edmond de Rothschild. Over the last few years, Stoneweg’s investment capacity in real estate assets has exceeded €1,600 million, spread across Spain, the USA, Italy and a small part of Switzerland. (…).

Commitment to Spain

“We decided to take positions in Spain in 2015, buying land and buildings from financial institutions, Sareb and individual owners”, said Joaquín Castellví, Stoneweg’s CEO in Spain. The reasons for the firm’s commitment to Spain include its confidence in the strength of the economic recovery, the “attractive” financing conditions being offered for real estate assets and the “speed and transparency” with which the firm is able to access and close operations with local agents. “Moreover”, added Castellví, “mortgages for real estate assets are increasing again, which means that the Spanish market will be the ideal place to sell assets in around five years”.

Stoneweg’s main investment focus is on the residential market (where it will allocate two-thirds of its capital under management) be it the development of new homes or the renovation of existing buildings. To this end, the modus operandi of the management company, which has already invested €450 million of the €750 million that it is planning to spend this year, consists of closing operations to purchase land or buildings with tickets of between €100 million and €150 million to build on themselves or in conjunction with local property developers.

Currently, the company has 30 residential projects underway (in varying phases), with a total of 1,300 homes, which are due to be ready at various points between this year and 2020. It also plans to close the year with 50 projects in its portfolio, corresponding to 2,000 homes for sale.

Stoneweg insists on building homes “in accordance with the highest international standards, to ensure an extraordinary level of comfort”.

In terms of their locations of choice, Castellví confirmed that his company is focusing on Madrid, Barcelona and the Mediterranean Coast, “but” he says, “ we are flexible both in terms of the type of project, as well as location within the aforementioned areas”. (…).

Original story: El Mundo (by Luis M. De Ciria)

Translation: Carmel Drake

Bank Of Spain: The Housing Market Is Not Overheating

4 April 2017 – El Mundo

The Bank of Spain (BdE) does not perceive “any signs of overheating” in the housing market, nor does it expect the real estate sector to overheat anytime soon, given that the recovery in the market is happening at the same time as the process to deleverage the economy.

During the presentation of the supervisory body’s macroeconomic forecasts for the Spanish economy (2017-2020), the Director General of Economics and Statistics at the Bank of Spain, Pablo Hernández de Cos, denied that the housing market is showing any signs of overheating.

Hernández de Cos highlighted that the housing market has been enjoying a recovery for several quarters, which is being seen in the number of transactions, the number of new builds started and the trend in prices, although the Bank of Spain does not expect “the market to overheat”.

Despite the fact that the growth rates “may be significant”, the Director of the Bank of Spain said that after a “very significant” adjustment process in the sector in terms of transactions and the correction of prices, the recovery in the market is taking place in parallel to the continuation of the process to deleverage the Spanish economy. “We are not seeing any signs of overheating”, he added.

“Uneven” reactivation

In its forecasts, the supervisory body notes that high-frequency information relating to both the number of new builds started and the number of transactions involving residential properties, indicates a “continuation of the path of gradual improvement in residential investment, whose prolongation during the forecast horizon will be based on the favourable evolution of employment, the expected continuation of propitious financing conditions and the expectation that assets are going to appreciate in value”.

Nevertheless, it forecasts that the recovery will progress in an “uneven” way by region, with the main cities and autonomous regions most focused on tourism experiencing the most intense growth. In any case, it warns that the latter areas may experience a certain moderation in demand as a result of the process for the United Kingdom’s exit from the European Union (EU).

Original story: El Mundo 

Translation: Carmel Drake

Bankinter: House Prices Will Rise By 3%-4% In 2017 & 2018

20 February 2017 – Idealista

The rise in house prices is starting to run out of steam and will become more moderate over the next two years. That is according to forecasts from Bankinter, which explains, in a report about the real estate sector, that the limitation on the upwards potential is the consequence of several factors.

On the one hand, prices are now reaching their pre-crisis levels in many areas, primarily in prime locations and, on the other hand, the financial effort that families are having to make to acquire a home is starting to increase once more.

