Are Spaniards “Condemned” to Buying Second-Hand Homes?

4 February 2018 – El Confidencial

Only 18% of the homes sold last year were new build properties. 

It is the dream of thousands of Spaniards: to buy their own home and, wherever possible, for that home to be brand new. Nevertheless, it is a dream that now, more than ever, only a lucky few are managing to realise. In 2017 – based on data for the 11 months to November from the National Institute of Statistics (INE) – more than 350,000 second-hand homes were sold in Spain – comprising second and subsequent sales for statistical purposes – compared with just 77,500 new homes – first sales -. In other words, the latter accounted for just 18% of the total number of transactions.

That has not always been the case. At the height of the crisis – between 2008 and 2013 – and as a consequence of the huge stock of unsold new homes that was generated during the real estate bubble, sales of both types of homes were pretty much the same. However, all indications are that new homes are going to continue to be a scarce product and only affordable for the lucky few, given that estimates for the property development sector as a whole indicate that activity is going to normalise at an output rate of around 150,000-200,000 units per year, a figure which the experts consider corresponds to the natural demand for housing, in other words, to the creation of new homes. These numbers come in stark contrast to the 850,000 new homes that were approved in 2006, the highest figure in the historical series.

To put it in context, 81,500 (new home) permits were granted last year, up by 27% compared to the previous 12 months, but still only half the number that property developers expected to reach and 10 times fewer than at the height of the boom.

Property developers dream of reaching those figures in the short term, nevertheless, some voices have already started to warn about the possibility that they may not be able to achieve it due, on the one hand, to a lack of land – plans and urban development projects have been suspended all over Spain, and in particular in markets with lots of demand for housing such as Madrid – but also, and above all, due to a lack of financing.

There will not be financing for 150,000 homes

That was stated publically this week by the President of Property Developers in Madrid (Asprima), Juan Antonio Gómez-Pintado. “The problem is that the market is heading towards 150,000 homes per year, whilst bank financing looks set to provide for just 65,000 homes” (…)

Despite those storm clouds, if there does end up being enough money to go round, will people on the buy-side be able to afford the new homes? For months, real estate debates have been raging about the fact that the homes that are being built at the moment are not affordable for most buyers, which primarily constitute owners looking to reposition themselves – people who already own a home and who want to sell it to buy a better one -.

“The demand is not willing to assume future increases in house prices (…)”, said Ignacio Moreno, CEO of Inmoglacier just a year ago.

The lack of product for sale and the high costs of construction are being passed on in the final prices of homes and also in the prices of land. And all indications are that the rising spiral is set to continue and may even intensify. “Land prices are going to continue to rise, following in the footsteps of housing but multiplied by three. In other words, if house prices go up by 5%, land prices will rise by 15%”, calculates Mikel Echavarren, CEO at Irea.

Price gap

In this way, according to data from INE, during the third quarter of 2017,  the prices of both new build and second-hand homes rose by 7%. And it is the very lack of new build product that is inevitably pushing up prices. But that same shortage is also forcing demand towards the second-hand market, which is also pushing prices up, although, at the national level, the price gap between second-hand and new build homes has been increasing in favour of the latter (…).

Nevertheless, the price per square metre of a new build home is not always more expensive than a second-hand property. El Confidencial has compared the prices per square metre of new build homes in several districts of Madrid and Barcelona, as reported by Socieded de Tasación at the end of 2017, with the prices of second-hand homes, according to the real estate portal Fotocasa, and found that in some cases second-hand homes are more expensive.

How is that possible? The real estate portals show asking prices – not the prices at which operations are actually closed. According to a recent study performed by this real estate portal, in the last year, 71% of buyers obtained an average reduction (on the asking price) of €14,000, a figure that in the majority of cases represented a discount of 10% on the initial sales price (…).

On the other hand, for statistical purposes, when we talk about second-hand housing, we are not always taking into account the age of the property, but rather the number of times that the home has changed hands. Many developments in the hands of the banks are considered second-hand because there has already been a prior transaction involving that property – from the bankrupt property developer to the bank, for example – This means that when such a home is sold it is considered as a second-hand property, even though it may never have actually been lived in. And the prices of those units tend to be higher than those of homes that are several years old (…).

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

Irea: “Mistakes Are Still Being Made But We Are A Long Way From A Bubble”

22 February 2018 – El Economista

The real estate sector is booming and the euphoria that is being experienced, especially in the residential segment, is leading to a genuine war in the purchase of land. That is according to Mikel Echavarren (pictured below), CEO of Irea, who says that the first mistakes are starting to be made.

The Director, who has participated in significant operations in the sector, such as Bain’s purchase of Habitat, and who has acted as a financial advisor to Blackstone in its acquisition of Banco Popular, believes that the next alliances will be harder to forge, but, even so, expects to see greater consolidation in the sector.

