Town Planning Paralysis In Madrid: 60,000 New Homes On Hold

2 February 2017 – El Economista

Paralysis is the word that best defines town planning in Madrid at the moment. And, the people who are ultimately paying the price for these stoppages in the capital are its citizens. The shortage of supply is pushing up land prices, which is, in turn, driving up house prices, forcing many families out of the city centre.

That is the scenario that Madrid is currently facing.  Construction of more than 60,000 homes has been suspended, in the north and south of the city alike, projects as iconic as Operación Chamartín with 17,000 homes, Valdebebas with 1,000 homes, Residencial Metropolitan with 400 homes, Berrocales with 22,000 homes and Operación Campamento with 11,000 homes, are being affected. And these are just a few of the most high profile examples that are still waiting to receive the green light from the Town Hall of Madrid.

The paralysis of these projects has created a lack of supply in terms of housing, which is forcing people to move to towns on the outskirts of Madrid. For example, in the north of the capital, buyers are moving towards Alcobendas and San Sebastián, and in the south they are moving towards Rivas. “These towns are aware of the significant demand that they are generating and in the end, that is causing prices there to rise. In fact, the supply has almost run out in Rivas”, explains Ignacio Ortiz de Andrés, analyst at Foro Consultores.

According to the politician Bosco Labrado, spokesman for the Ciudadanos Party and President of the Committee for Town Planning at the Town Hall of Madrid, “in order to resolve town planning in Madrid, we at Ciudadanos propose obtaining consensus between all of the political forces and agents that participate in town planning – we demand greater legal certainty, updates and modifications to the General Town Plan – which is the tool that we use nowadays, but which is out of date – and finally, support for more public-private collaborations, which have already worked well, such as the renovation of the Beurko neighbourhood in Vizcaya, and efforts to try and strengthen them”.

Affordable (subsidised) housing is particularly scarce. If we look at the south of Madrid, demand has been forced out to towns on the outskirts due to the lack of supply. “If someone is looking for a subsidised homes for between €160,000 and €200,000 with three bedrooms, there is currently nothing available in Madrid. In the south, all construction work at Los Berrocales, where most of the land is owned by the Town Hall, has been suspended and demand has moved to Rivas”, said Juan José Perucho, CEO at the Ibosa Group.

And Los Berrocales is not the only area where work has been suspended. The situation is the same with Operación Campamento, owned by the Ministry of Defence (…). In short, in both the north and south of Madrid, the Town Hall has put the brakes on and Madrid’s housing supply is becoming increasingly limited.

Original story: El Economista (by Luzmelia Torres)

Translation: Carmel Drake

Spain Needs To Build 150,000 New Homes Per Year

27 December 2016 – El Confidencial

The International Monetary Fund (IMF) issued a warning a few weeks ago: the greatest danger in terms of a new real estate bubble on the world scale is the lack of homes. Although it seems impossible, Spain, with its housing stock of 25 million – for a population of 47 million – of which approximately one and a half million are empty, needs more homes. In fact, it needs around 150,000 new homes per year in order to have a healthy residential market. Otherwise, there will end up being strong upwards pressure on prices (of both new builds and second-hand properties), which could lead to a new and much-feared bubble.

At least that is according to the majority of the experts in the real estate sector. From appraisal companies, to consultancies, to property developers, to cooperative managers. Everyone agrees that Spain needs more homes. But, how is that possible when the country has a surplus stock amounting to almost half a million units?

“The surplus stock, or rather, the census of unsold homes is not always in the locations in which there is demand. Homes are not bricks that can be moved from one place to another”, said Juan Fernández Aceytuno, Director General at Sociedad de Tasación. “Moreover, in some places in Spain, the stock is very low and new homes need to be built to satisfy demand”, added Julián Cabanillas, CEO at Servihabitat.

But isn’t the second-hand market sufficient to satisfy demand? “When making a major investment such as buying a home, families prefer to acquire a new build than a second-hand property” (…), said Ernesto Tarazona, Partner and Director of Residential and Land at Knight Frank.