As a result, the capacity of families to access the residential market will be limited if prices rise at disproportionate rate. In this way, Bankinter estimates that house prices will grow by between 3% and 4% in 2017 and 2018. Moreover, the entity insists that, despite the moderation in price increases, the residential market will continue to rise.

One of the reasons is the shortage of supply, given that the number of finished homes is still at historical lows (40,000 homes were completed in 2016) and the fact that that figure cannot cover the normalised demand of around 200,000 new homes per year. “The combination of the scarcity of supply and the increase in house sales (which exceeded 400,000 operations in 2016) will continue to put upwards pressure on prices”, said the bank, which insists that, in this context, prices will continue to rise.

On the other hand, the report highlights the appeal of large cities, primarily Madrid and Barcelona, which are registering YoY price increases of between 4% and 7% and which have now recorded increases for eight quarters in a row. By contrast, average prices are still adjusting downwards slightly in YoY terms in other cities such as Bilbao and Sevilla.

Another factor that is also affecting prices is the increase in rental prices, which are also being driven upwards by the evolution of leases in the large cities, where, like in the case of the purchase market, there is a shortage of supply and high demand.

Demand for 500,000 homes.

The financial institution predicts that residential demand will continue to rise. “The upwards trend will continue for the next few years. We expect growth of almost 10% in 2017 and for demand to reach 500,000 homes by 2018”, explains the report.

But what is behind this increase? As sources in the sector have been commenting for several months, the drivers of demand are economic growth and the creation of employment, as well as the fact that housing is becoming more attractive as an investment opportunity and that financing conditions are still accessible.

Nevertheless, and this is where the experts are focusing, none of these drivers are reducing the effort that families are having to make to buy a home.

“The effort (that families are having to make) has risen again to 6.6 years of annual household income (compared to 6.2 years at the end of 2014) and there is no scope for improvement in terms of financing conditions. Finally, Sareb’s marketing of discounted homes located in areas characterised by oversupply will continue to limit the increase in average prices”, said Bankinter. (…).

Original story: Idealista

Translation: Carmel Drake

Ministry Of Dev’t: New Home Permits Soared By 17% In 2016

4 January 2017 – Expansión

Moreover, loans to build new homes have grown by 37%, despite the tightening of controls by the banks.

A decade later, the cranes are back on the skyline of Spain’s major cities once again. The economic improvement and return of credit to the property sector boosted the construction of new homes by 17% in 2016, according to the construction permit statistics published by the Ministry of Development.

The growth was driven by a 37% increase in the financing granted to construction companies and property developers, which received €1,025 million between January and October, according to the General College of Notaries. The banks have now digested the majority of the toxic assets left over from the bubble and are opening the credit tap to the construction sector once again, albeit including more restrictions and controls to avoid repeating the errors of the past.

On the one hand, in most cases, financial institutions are demanding that 80% of developments are pre-sold before the construction of any new buildings can begin. Moreover, the banks are requiring project monitoring to audit the execution of the work and, in the same sense, a more detailed control of the clients that choose to buy properties.

With the money loaned by the banks, property developers and cooperatives have started to design buildings aimed at capturing the demand for new homes that exists in the market. “Clients believe that the worst of the crisis is over and that prices are not going to decrease any further. Moreover, financing conditions for buyers are unique given the low level of Euribor”, explains Daniel Cuevo, Chairman of the Association of Property Developers in Madrid (Asprima).

But the doors to the new real estate market have not been opened to everyone. Most of the new homes sold are “reposition” properties, in other words, they are properties that replace homes that have become too old or too small for their occupants. Young people are finding it the hardest to form their own homes, due to the high rate of youth unemployment, the level of wages and the instability in the market. (…).

In total, during the first ten months of 2016, 16,043 permits were requested to build new homes. The sector expects to reach the 20,000 permit threshold by the end of the year, a figure that exceeds the number of permits requested in 2015 by 17%, but which is still well below the 113,000 permits requested in 2006, a record year, at the height of the real estate bubble. (…).