Q: How is the fabric of the real estate business evolving?

A: The residential development sector is giving rise to eye-catching activities in the market, such as stock market debuts and corporate acquisitions. On the one hand, we have the upper part of the sector, with large companies and on the other hand, we have the vast majority of real estate companies, which are lifting up their heads, maximising everything they can with the few resources they have. They have more money now than they did in 2013 and they have resolved almost all of their debt problems (…). They are all taking their first steps with something that did not exist before the crisis: money from funds for specific projects. And that is causing companies to revive and, as always happens, the markets that are recovering first are the Costa del Sol, Madrid, Barcelona, Málaga, Sevilla and Bilbao. But there are still some markets that have not recovered at all.

Q: Do you need to be big to survive in this sector?

A: Being big in the residential sector means that you can access the land purchases that the majority of companies don’t have the capacity to afford. It does not mean you have to be listed, but being large allows you to access faster and cheaper financing, and with that, you can rotate your portfolio much more. Meanwhile, smaller property developers have to hand over developments that they started three years ago to be able to afford to invest in land now (…).

Q: So, whoever can afford to buy land is guaranteed success?

Yes. Whoever has funds today to buy land in good locations is going to emerge victorious. That is one of the reasons why being large makes sense. Land is a scarce asset and since no new plots are coming onto the market due to the active or passive inoperativeness of the Administration, and because there is no capacity to finance the development of new land, prices are going to soar. Developable land prices have decreased by a lot (since their pre-crisis peaks), by between 60% and 80%, and I am certain that they will rise by between 200% and 300% (…).

Q: This situation means that the greatest fights are now over the purchase of land…

A: Yes, punches are already being thrown in this fight and we are entering a time in which mistakes are being made because people are buying land that is too expensive. But given that they are making those mistakes with their own funds, we are not facing a bubble scenario (…).

Q: With Neinor Homes, Aedas and Metrovacesa now listed, do you think we are going to see a boom in the number of property developers going public?

A: Going public is a consequence of the fact that there are funds behind the real estate companies that are looking to obtain returns. Nowadays, there are so many players wanting to invest in property developers in Spain, because, in theory, their performance is going to be very highly correlated with the recovery of the Spanish economy, that with few listed firms and so much capital, the value of them is increasing and it does not make sense for a property developer’s share price to exceed the value of its assets. I think that in two years time, we will see half a dozen companies listed on the stock market, but no more. There are not going to be that many because it is hard for a property developer to be strong, and to have good and geographically diversified plots. There have been some clear examples that are not going to be replicated, such as in the case of Vía Célere, which is a really good company that was sold because it did not have anyone to take over, but it is hard for many more operations like that to arise. Funds that already participate in a property developer do so because they are sure that they are going to go public. But we can expect to see acquisitions, purchases that seem like mergers (…).

Q: One of the major social problems in this country is the difficulty that young people face when affording to buy their first home. Moreover, they are now also struggling in the rental market…

A: It is a big problem and it reflects a structural change, not a circumstantial change. There is a huge proportion of the population who cannot and will never be able to buy a home in their lifetime, and then there is a percentage of people who do not want to buy a home, who prefer to travel or buy a good car, or simply have more flexibility (…). What is happening is that there is an unstoppable process to expel people from their homes who traditionally lived in rental properties in the centre of cities. That has happened in all of the major cities in Europe and it is going to happen here too. The centre is reserved for people with more money and for tourist rentals (…).

Q: In your view, which operations and businesses do you think still offer good opportunities for investors in Spain?

A: Large investors still have the possibility of creating residential development platforms with good managers and to debut them on the stock market or sell them to another party. I also see options in the sector for alternative financing. If everyone wants to buy land and the banks don’t want to finance land purchases, then there is a niche to lend (expensively) to whoever wants to buy. I also see opportunities in the market for land purchases; for example buying land to develop it or to carry out the final management procedures and then sell it on (…).

Original story: El Economista (by Alba Brualla)

Translation: Carmel Drake

JLL: Real Estate Investment Rose by 45% in 2017 to €14bn

11 January 2018 – El País

The volume of real estate investment in Spain broke records once again in 2017, closing the year at €13.989 billion, up by 45% compared to 2016, according to data from the international real estate consultancy JLL. And investors were not averse to any of the market segments, although two really stood out in 2017. On the one hand, the retail sector (stores and shopping centres), which saw investment of €3.909 billion, up by 31% compared to 2016 – that represents a historical figure thanks to the 35 operations that were closed during the year. And on the other hand, investment in hotels, which increased by 75% with respect to 2016.