The problem, according to the real estate experts, is that hardly any new homes are being built. Since the burst of the real estate bubble in 2007, house construction has been completely paralysed. Spain went from building 800,000 homes per year to just 35,000 homes in 2013 and 2014 (according to housing permit data from the Ministry of Development) and for the market to be healthy again, we should be building around 150,000 units per year.

“House prices and sales are definitely showing signs of improvement, but we cannot talk about the stabilisation of the sector until we see a recovery in terms of construction”, said Carolina Roca, Vice-President of the Property Developers Association in Madrid (Asprima). (…).

And that is not an easy task, according to Roca. “In order to reach that figure (of 150,000 new homes per year), we not only need land, but we also need to restore the productive and entrepreneurial fabric of the sector, given that the majority of the players in the property development and real estate sectors have disappeared. Very few property developers are actually building homes at the moment, and those that are, are doing so using own funds for the most part, given that although financing to individuals has recovered, it has not for property developers to the same extent. Not even with the entry of new players such as investment funds will we reach those figures”, laments Roca.

“The construction of 150,000 homes per year seems like a reasonable figure. Nowadays, around 500,000 homes are sold per year, of which, only 10% are new builds. During the boom years, new builds accounted for 50% of all house sales and it is likely that the percentage will end up stabilising at around 30%, which means that 150,000 homes per year seems reasonable”, acknowledged Juan Velayos, CEO at Neinor Homes, one of the new players in the sector. (…).

“Nowadays, everything that is built is sold. Off-plan homes are sold out in a matter of weeks”, said Ernesto Tarazona who, nevertheless, recognises that a very important segment of potential buyers is being left out of this timid recovery. “Nowadays, anyone wanting to buy a home for €160,000 in Madrid is going to be disappointed; they just can’t. There isn’t any land available to build houses at those prices”, comments Juan José Perucho, Managing Partner at the Ibosa Group. (…).

Original story: El Confidencial (by Elena Sanz)

Translation: Carmel Drake

Ibosa To Convert Hotel Foxá Into Luxury Homes

30 November 2016 – Cinco Días

The Hotel Foxá located next to Chamartín train station will soon disappear to be converted into a residential tower containing luxury homes, worth up to €1 million each. According to the property developer, the Ibosa Group, the design will adopt a “New York architecture” style.

The company, which manages housing cooperatives, will spend €30 million (including the purchase of the building) on the project to convert the former Hotel Foxá M-30 in Madrid – which has been closed since 2013 – into a 16-storey residential complex containing 72 homes, which are expected to be handed over to their owners during the final quarter of 2018.

70% of the homes in the tower, known as Torre Borealis, have already been sold and the demolition work is expected to begin next spring, once all of the properties have been sold. The construction work will involve the complete renovation of the building, including a total transformation of the façade, according to explanations provided by the Head of Ibosa.

In fact, the company expects to obtain the licence that it needs to undertake the work at the building within the next few weeks. The property previously housed a four star hotel for 13 years.

The price of the homes will range from €175,000 to €900,000, with each property containing between one and four bedrooms. Moreover, the constructed surface area will range between 40m2 and 200m2 per apartment. The building, located on Calle Serrano Galvache 14, will have a double height entrance hall and 1,000 m2 of common areas, including a “gastroteca”, a swimming pool and a gym. There will be several different types of apartments, including ground floor duplexes, (normal) duplexes and penthouses with terraces up to 120m2.

Hotel Foxá M-30 closed its doors after the company Trome, owned by the businessman Mariano Moreno Fernández, was declared bankrupt, with debt amounting to around €300 million. The company used to own several hotels and spas.

Original story: Cinco Días

Translation: Carmel Drake

Cooperatives Queue Up To Buy A Plot That The Treasury Purchased 30 Years Ago

16 February 2015 – El Confidencial

All eyes are focused on one plot of land in Madrid. A plot of land, which the Treasury purchased from a group of nuns for 800 million pesetas in 1985, could now, three decades later, be sold for several million euros. It is one of the largest and rarest gems left in Madrid and many of the large housing cooperatives have already expressed interest. These same cooperatives were responsible for some of the most talked about transactions in the country last year; and this deal would allow them to offer hundreds of low cost homes in the centre of Madrid, just a few metres from the Paseo de la Castellana, something that was unthinkable a few years ago.