On the other hand, the new homes that are being built post-crisis are not the same as those that were built during the boom years. Now, property developers are designing buildings with three-bedroom homes that cost the same as a two-bedroom home back in 2006. Urbanisations, which become so fashionable at the beginning of the century, are also back in demand. “People want homes with padel courts and a swimming pool, plus they now also want specific spaces to celebrate parties for children and adults”, explains the President of Asprima. In total, the Ministry of Development granted 1,175 permits to build urbanisations in Spain during the ten months to October 2016.

The increase in property construction has been accompanied by more transactions involving land. The number of land purchases by companies recorded an average growth rate of 23% during the nine months to September 2016, across the country as a whole. In certain regions, such as Madrid, the increase during the first three quarters of the year amounted to 135%. (…).

The improvement in new build construction work also extended to renovations. Thousands of households took advantage of the economic recovery to undertake home improvements and even to extend their properties. Thus, during the first 10 months of 2016, 21,801 requests were filed to renovate or restore homes, up by 2.1% compared to a year earlier. Meanwhile, demand for permits to extend homes soared by 39%, to 1,634. (…).

Original story: Expansión (by Victor Martínez)

Translation: Carmel Drake

Fitch: Banks Are Selling Homes With Record Discounts Of 65%

27 October 2016 – Expansión

The housing market is improving, supported by the strong macroeconomic outlook. Nevertheless, this increased optimism is not being reflected in the prices at which banks are selling their foreclosed properties.

According to a report from Fitch Ratings, which will be published today, banks have continued to sell homes during the first half of the year at prices that represent an average discount of 65% on the original appraisal value – the highest ever. “This is because the majority of the assets that have been sold recently are lower quality products, those for which demand was lowest during the worst years of the crisis”, explains the report prepared by the ratings agency’s analysts Christian Gómez, Juan David García and Beatriz Gómez. And the outlook is not much rosier. In Fitch’s opinion, there will only be a reduction in the discounts being applied to these assets if the recovery in the housing market improves significantly.

In this sense, Fitch highlights the role being played by the servicers and other firms that specialise in the management of these types of assets. Specifically, the banks sold the managers of their real estate portfolios to funds such as Apollo, Värde and Cerberus. They now operate as independent firms in the financial sector and “they have had a positive influence on the management of residential mortgages and on the real estate sector in general since they entered the market three years ago”, said Fitch.

“They will have an increasingly strong influence in Spain due to their competitive advantages (more technological capacity and international experience) than the banks”, it added. Fitch estimates that between €20,000 million and €30,000 million of problem assets relating to the real estate sector are now being managed by these platforms, which prefer to reach a consensus with the borrower before pursuing legal channels.

Potential for more lending

The ratings’ agency noted that new mortgage lending grew by 38% during the second quarter of the year compared with the same quarter last year, thanks to the economic recovery and the improvement in financing conditions. Fitch expects this trend to continue because the total volume of credit currently represents just 30% of its pre-crisis levels, and other factors are also at play. This recovery is significantly lower than that seen in other countries, such as Italy, Germany and France, whose credit volumes now represents 80% of their pre-crisis levels.

Original story: Expansión (by D. Badía)

Translation: Carmel Drake

Tecnocasa: Second-Hand House Prices Rose By 8% In H1

7 September 2016 – El Mundo

The average price of second-hand housing in Spain rose by 7.99% YoY during the first half of 2016, to €1,666/sqm, according to the XIII Report about the residential market, prepared by Tecnocasa and the University of Pompeu Fabra (UPF) using sale/purchase and mortgage data from the real estate company.

Despite the significant increase, this average price is still well below the maximum values that the market reached at the end of 2006 and the beginning of 2007, when the average cost per square metre of second-hand homes amounted to more than €3,500. (…).

The city of Barcelona, which saw a price rise of 9.45%, led the increases during the first half of 2016, followed by Málaga (9.21%) and Madrid (9.03%). In this way, the cost per square metre rose to €2,443/sqm in Barcelona, to €1,044/sqm in Málaga and to €1,835 in Madrid.