Not even the political crisis in Cataluña deterred hotel investment from beating its own record by the end of 2017, with investment of €3.907 billion, representing an increase of 79% with respect to 2016 and comfortably exceeding the historical record set in 2015, when investment amounted to €2.614 billion, according to the study of this market conducted by the consultancy firm Irea. And that despite the slowdown in Cataluña, where no transactions have been closed since the referendum was held on 1 October. Nevertheless, “the impact of the uncertainty in Cataluña will make it hard for the investment data seen in 2017 to be repeated”, says Miguel Vázquez, Partner in the firm’s Hotels division.

For the time being, the incessant arrival of tourists in Spain (the country welcomed more than 82 million foreign visitors in 2017, almost 10% more than in 2016) is continuing to spark investor interest. In fact, in 2017, investment in holiday hotels comfortably exceeded financing in the urban segment (69% vs 31%), rebalancing the trend seen in 2014 and 2015.

Moreover, destinations that had remained quiet following the crisis were revived. Málaga rejoined the list of investors’ preferred destinations, accounting for 15% of total investment with 18 transactions amounting to €516 million. The Canary Islands retained its position as the favourite investment destination, accounting for €939 million of investment, representing 27% of the total volume. Madrid was the main destination for urban investment once again, with €637 million (including existing hotels and the acquisition of properties to convert them into hotels), ahead of Barcelona, which recorded €422 million.

Last year in Spain, 182 hotels were sold, containing 28,813 rooms, compared with 147 hotels and 21,646 rooms in 2016. That represented an increase not only in terms of the number of assets but also in the average price paid per room, which amounted to around €119,000, approximately 30% higher than the average price paid in 2016. In 2017, conversion projects and transactions involving land for the construction of hotels recorded a combined investment volume of €478 million, representing an increase of 139.8% compared to 2016, according to Vázquez.

Offices and residential assets

Offices were the third favourite assets for investors, accounting for investment worth €2.210 billion. Nevertheless, it was the only segment that recorded a decrease in absolute terms with respect to the prior year, with investment in this asset class falling by 20%. That reduction was driven by data in Madrid, given that investment in the Spanish capital fell by 38% with respect to the previous year – €1.374 billion – whilst in Barcelona, the investment volume amounted to €835 million, equivalent to an increase of 60%. Nevertheless, according to Borja Ortega, Director of Capital Markets at JLL, “that decrease was not due to a decline in investor interest, but rather a lack of product on the market and the fact that the previous two years saw record-breaking figures”.

Investment in land also stands out, since it amounted to a record volume of €109 million in Barcelona and €193 million in Madrid; moreover, that trend is expected to continue in 2018.

But it was investment in the residential sector – the purchase of entire buildings and land – that really soared in 2017. It amounted to €2.082 billion, which represented an increase of 160% with respect to the €802 million recorded in 2016. In Cataluña, residential investment amounted to 145% to reach €444 million.

Original story: El País (by S. L. L.)

Translation: Carmel Drake

Experts: Foreign Investors will Continue to Back the Spanish RE Sector in 2018

11 January 2018 – Expansión

The experts believe that the residential sector is going to be the main protagonist of 2018, in terms of both development and investment. The banks are expected to continue their balance sheet clean-ups with more portfolio sales.

The real estate sector is expected to continue to constitute a mainstay of the Spanish economy in 2018 thanks to the growth of residential property development and the commitment from international investors to Spanish property as a safe haven for their investments, according to the experts consulted by Expansión.

For Adolfo Ramírez-Escudero, President of CBRE España, property developers will be some of the most dynamic investors in 2018. “Last year, they underwent an expansionary cycle and, through specialisation and the sophistication of their product, they will continue to increase their prominence in the sector”, he explains.

The CEO of JLL España, Enrique Losantos, forecasts that 2018 will maintain the positive rhythm of recent years and that figures will remain in line with 2017, with a total investment volume of around €13 billion. Losantos also expects that portfolio operations, which were the major stars of 2017, thanks to the sale of assets by Banco Popular and BBVA, will continue to strengthen their position in 2018 (…).

Rents

For Santiago Aguirre, President of the Board of Directors of Savills Aguirre Newman, “we are entering a year of consolidation in terms of the upward cycle that we have been immersed in since 2014. Several segments, such as offices and logistics, have reached maximum leasing levels, nevertheless, we still see potential for rents to reach the maximum levels seen in the previous cycle”.

In terms of investment in tertiary assets, Oriol Barrachina, CEO at Cushman & Wakefield, explains that there is a perception that there will be more liquidity than product, despite caution being erred in light of the local and international uncertainty. “The main difference with respect to the last two years is that one group of buyers, the Socimis, are now also going to be selling assets. For years, they have purchased lots of assets and after generating value from them, they are going to put them up for sale, a fact that will also help to bridge the gap between supply and demand”, adds Barrachina.

Sandra Daza, Director General at Gesvalt, thinks that this year those investors who entered the cycle during the opportunistic period, between 2013 and 2015, will be replaced by long-term investors, such as insurance companies and pension funds.

