Juan Velayos: “Neinor will Not Buy Land in Municipalities that Oblige 30% of Developments to be used for Social Housing”

19 October 2018 – El País

Next week, the ‘Meeting Point’ real estate fair is going to be held in Barcelona and the atmosphere is palpable: property developers are angry about the obligation to allocate 30% of new developments to social housing, a measure approved recently by the Town Hall of Barcelona, which may be extended to other municipalities. In an informative breakfast on Friday, the CEO of Neinor Homes, Juan Velayos, added fuel to the fire. Velayos explained that this “manifestly illegal” measure, will generate legal uncertainty and hinder the purchase of land for construction. In the case of Neinor Homes, Velayos confirmed that his firm will not buy land in any municipalities that adopt the obligation to allocate 30% of developments to social housing.

The measure approved by the municipal government led by Ada Colau will oblige property developers to reserve 30% of all new and renovated residential developments spanning more than 600 m2 to social housing. “The need to create social housing is a reality in the city, but the measure is very unfortunate. It is great for winning votes, but not for resolving the problem of housing”, said the CEO of Neinor Homes. In his opinion, the obligation established by the Town Hall, which does not discriminate by area or reflect the specific needs of neighbourhoods, only serves to restrict the action of property developers. They will not have the same incentives to buy or build and, in his opinion, that will affect buyers, who will see prices continue to rise.

For the time being, the measure does not affect Neinor Homes, given that the real estate company only has 40 homes in the city of Barcelona. Its activity is focused on the municipalities of the metropolitan area. When asked about the possibility of those cities also adopting the measure, Velayos said that Neinor “would not buy land, or it would only buy it for a much lower price, because it would be land with a worse output”. “Municipalities that adopt this measure are going to deter investment”, he added. Velayos also criticised the ruling from the Supreme Court that establishes that it should be the banks, and not customers, who bear the cost of the Documentation Registration Tax (AJD) for mortgages. In the opinion of the CEO of Neinor, this is another measure that “will generate legal uncertainty” and it is the buyers who will have to take out more expensive mortgages.

Uncertainty due to the independence process

Despite this “legal uncertainty”, which has also been linked to the independence process in Cataluña, Velayos insisted that the region “is a very important location”. Neinor Homes has 34 developments in the autonomous community, comprising 2,700 homes in total. Of those, four developments, containing more than 200 homes, have already been sold.

In Spain, Neinor owns land for the development of 180 projects and 13,500 homes. Of those, 5,000 homes are under construction. The land owned by the property developer is worth €1.8 billion. The firm plans to hand over 1,000 homes in 2018 with more than 100 developments underway, followed by around 2,000 homes in 2019 with 120 developments underway, before reaching its “cruising speed” with the delivery of between 3,500 and 4,00 homes in 2020 and 120 developments underway.

Original story: El País (by Josep Catà)

Translation: Carmel Drake

Neinor Starts Buying “Non-Finalist” Land

23 February 2018 – Expansión

With its first birthday as a listed company just around the corner, Neinor is making a strategic shift. It is negotiating the acquisition of “non-finalist” land (plots that require urban planning management to become developable) to maintain its pace of development once it has reached its cruising speed in 2020. Specifically, the property developer, which has plots of land on its radar worth €500 million, is holding negotiations with banks, private investors and institutional funds regarding the possible completion of three land purchase operations involving “non-finalist” plots for around €200 million. They will allow for the construction of around 1,000 homes spread over various cities, including Madrid and Barcelona.

Under the framework of the negotiations, Neinor plans to make an initial payment of almost 10% of the total price to take control of the “non-finalist” land and to pay the remaining balance once the plots have been granted their corresponding urban planning permits, within a period of between three and five years. “My concern now focuses on acquiring a land bank to put into production from 2022 onwards”, explains the CEO of the company, Juan Velayos (pictured above).

The real estate firm, which announced results yesterday, closed last year with losses of €4.6 million but expects to become profitable in 2018. If we take into account the incentive plan for directors amounting to €19 million – of which €10.6 million corresponded to the CEO – paid in its entirety by the fund Lone Star, and the costs associated with the stock market debut,  then the property developer lost €25.9 million last year.

In 2017, Neinor generated revenues of €225 million, of which €77 million proceeded from its property developer business. It also recorded cumulative pre-sales of €746 million. The company, which delivered 313 homes in 2017, expects to hand over 1,000 units in 2018. It then plans to double that figure in 2019, to 2,000 units; and reach its cruising speed from 2020 onwards with 4,000 units. That would represent the high end of the range announced initially, although it will do so with an evolution in “more conservative phases to protect margins, improve the quality of revenues and deliveries”, he said.

Neinor owns 1.5 million m2 of developable land with capacity for the construction of 12,500 homes and a gross asset value (GAV) of €1.7 billion. The company, which invested €286 million in land in 2017 for the development of 3,100 units, plans to disburse another €200 million on purchases this year. Neinor’s share price closed trading down by 4% yesterday at €16.66.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Gómez-Pintado: House Building Up By 15% In 2016

6 October 2016 – Expansión

Yesterday, the Chairman of the property developers association APCE, Juan Antonio Gómez-Pintado, opened the association’s National Conference with moderate optimism. “We have not recovered completely”, he said, but he highlighted that his forecasts point to “a 15% increase in house construction” in 2016, “with signs of continued increases in 2017 and 2018”.

