ST: House Prices Will Rise By 3% In 2017

18 January 2017 – Cinco Días

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

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

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

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

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

Moderate pace

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

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

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

Original story: Cinco Días (Raquel Díaz Guijarro)

Translation: Carmel Drake

Sociedad de Tasación Predicts RE Recovery From Mid-2017

25 April 2016 – El Economista

ST Socided de Tasación forecasts that 2016 will mark the year of house price “stabilisation” and the start of improvements in the sector, however the recovery in real estate activity, and therefore in prices, will not come until the middle of 2017.

Those were the predictions made by the CEO of ST Sociedad de Tasación, Juan Fernández-Aceytuno, in an interview with Europa Press, in which he explained that in order to talk about a recovery in the real estate sector, the number of mortgages (which are currently growing at a YoY rate of 35%) have to get closer to the number of house sales (which are increasing by 20%), and he estimates that there is still “between 12 and 18 months” to go in that regard.

Fernández-Aceytuno believes that there is still “potential” for the creation of households, mortgages and transactions, given that this year, it is estimated that 300,000 new mortgages will be granted, compared with 1.35 million in 2006, and around 450,000 transactions will be closed, a figure that peaked at 900,000 during the real estate boom. (…).

He considers that for a country like Spain, a “very reasonable balance” would be 650,000 transactions per year, which would represent a “fabulous” market.

For the time being, the surveyor says he is observing “stabilisation” and the “start of the recovery” in terms of prices, which is now extending to all provinces, and is being led by the autonomous regions of Madrid, Cataluña, the Balearic Islands and País Vasco.

Eight-year upwards cycle

The CEO of Sociedad de Tasación explained that real estate cycles in Spain seem to span periods of 16 years, eight years of decreases and eight years of increases, which means that, in theory at least, the country can now look forward to eight years of increases, although “ it would be better if the growth were not so marked, but more sustained”. (…).

According to Fernández-Aceytuno, the Socimis “will be a very significant investment engine in the rental market”; he also sees a “great opportunity” in urban renovation and regeneration. The “big question” in this recovery process is whether the generation of “millennials” will opt to buy homes or to rent, a market that has been booming in recent years.

“Over the medium and long term, I expect to see a reasonably good market. The growth rate will depend on many factors, but I am reasonably optimistic”, he added.

Uncertainty affects investments, but not purchases

In terms of the impact of the political uncertainty on the real estate market, the CEO of Sociedad de Tasación considers that for now, at the micro level, the repercussions are “limited” and are not delaying purchase decisions, but he warned about the effect on “major investments, shopping centres and funds” as a result of the regulatory risk surrounding urban planning. (…).

Original story: El Economista

Translation: Carmel Drake

The RE Sector & Its Challenges For The Future

14 April 2016 – Cinco Días

“Few countries in the world have as much regulatory complexity as Spain”, said Alfonso Benavides, Chairman of the Urban Land Institute in Spain yesterday, at the Sustainable Urban Development Forum organised by the newspaper El País and sponsored by Distrito Castellana Norte. According to experts, the diversity of legislation hampers growth in a sector that has great potential for expansion. The politicisation and lack of a roadmap for management plans represent another obstacle”. “There is no strategic vision”, said Eduardo Fernández-Cuesta, Chairman of RICS in Spain.

The system is so complex (and hard to interpret) that it generates more questions than it answers. The continuous updates to the regulatory framework resolve one set of problems and create another. “The private sector can work with complexity, but not with uncertainty over timings”, warned Benavides, who pointed out that the first draft of an urban planning request alone can be up to 2,500 pages. The proposed extension of the Castellana being managed by Distrito Castellana Norte has been in the pipeline for more than 20 years, awaiting the various approvals.

“The fundamental concept is legal security, something which we currently lack”, said Ricardo Martí-Fluxa, Chairman of the Spanish Association of Real Estate Consultancy Companies. It is estimated that for every €1 million of real estate investment, between 18 and 20 jobs are created. In his opinion, we should stop demonising the economic gains of projects because the private sector, which has to drive these processes, must be able to generate a return from its investments and he noted that Town Halls in other European capital cities, such as London, are determined to give companies facilities so that they can execute such investments.

Juan Antonio Gómez-Pintado, Chairman of the Association of Real Estate Developers in Madrid, expressed the same views. He noted that the first people who are interested in putting an end to speculation are property developers. “It is absolutely essential that land is available, when it is restricted, a natural speculative process occurs. By the law of supply and demand, when land is restricted, its price increases”, he complained. (…).

The big question is, following the burst of the real estate bubble, whether Spain needs to continue building homes. The Ministry of Development, which prepares an annual report, estimates that there are 43,000 empty new homes in Madrid alone. Sources in the sector dispute those figures. “The report is prepared using a valid methodology, but it does not reflect the reality because, for example, it does not take account of the fact that the owner of a new home may not want to sell it”, said Juan Fernández-Aceytuno, CEO of Sociedad de Tasación. The actual number, if we look on a promotion by promotion basis, does not exceed 8,000 homes in Madrid. “One of the major problems is that we have run out of stock”, said Gómez-Pintado.

Nevertheless, the experts agree that, a new bubble is unlikely, especially due to the lack of available mortgage financing. In 2006, around 1.3 million loans were granted. In 2014, that figure barely reached 350,000. “There is no risk of a bubble”, said Fernández-Aceyuno. “We expect a period of stability in terms of house prices across the country”.

Original story: Cinco Días (by Carlos Santana)

Translation: Carmel Drake