In terms of trends, Mikel Echavarren, CEO at Irea, considers that residential development will continue to generate news this year, both in terms of land transactions, as well as price rises and the recovery of secondary markets (…).

Humphrey White, Director General at Knight Frank, highlights that Spain is currently at the beginning of an expansion period, with forecast demand of between 120,000 and 150,000 new homes per year, even though it closed 2017 with just 47,500 new home transactions (…).

No sign of a bubble

White considers that the growth in the sector in Spain rests on “some very firm foundations in terms of the law of supply and demand, whereby moving firmly away from a possible real estate bubble”.

For Gonzalo Gallego, Partner in Financial Advisory at Deloitte, buildable land will be one of the major challenges in the property development sector.

In terms of the rental market, Ramírez-Escudero explains that in 2018, we will see “quite a lot” of activity in the market from institutional investors backing rental homes. Over the last decade, the number of rental homes has increased significantly to reach 22.5%. Nevertheless, Spain still has major potential given that the average in the EU is 33% (…).

Javier López-Torres, Partner in Real Estate at KPMG, agrees. He considers that the rental segment will continue to gain weight due to the difficulties involved in accessing credit, mobility and cultural change (…).

Asset types

By sector, Thierry Bougeard, Director General at BNP Paribas Real Estate, says that demand for office space will continue its strong performance (seen in 2017), above all in Madrid, where leasing volumes are expected to increase to around 600,000 m2.

Meanwhile, in the logistics market, e-commerce will continue to be the main motor of demand, whilst in retail, many owners are betting on improving the quality of their centres, boosting leisure areas and the quality of them, with the aim of encouraging customers to stay longer, he explains.

The experts also agree in highlighting the high level of interest expected in alternative real estate assets, such as student halls and nursing homes.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

26 Spanish Real Estate Experts Share Their Predictions for 2018

6 January 2018 – Expansión

House prices will rise by more than 5% on average this year, with increases of more than 10% in the large cities. These gains will happen in a context of great dynamism in the market, in which house sales will grow by more than 10% to exceed 550,000 transactions. Rental prices will also continue to rise.

Those are just some of the predictions made by 26 real estate experts for Expansión.

Aguirre Newman: “House prices will grow by more than 10% in Madrid and Barcelona”.

“In our opinion, house prices are going to continue to rise in 2018, reaching average growth rates of 6%-7%”, says Juan Riestra (pictured above, top row, second from left), Director of the Residential Area at Aguirre Newman. “In Madrid, Barcelona and the coastal cities, we expect to see double-digit growth, driven by the supply of new homes that the property developers have announced, which will result in an even more intense increase in prices than seen in 2017 since new build home are typically more expensive than second-hand properties”, he adds (…).

Fotocasa: “New build homes will have a higher profile in 2018”.

“New build homes will have a higher profile in 2018, as we have already seen during the last quarter of 2017. And that, combined with the return of confidence to the housing market, will continue to push prices up if the economic context is maintained and the situation in Cataluña is resolved”, says Beatriz Toribio (pictured above, bottom row, second from left), from Fotocasa, who thinks that this effect will drive up house prices by more than 5%, but not reaching double-digits (…).

Universitat Pompreu Fabra: “Everything depends on the situation in Cataluña”.

“The upward momentum in the market will be accentuated in 2018 due to the improvement in the new build market since the homes that started to be built two years ago are now being sold”, said José García Montalvo (pictured above, top row, second from right), Professor of Economics at the Universitat Pompeu Fabra. “The major change is that new homes now account for 20% of the market, whilst before they represented 60%” (…). But “everything depends on the political uncertainty in Cataluña” (…).

Arcano: “Demand for investment in housing will continue to grow”.

“There is still a very significant imbalance in terms of demand, spurred on by the ECB’s policy and labour improvement, and a supply that is still restricted by the very low level of new house starts. Moreover, demand for housing as an investment will continue to grow. In this context, prices will rise by more than 5%”, says Ignacio de la Torre, Chief Economist at Arcano (…).

Notaries’ Centre for Statistical Information: “We expect house prices to increase by more than 5%”.

“On the basis of our analysis of the available information, we expect house prices to grow by between 5% and 10% in 2018 (…). Although we expect the housing stock to increase, due to greater investment and employment in construction in recent months, which may lead to price rises being contained, we also expect an increase in demand, given the dynamism of economic activity and the behaviour observed in the labour market”, says Milagros Avedillo, at the Notaries’ Centre for Statistical Information. In her opinion, the growth in mortgage loans will be single-digit.

Asprima: “Very few new homes will be built”.

“I don’t think that the volume of transactions will increase by more than 10% and the forecast for price growth will be below 5%”, says Carolina Roca, Vice-President of Asprima. “The most important macro-factor is income”, she laments. Therefore, prices cannot rise by much, in her opinion, although they will increase in certain areas. “New builds will recover in 2018, but not by much (…)”.