In this regard, Tecnocasa notes that “we are seeing a two-speed recovery”, given that prices in cities such as Guadalajara, Sevilla, Zaragoza and Valencia increased by less than 2% (during the same period).

At a press conference held to present the report, the Director of the Department for Analysis and Reports at the Tecnocasa Group, Lázaro Cubero, explained that rental prices are also increasing, in the same proportion, and the average mortgage is also rising (€91,808), which represents an increase of 9.8%, although still represent less than half the lending figures in 2007 (€185,462). In this sense, it is worth remembering that the average monthly repayment amounts to €367.

Cubero stated that prices are still “attractive” – they are 52% lower than they were in 2006 for Spain as a whole – and financing conditions are very favourable, thanks to low interest rates, at a time when vendors are still having to apply discounts to their initial asking prices to achieve a sale.

The CEO of the Tecnocasa Group, Paolo Boarini, indicated that financial institutions are still behaving in a conservative way when it comes to granting mortgages: they are granting 73% of the appraisal value, and “it is very hard for people with temporary contracts to obtain a mortgage; self-employed people also face challenges”.

Meanwhile, for the Professor of Economics at the UPF and the coordinator of the report, José García Montalvo, the increase in the uptake of fixed-rate mortgages is “a significant change in the right direction”. He criticised Spain in this regard, stating that variable rate mortgages do not account for 95% of the total market in any other country, given that this means all of the risk in terms of interest rate fluctuations is transferred to the client. (…).

On the other hand, the Tecnocasa Group brokered 4,327 house sales in Spain during the first half of the year, up by 22% compared with the same period in 2015, as well as 1,445 mortgages, up by 28%, through its network of 465 offices (19.23%) and 2,000 sales agents. (…).

Original story: El Mundo

Translation: Carmel Drake

C&W: Spain Will Be A Key Country For RE Lenders In 2016

22 February 2016 – Mis Oficinas

Spain will continue to represent a very attractive market for entities wanting to lend money to the real estate sector in 2016, according to “The European Lending Trends” report published by Cushman & Wakefield, the global leader in real estate services. This conclusion has been drawn on the basis of surveys completed by 60 European lenders, who contributed €80,000 million in loans to the real estate sector in 2015.

11% of the entities that responded to the questionnaire expressed a clear interest in granting loans to (companies in) Spain over the coming months. That figure is higher than the 9% obtained in the previous report compiled by Cushman & Wakefield. This upward swing in Spain is the largest increase recorded in Europe.

Meanwhile, the survey shows that average financing conditions have also improved in Spain. In Madrid, average leverage levels are close to 59% (previously they stood at 54%), whereby surpassing those recorded in comparable cities – Milan stood at 57% and Lisbon at 50%. Similarly, average margins have reduced, but Madrid still generates returns of 185 bps, well above those recorded in the established markets of central and northern Europe. In the previous report, average margins in Madrid amounted to 210 bps.

According to Pablo Kindelán, Associate in the Capital Markets team at Cushman & Wakefield, “this report confirms a trend that is mirroring real estate investment in Spain, with significant interest from investors, record levels of activity and decreasing yields. The improvement in financing conditions highlighted in this report can only serve to facilitate investment activity”.

According to the report, average loan-to-value, LTV, ratios in Europe range between 55% and 66%, with the highest ratios recorded in Frankfurt and Paris (64%), followed by London (63%). The debt funds are willing to lend at higher LTVs than those typically granted by commercial banks and institutions, and only a few lenders want to expand through speculative developments.

In terms of margins, there are significant variations in the averages by country. In this sense, Stockholm records margins of 130 bps, Frankfurt and Paris generate margins of 140 bps, whilst Lisbon registers margins of 250 bps. Milan is the only other city (in Europe) where margins exceed 200 bps. (…).

Original story: Mis Oficinas

Translation: Carmel Drake