The plot measures just over 15,000 square metres and is located at the intersection of Calles Padre Damián and Fray Bernardino Sahagún, very close to the Castellana and ten minutes away from the Santiago Bernabeu stadium and the Torres KIO. It is owned by State Heritage (Patrimonio del Estado), which in turn reports to the Treasury (Ministerio de Hacienda). The land has its own history…it used to house a convent, which was demolished shortly after the plot was acquired by the Government. Three decades later…., the plot may come back onto the market in a perfect transaction for the public coffers, thanks to the increase in land values during the intervening period.

Nevertheless, before the plot is auctioned, some administrative hurdles will need to be overcome to change its intended use. The State Heritage department has proposed a one-off amendment to the General Urban Plan for Madrid because, for this land to be attractive in the market, and for the Treasury to obtain the maximum price for its sale, its use must be residential; currently it may only be used for the collective services of the Public Administration. (…)

This one-off amendment is awaiting provisional approval by the Town Hall of Madrid and definitive approval by the Community of Madrid, according to sources from the Treasury who say that until this happens, the plot will not be put up for sale. (…)

(…)

Under the spotlight of the management cooperatives

“The size of the plot, its location, its environment, its intended suitability for construction, its scope, the potential appeal of the project that could be developed makes this plot of land a clear target that is going to generate a lot of interest”, said Leopoldo Morena, the CEO of the Ibosa Group, the cooperative manager that was responsible for one of the most important land transactions in the capital last year, when it was awarded ownership of Metro de Madrid’s depots in Cuatro Caminos for €88 million. That project, Residencial Metropolitan, which will bring more than 400 homes onto the market, with prices upwards of €2,600 per square metre, has almost all been sold (95%).

Nevertheless, the operation of the year was, without a doubt, the sale of a plot of land on Calle Raimundo Fernández Villaverde by the Ministry of Defence in a bid that was won by the cooperative manager Domo. Its offer for €111 million exceeded those made by Ferrovial, Pryconsa and Construcciones Amenabar; all of the homes in the development have already been sold. The sales price of the 355 homes was expected to start at €3,300 per square mete.

These two transactions boosted the market in 2014. According to data from the real estate consultant Irea, transactions involving land in Spain amounted to €346 million last year, which represented just 4% of the total investment in the market. A low percentage, however, in 2013, there weren’t any transactions involving land above five million euro, the threshold that Irea uses to prepare its analysis of investment in Spain (and so the deals closed in 2014 did represent a move in the right direction).

“Transactions such as the one in Calle Raimundo Fernández Villaverde, the Metro de Madrid and more recently, Amenabar’s purchase of various plots of land from Sareb, without financing, were unthinkable a few years ago”, explains Mikel Echavarren, the CEO at Irea.

In his opinion, the main players that may sign land-related transactions in Spain this year will continue to be domestic companies, developers and cooperatives, which are capable of financing their land purchases with their own funds: “There are scarcely six companies in Spain at the moment with sufficient financial capacity to finance land purchases”….

The role of international investment funds in the direct purchase of land will be practically zero, but they will be involved in the acquisition of portfolios of debt that contain land or residential developments as underlying collateral.

The plot of land in Madrid has also attracted interest from prospective house buyers, as evidenced by the fact that some managers have received requests from more than 2,000 interested parties. And it is no wonder: if the land falls back into the hands of cooperatives, they may build homes right in the centre of Madrid at very competitive prices, especially compared with those in private developments, such as the one that will start soon in Calle Juan Bravo, 3, where the prices of the luxury homes that are going to be built on the site may reach €9,000 per square metre, significantly higher than the less than €4,000 per sqm being charged by both the Ibosa Group and Domo Gestora for their recent acquisitions in Madrid.

Original story: El Confidencial (by Elena Sanz)

Translation: Carmel Drake