Tinsa: “The reduction in the unemployment rate will boost the market”.

“The residential market will record moderate price growth in 2018 (of between 3% and 4%), similar to that seen in 2017, with different speeds, depending on the region”, says Pedro Soria (pictured above, bottom row, second from right), Commercial Director at the appraisal company Tinsa. “The recovery will expand to more areas; the large capitals will continue to be the drivers, although the rate of growth will soften”, he adds. “The reduction in the unemployment rate and continuing investor interest, due to the prolongation of the low-interest rates, will increase house sales by between 10% and 15% (…).

Sociedad de Tasación: “New house prices will rise by 5.4%”.

“Applying our predictive model to the data from the Ministry of Development, we estimate that 14.1% more house sales will be completed in 2018 than in 2017 (…)”, says Consuelo Villanueva (pictured above, top row, far left), Director of Institutions and Key Accounts at Sociedad de Tasación. “The result (…) indicates growth of 5.4% in the price of new homes under construction for the average of provincial capitals in 2018 (…)”.

Gesvalt: “Mortgage lending will rise by around 15%”.

“According to the forecasts at Gesvalt, we predict moderate growth in second-hand house prices of around 5% at the national level, although there will be notable differences between provinces”, says Sandra Daza (pictured above, bottom row, far right), Director General at Gesvalt. (…). And by how much will mortgage lending grow? “By around 15% and there will be a slight increase in the number of mortgages that exceed 80% of the total property value”.

Foundation of Real Estate Research: “The political uncertainty will weigh down on Barcelona”.

The President of the Foundation of Real Estate Research, Julio Gil, believes that house prices will rise by “between 0% and 5% in 2018. “We will move to a three-speed market”, he thinks, referring to consolidated areas, cities in recovery and provinces with a surplus supply and/or limited demand. “And I think that Barcelona will perform less well than Madrid, weighed down by the political uncertainty”, he adds (…).

Pisos.com. “Mortgage lending will rise by more than 10% for the fourth consecutive year”.

According to Ferran Font, Head of Research at Pisos.com (…) “Historically low interest rates and the decrease in unemployment mean that we expect mortgage lending to grow at double-digit rates in 2018, like it has done for the last three years”.

General Council of Real Estate Agents: “The rise in rents will lead to tension in sales prices”.

“House prices will grow by around 5% in 2018, driven more by the refuge effect of savings than by objective economic variables”, says the President of the General Council of Real Estate Agents, Diego Galiano. “Savings are not being rewards and housing is recovering a certain degree of stability and offering good prospects for investors (…)”.

TecniTasa: “Prices will grow by around 5%”.

“On average in Spain, we estimate price growth of around 5%, but we highlight that that figure represents an average of a very heterogeneous market, by area and asset class. In some regions and for certain types of high-end homes, the increase will amount to between 5% and 10%, and may even exceed 10% (for example, in the Balearic Islands). Whilst in small towns and for cheaper homes, prices are barely expected to rise at all in 2018”, says José María Basáñez, President of TecniTasa (…).

Civislend: “The mortgage war will intensify”.

“The growth that we will see in terms of mortgage lending is going to continue to reflect double-digit rates and the war in terms of granting loans by financial institutions is going to intensify”, says Manuel Gandarias, Director and Founder of the real estate crowdlending platform Civislend (…).

Acuña & Asociados: “80% of sales will be made in 400 towns”.

“Given the current situation, the expected growth in prices at the national level for 2018 will amount to around 5.5%”, forecasts Luis Rodríguez de Acuña. However, “demand for housing is not behaving in a homogenous way across the country, and transactions are only being recorded in 1,300 of Spain’s 8,125 municipalities”. In other words, in one out of every six. And 80% of transactions “are being closed in just 400 municipalities (…)”. (…).

CBRE: “The sale of new homes will continue to gain weight”.

The value of homes will increase “by around 5% YoY at the national level, with higher rises (between 7% and 10%) in certain markets such as Madrid, Valencia, Málaga and the Balearic Islands”, predicts Samuel Población (pictured above, top row, far right), National Director of Residential and Land at CBRE (…). “Sales of new build homes are going to increase their relative weight (with respect to second-hand homes) as a result of the recovery in construction output; nevertheless, the recovery will not have an immediate impact on transaction volumes given the time lag associated with new build developments”, he says.

BDO: The land market is preventing soaring construction output”.

“We are facing a very favourable macro context (GDP and employment, above all) and therefore, an upwards cycle is likely, which will have different regional rates”, explains Alberto Prieto, at BDO. (…). “The launch of new build projects by the new large players will start to be felt in 2018, and then more intensely in 2019”, he adds. “The situation in the land market makes it unfeasible for the volume of new build homes to soar for the time being”, he says.