Gómez-Pintado highlighted that the major problem in the sector is the large latent demand for housing from young people who find themselves dissatisfied. For this reason, he asked the public administrations “to address” this debate. We need “stability regardless of whoever is in Government”, he said. He also urged property developers to “reduce production costs by focusing on innovation”.

“We face a significant challenge, to facilitate access to housing for young people (…). If not, the current improvement will be a new mirage”, added the Chairman of the association of property developers.

The Secretary of State for Finance, Miguel Ferre, did not take the hint and refused to discuss the possibility of any incentive plans for the sector. In his opinion, the fact that VAT has not been increased for property renovations and that a very favourable fiscal framework has been created for the Socimis are “measures that already carry weight” in the residential sector.

Ferre highlighted that the Socimis – listed real estate investment vehicles – already hold more than €9,300 million in assets and have a stock market value of more than €5,000 million. “It is one of the things that this minister is most proud of”, he said, referring to Cristóbal Montoro, who he stood in for at the conference. There are currently 30 Socimis in Spain, and 25 of them are listed on the Alternative Investment Market (MAB).

On the other hand, Ferre emphasised that, thanks to the fact that work to repair and renovate homes still carries a reduced VAT levy, of 10%, means that “the turnover of repair and renovation companies has increased by 13%”. The European Commission has mobilised €4,200 million of investment for potential low-carbon economy projects and “those funds should be redirected to building sustainability”, he added. (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Real Estate Starts To Drive GDP Again After 7 Years In Decline

6 April 2015 – El Mundo

On the demand side, household consumption and the recovery in investment in the construction sector are the components that drive growth. And, on the supply side, construction has reappeared on the scene again after seven years of harsh decreases. The same elements with which the crisis started in 2007.

In light of this data, the recovery is therefore bracing itself with identical components to those that led to two recessions, in particular the return of property.

The fact is that, although it is likely that errors from previous periods will not be committed, for example, the abolition of tax deductions, incentives for developers and easing of credit, housing has had an important impact both on the banking sector, as well as on the economy as a whole. For this reason, many analysts think that the production model of the Spanish economy should be more diversified and depend to a lesser extent on construction.

Most of the indicators suggest that the property market has been stabilising since 2014 and is now brimming with strength. The recovery in the gross added value of the sector is already materialising. After 24 consecutive quarters of negative growth, with annual decreases of more than 15% in 2010 and 2012, the sector recorded its first, albeit meagre, upturn (0.02%) in the third quarter of 2014 and bounced back forcefully in the fourth quarter, growing by 3.4%.

All of this has meant that construction at current prices (€53,829 million) accounted for 5.1% of GDP. It still only accounts half of what it represented at the start of the crisis in 2007 (10.1%). But experts expect a rapid acceleration.

In terms of investment in construction, possibly catapulted by the activation of public works in the face of new electoral commitments and also by the increase in building (activity), the sector recorded its first positive annual growth rate since the crisis (and the second quarterly increase) after 26 quarters of consecutive decreases. Therefore, the decline is deemed to have come to an end.

Specifically, residential investment increased by 0.4% in inter-quarterly terms during the last three months of 2014, whereby completing four quarters of gains. According to the Bank of Spain, all of this seems to mark “a change in the cycle for this component of demand”. Moreover, the indicators available from the first quarter (of 2015) point to a continuation of this trend in a context in which new building permits recorded a new upturn.

Meanwhile, the notarial statistics show that house transactions increased by 20% at the end of the year, with an average transaction volume of 30,000 homes per month. This recovery is concentrated in the segment of used homes and is continuing to benefit from the increase in purchases by overseas citizens. Now Spanish citizens have joined the drive to make house purchases.

Other indicators in the real estate market also show the same trend, with an increase in house sales and in house prices. Thus, in 2014, for the first time since the crisis started, the segment experienced a positive average annual increase (0.3%) following decreases of 10.6% and 13.7% in 2013 and 2012.

But, as Santiago Carbó and Francisco Rodríguez note in a report prepared for Funcas about the start of the recovery in the market, the real estate and construction sector “have unquestionable importance for the economic growth of Spain”. For this, they say that now that the economy is recovering “the role of (the) construction (sector) will become significant, sooner or later”. Above all, it is important for the generation of employment. In this way, construction contributed more than any other sector to the creation of more than 96,000 new Social Security memebrs in February; construction alone accounted for 26,000 jobs, i.e. more than a quarter of the total. The number of social security contributors has returned to one million (people); in 2006, there were 2.5 million. In terms of employment, the number of people has decreased by 62,000 with respect to the same month last year.

The emergence of the construction sector in (terms of GDP) growth will be more important this year and in the future. According to the Bank of Spain, the recovery of the added value of construction companies has continued during the first months of 2015. Meanwhile, Funcas indicates that, as a result of the more vigorous than expected behaviour of consumption and construction, GDP (growth) should reach 3%, versus the 2.8% that the Bank of Spain currently predicts.

Original story: El Mundo (by Francisco Núñez)

Translation: Carmel Drake