Foro Consultores Inmobiliarios: “Fixed-rate mortgages will play an important role”.

Carlos Smerdou, CEO at Foro Consultores, believes that “new build homes will drive the market and that recent land transactions indicate that the trend in terms of prices will be upward, of between 5% and 10%” (…). In terms of fixed-rate mortgages, “they will play an important role”, despite the fact that “interest rates are forecast to remain negative”.

MAR Real Estate: “Banks are still reluctant to grant the necessary financing”.

Rosario Martín Jerónimo, representative of MAR Real Estate in Marbella, believes that house prices will grow by more than 5% in Spain this year, on average (…). Nevertheless, she does not think that sales or mortgage lending will be as high in 2018 as they were in 2017 and that the growth rates will remain below 10% in both cases. “Buyers are willing but the financial institutions are still very reluctant to grant the necessary financing”, she explains. “Many property developers are completely financing their projects using money from private investors/buyers, without any support from the bank”, she says (…).

uDA (urban Data Analytics); “Prices will rise by more than 10% in the large cities”.

“House prices will rise by around 6.9% in 2018, although the behaviour will be tremendously heterogeneous”, warns Carlos Olmos, Director of urban Data Analytics. In other words, there will be “some large cities with growth rates of more than 10% and many other capitals with small decreases” (…).

Gonzalo Bernardos, Professor of Economic: “House prices will rise by 11% and sales volumes by 23%”.

“I think that house prices will rise by 11%”, says Gonzalo Bernardos, Director of the Real Estate Masters at the Universidad de Barcelona (…). Moreover, in macroeconomic terms, it is the best scenario for the residential market: high (economic) growth (around 3%), the creation of employment, scarce new build supply (new build permits will amount to 125,000 in 2018), very low interest rates and bank willingness to grant mortgages”. “House sales will rise by around 23% and mortgage lending will increase by 17%”.

Irea: “House prices will rise by more than 7% in consolidated markets”.

Mikel Echavarren (pictured above, bottom row, far left), CEO of the real estate consultancy and advisory firm Irea, forecasts that house prices will rise by between 5% and 10% in 2018 with respect to 2017. “In consolidated markets, the increases will be closer to 7%”. (…). In the mortgage market (…), “in theory, financing conditions will continue to be very beneficial for buyers and property developers”, he adds.

College of Registrars: “Mortgage lending will grow by around 20%”.

The registrars believe that house prices will rise by less than 5%. “Taking into account our data and the slowdown that is already being seen in Cataluña, which accounts for approximately 17%-18% of the Spanish housing market (…), we think that it will be hard to exceed a growth rate of 5% in 2018”, explains Fernando Acedo Rico, Director of Institutional Relations at the College of Registrars. (…). Something similar will happen with mortgage lending, which “will continue to grow at around 20%”.

Idealista.com: “Madrid will drive the price rises”.

According to Fernando Encinar, Head of Research at the real estate portal Idealista, house prices will rise by less than 5%. (…). “There will be cities that will experience a more acute recovery, such as Málaga, Valencia, Sevilla and the islands. But I think that Madrid is going to be the real driver, with even more accelerated price growth”. Why? “The Spanish capital is gobbling up talent and investment, and demand there indicates that prices are going to continue to rise. There is minimal stock left in Madrid (…)”.

Instituto de Práctica Empresarial: “In 2018, 550,000 homes will be sold in Spain”.

According to the Director of the Real Estate Chair of the Instituto de Práctica Empresarial, house prices will rise by 6.1% in 2018 (…). In Spain, 550,374 homes will be sold, which represents 14.5% more than in 2017, despite the sluggishness that may be seen in Cataluña.

Invermax: “Tourist areas may see price rises of 10%”.

Jesús Martí, Real Estate Analyst at Invermax, thinks that “house prices will grow by another 5%, with this average varying between the large cities and the traditionally touristy coastal areas, where they may rise by 10%”. “It is still a good time to buy a home, especially for investors”, he adds (…).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

UBS Finalises Purchase of Torre Titán from España-Duero for €50M

29 December 2017 – Voz Pópuli

UBS is on the verge of closing one of the largest real estate operations of this year-end. The Swiss entity is negotiating the purchase of one of the two Titán towers, owned by Banco Ceiss (España-Duero), a subsidiary of Unicaja. The sale is in its final phase and could be closed within the next few days, for more than €50 million, according to financial sources consulted by Vozpópuli.

The final consideration may even reach €55 million, which is exactly the price that España-Duero paid Nozar for the tower in 2008. That acquisition caused a great deal of controversy at the time to the point that some of the former directors of Caja Duero were subjected to investigations, but the case was archived in the end.

The Titán towers are two 13-storey buildings constructed by Nozar in 2008. One of them is owned by Invesco (which acquired it in 2011 for €40 million) and leased to the state-owned firm Adif. The other one is owned by España-Duero and it not only houses the headquarters of Unicaja’s subsidiary but is also home to Nozar and Enagás.

Ceiss continues

This process has been led by Irea, according to El Economista, and two other consultancy firms, Knight Frank and Aguirre Newman, have also been involved, in the search for tenants for the 30,000 m2 of available space. The useful surface area for offices is 10,722 m2.

According to sources close to the operation, España-Duero is expected to commit to continue to occupy the offices. The entity is in the middle of a merger with Unicaja, after the Malagan entity acquired the 12.5% stake that it did not own in the subsidiary from the Frob.

During the IPO in the middle of this year, the heads of Unicaja expressed their intention to merge the two companies (Unicaja and Banco Ceiss). As such, observers in the market speculate that Torre Titán will serve as the new headquarters for the central services team in Madrid.

The sale of Torre Titán will be added to the list of divestments that the Unicaja Banco group has been carrying out in recent weeks. Earlier this month, it sold a portfolio of foreclosed assets to the fund Axactor, as this newspaper revealed.

Original story: Voz Pópuli (by Jorge Zuloaga)

Translation: Carmel Drake

EspañaDuero Finalises Sale of its Madrid HQ

19 December 2017 – El Economista

Over the next few weeks, EspañaDuero will close the sale of its headquarters in Madrid, located on Calle Titán 8, according to confirmation from various sources in the sector, who say that the entity is holding advanced, exclusive negotiations with an investor.

The entity, which is soon going to be completely integrated into Unicaja Banco, declined to comment about the operation. However, this sale is reminiscent of the divestment strategy that the entity has been carrying out in recent years.

The office block that is about to be sold is located in the Méndez Álvaro area of the Spanish capital, overlooking the M-30 ring road. It also houses the offices of Enagás and Nozar, the former owner of the property. In this way, Caja Duero acquired the building for €55.8 million in 2008, a price that is €9 million higher than its current valuation.

At the end of 2011, following the merger of the entity with Caja España, which resulted in the creation of the current EspañaDuero, the combined company moved its offices to Caja Duero’s headquarters in Madrid, on Calle Marqués de Villamagna, 6.

In 2015, the company began a period of office restructuring, which led it to sell one of its real estate jewels: the former headquarters of Caja España in Madrid, on Calle Velázquez 23, in the heart of the Salamanca neighbourhood.

A year later, in the middle of 2016, EspañaDuero decided to move its headquarters again and vacate the offices on Marqués de Villamagna, very close to Madrid’s Paseo de la Castellana. The entity put them up for sale for €90 million and moved to Titán 8. Now, history is repeating itself, as the entity continues to sell off property, in a discrete sales process being advised by the consultancy firm Irea, according to the same sources.

The 13-storey building, including one underground floor and three basement levels for parking, has a total surface area, including the outside space, of 18,152 m2, of which 10,711 m2 are offices and 6,643 m2 are garages, with 212 parking spaces.

Currently, the property has almost 3,000 m2 of office space available for rent, which is being marketed by Knight Frank and Aguirre Newman.

Original story: El Economista (by Alba Brualla)

Translation: Carmel Drake

The RE Sector Is On Course For Record-Breaking Year

12 September 2017 – Expansión

The real estate sector is experiencing a whirlwind year. After breaking the investment record in 2016, experts now expect the pace to continue this year and for a new investment record to be registered, excluding corporate operations.

For Adolfo Ramírez-Escudero, President of CBRE, 2017 is going to be an “exceptional” year, once again. “Investment could reach €12,000 million, whereby exceeding the expectations at the beginning of the year, which would make 2017 the best year since records began, if we exclude the corporate transactions carried out by Merlin in 2015 and 2016”, he says.

The CEO of JLL, Enrique Losantos, says that investors are maintaining their interest in the Spanish market “attracted by the strong underlying economics, returns that are still higher than in certain other European markets such as Paris and prices that are much more affordable, comparatively”.

For Oriol Barrachina, the CEO of Cushman & Wakefield, although the ECB is expected to inject less money, the appetite from investors will continue into 2018, given that the growth in wealth and the performance of assets comes from economic activity and not from the issuance of money by the Central Bank”.

Meanwhile, according to Alberto Valls, Partner in Financial Advisory at Deloitte, whilst institutional stability continues and the expectation of growth and the creation of employment in the economy is sustained, Spain will continue to be an attractive country. “We are not ruling out consolidation in the sector towards larger vehicles, involving Socimis and property developers, therefore I forecast a high level of activity in terms of corporate operations in the sector in 2018 due to concentration”.

The star players

In this sense, the Partner responsible for the Real Estate sector at KPMG in Spain, Javier López Torres, says that “the trend of consolidation amongst the new real estate companies, and their debuts on the stock market, is going to continue, and there will also be new inter-relations between new players”.

In terms of the most powerful players, institutional investors with the lowest capital costs will be the stars of operations with less need for management, which are becoming increasingly fewer because most of what could be sold has already changed hands, explains the Partner in Financial Advisory at Deloitte, Javier García-Mateo. “In the face of a pipeline of operations where there is a need for a strong transformation component, the PERES (Private Equity Real Estate) will be the players that will likely lead the sale and purchase of properties”, he adds.

Meanwhile, the Socimis will have more freedom to divest their assets as most have now fulfilled the three year period since their purchase, the fundamental requirement to be able to enjoy the tax benefits afforded to these vehicles, says Alejandro Campoy, Director General of the Investments Divisions at Aguirre Newman.

Increase in rents

In terms of the behaviour of rents in the office segment, Mikel Echevarren, CEO at Irea, says that “the economic recovery and the creation of employment will lead to an increase in occupancy rates and rents in Madrid and Barcelona”.

Sources at CBRE indicate that Barcelona is already ahead of Madrid, due to the even greater scarcity of high-quality office space in the Catalan capital. Moreover, that situation is giving rise to a significant number of pre-rental operations.

“The growth forecast in rental income is clear and very robust. Our data estimates that for the period 2017-2019, office rental prices in Barcelona will grow by around 5.2% p.a. on average, and in Madrid by 4.3% for the same period”, explains Losantos (…).

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Irea: Hotel Inv’t In H1 2017 Amounted To €1,655M

10 July 2017 – Reuters

Attracted by encouraging forecasts in the hotel sector, domestic and international investors alike purchased 79 hotels in Spain during the first six months of 20176, for a combined amount of €1,655 million, according to a report presented on Friday by the consultancy firm Irea.

The consultancy said that the figure for the first half of this year exceeds the volume recorded during the same period a year earlier by more than double and “should allow the sector to break the historical record for investment reached in 2015, when more than €2,600 million was spent”.

The strong interest in the hotel segment is being driven by a significant increase in hotel rates and sustained demand from tourists.

Spain received almost 28 million international tourists during the first five months of 2017, which represents an 11.6% increase compared to the first five months of last year, when foreign visitor numbers exceeded historical records for the second year in a row.

Spain received a record 75.5 million tourist visits in 2016 and Cehat forecasts that this year the figure will exceed the threshold of 80 million visitors.

According to Irea, investment in the hotel sector was split almost equally between the holiday segment (52%) and the urban segment (48%).

Two deals stood out in the urban sector during H1: the purchase of 55% of the Hilton Diagonal (4* – 433 rooms) by Axa Investment Managers and the acquisition of Hotel Silken Diagonal (4* – 240 rooms) by Benson Elliot and Highgate, both of which were closed for prices of more than €300,000 per room, said Irea.

Meanwhile, in the holiday segment, the star buy was London & Regional’s purchase of a portfolio of 4 hotels containing 2,050 rooms in total from Starwood and Melià, for an estimated amount of €240 million.

According to data from Spain’s National Institute of Statistics, there are 15,855 hotels in Spain, with a total of 822,002 rooms.

Of the 31.5 million overnight stays recorded in May (the latest figures available), 71.3% corresponded to foreign guests and the remaining 28.7% related to domestic customers.

The expectations of another record summer have boost hotel rates in recent months. According to the latest report from Trivago, hotel prices in Spain rose by 14% YoY on average in June to reach €134 per night.

Original story: Reuters

Translation: Carmel Drake

Iberdrola Sells 55% Of Hotel Hilton Barcelona For €80M

22 June 2017 – Expansión

Iberdrola Inmobiliaria has completed the sale of 55% of Hotel Hilton Diagonal Mar in Barcelona to the real estate division of the insurance company Axa (Axa Investment Managers- Real Assets). The operation has been closed by Axa on behalf of one of its clients, said the vendor in a statement issued on Tuesday.

The energy group’s real estate arm will retain ownership of 45% of the property. Iberdrola Inmobiliaria will receive €80 million for the percentage stake sold.

The Hotel Hilton Diagonal Mar, inaugurated in 2005, is operated by the chain Hilton Worldwide under a long-term lease contract. The four-star establishment contains 430 rooms, of which 20 are suites.

In the operation, the vendor has been advised by the consultancy firm Irea and the law firm Ashurst. Currently, Iberdrola Inmobiliaria owns a portfolio of rental assets spanning a gross leasable area (GLA) of more than 217,000 m2. Its most iconic property is the company’s headquarters in Bilbao.

Moreover, the company is developing around 300 homes, located mainly in the Community of Madrid, although it also has two projects on the coast. In addition, Iberdrola Inmobiliaria is working on a project comprising 42 villas located in the Islas del Mar area (Puerto Peñasco) of Mexico.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake