Large Investors Manage Only c. 3% of Spain’s Rental Homes

28 May 2018 – Cinco Días

In recent months, a new name has been added to the list of alleged culprits to blame for the fact that rental prices in large cities are rising at a dangerously accelerated pace – they increased by between 10% and 18% last year. They are what the experts call the large owners of rental home portfolios. And are otherwise known as Socimis, investment funds, servicers and, to a much lesser extent, public companies.

But, how many homes are we talking about (…)? And what percentage do they represent over the total stock of rental homes? Taking into account that no official figures are compiled for the number of rental homes in Spain, and that we only talk about percentages of the total number of households (…) the truth is that the task seems complicated.

Nevertheless, according to the calculations performed by Cinco Días and after having requested data from the large funds, the resulting figure is so small, both in absolute and relative terms, that it seems to have almost no or limited influence on the evolution of rental prices. The figures compiled by CBRE reveal a balance that ranges between 2% and 4% of the total stock of rental homes. “It is possible that they have an influence at the local level in areas where more homes managed by those kinds of companies are concentrated, but it is clear that they cannot be blamed for what is happening to rental prices”, explains Sandra Daza, Director General at Gesvalt.

Thus, the statistics compiled by the Government and Eurostat reveal that approximately 22% of Spanish households live in rental properties, a figure that has increased considerably from 15% before the outbreak of the crisis (…).

Multiple factors

In this way, if we take as the reference the most recent figure for the number of households during the first quarter of this year, according to the Active Population Survey (EPA), of the 18.55 million households in Spain, 4.07 million were rental homes.

Of that volume of household-homes, a total of 114,000 homes are in the hands of the 15 largest investors, which together account for just 2.8% of the total stock of rental homes (…).

As Samuel Población, the National Director of Residential and Land at CBRE, explains, the increase in this regime of tenure over buying is driven by several factors. The new labour market, with more instability and lower salaries, is forcing many households to rent, plus all the demand that was expelled from purchasing during the crisis (…).

This increase in demand has not been accompanied by a parallel rise in the supply to the same extent and that is what is causing most of the tension in terms of rental prices, together with the effect of tourist apartments in certain neighbourhoods of large cities and higher visitor numbers. Not even the fact that one out of every five homes purchased is destined for rent to make the investment profitable has managed to generate more homes for rent.

“The current rise is a consequence of the large gap between demand and supply”, says Wolfgang Beck, CEO of the Socimi Testa Residencial, one of the largest owners of this kind of asset (…).

“It does not make sense to attribute the rise in rental prices to the funds. They have a long-term focus and are actually responsible for increasing the stock of rental homes on the market”, says Javier Rodríguez Heredia, Head of the Residential team at the housing manager Azora.

“Establishing regulations that provide certainty for institutional investors to make it attractive for them to enter the sector would result in the creation of a rental home stock commensurate with the needs of the country”, he said (…).

Original story: Cinco Días (by Raquel Díaz Guijarro & Alfonso Simón)

Translation: Carmel Drake

Fitch: House Prices Are Going to Rise At A Faster Rate Than Salaries

20 February 2017 – El Economista

On Thursday, the ratings agency Fitch warned that access to housing in Spain is going to gradually worsen as a result of the difficulties facing the labour market.

In its report about the outlook for the real estate and mortgage market in 2017, the ratings agency forecasts that house prices in Spain are going to rise at a faster rate than salaries, which means that the accessibility of housing is going to deteriorate.

“Fitch expects the accessibility of housing to gradually worsen given that any recovery in salaries will be lower than the increase in house prices, taking into account the challenges facing the labour market”, said the agency, which added that access to the real estate market will be “especially difficult” for first-time buyers.

Fitch expects the positive trend observed in house prices, which rose by 4% during the third quarter of 2016, to continue thanks to “robust economic growth”, the maturity of the mortgage market and foreign demand, which currently accounts for 13% of transactions.

Nevertheless, it says that the two-speed market will continue, given that the “bulk” of the recovery will focus on homes whose quality and location place them above average.

Slow down due to floor clauses

On the other hand, Fitch thinks that the legal uncertainties surrounding the floor clauses and the reform of the mortgage market will slow down the growth experienced since 2014 for the granting of loans to buy homes.

“The rate of growth in loans will slow down from the levels seen in 2015 and during the first half of 2016, given that Spain’s banks will adopt a more cautious approach in the face of the legal uncertainties that are affecting the mortgage market”, said the agency.

Nevertheless, it considers that the rise in house prices and the favourable loan environment, thanks to low interest rates, are still offsetting the repayment of loans in progress.

Finally, Fitch thinks that Spain’s banks will continue to reduce their exposure to toxic assets by divesting their non-strategic businesses, such as their non-performing loans and foreclosed properties.

Original story: El Economista

Translation: Carmel Drake

Unemployment Rose Slightly In August As Tourism Boom Waned

5 August 2016 – Reuters

Spanish unemployment rose for the first time in five months in August, coinciding with the tail-end of a bumper tourism season, however, the underlying pattern suggests that a long but gradual recovery in the labor market remains on track.

A record summer for tourist arrivals has helped the economy shrug off a prolonged period of political uncertainty and, seasonally-adjusted, the number of people registered as jobless fell by 24,462 people in August, according to Labour Ministry data on Friday.

But compared with July, the jobless number rose by 0.39%, or 14,435 people, leaving 3.7 million out of work.

Increases in unemployment are common in Spain in August, as factories reduce activity in what is the peak holiday season and many private sector teachers fall off the social security registers that track job creation in the lull that precedes the start of the new school term.

Hotels and restaurants, meanwhile, continued to create jobs last month though the services sector as a whole laid off staff, the ministry said.

With the bumper summer for tourism drawing to a close, Spain faces a fresh challenge to keep its economic recovery on track as one of the major drivers of growth and employment wanes.

Two inconclusive elections in the past eight months have left the country unable to form a new government amid a stand-off between parties on the right and left, and the impasse may start to weigh more heavily on the turnaround if it drags on, acting Economy Minister Luis de Guindos said this week.

Later on Friday, Conservative acting Prime Minister Mariano Rajoy faces a second confidence vote in parliament for a second term in office. If he loses, as expected, the countdown would be triggered to a likely third election in December.

A gradual recovery in Spain’s jobs market, which collapsed in 2008 when a real estate bubble burst and the economy sank into a long recession, has so far underpinned a consumer spending rebound.

That in turn has helped economic growth stay robust in the first two quarters of the year, meaning Spain can ill afford any slowdown in job creation.

Compared to August last year, there were just over 519,000 more people in work, up 3%, the ministry said.

But on a month-on-month basis, nearly 145,000 fewer people were registered as working, the biggest drop between July and August since 2008.

Original story: Reuters (by Sarah White)

Edited by: Carmel Drake

Madrid: 26% More Office Space Was Leased In Q2 2016

7 July 2016 – Expansión

Despite the decrease in investment in the real estate sector and, specifically, in the office segment so far this year, leasing of office space in Madrid is continuing to rise; and it exceeded the threshold of 100,000 sqm in Q2 2016.

Specifically, leasing of office space in the capital rose by 26% during the second quarter of the year, to 110,000 sqm. In half year terms, that figure represents an increase of 14,000 sqm, to 219,500 sqm, according to a report from BNP Paribas Real Estate. For BNP Paribas Real Estate, this leasing trend reflects the “good health” of business activity in Madrid, which is driving further forecast increases in office space leases.

During the second quarter, approximately 110 operations were signed, which means that more than 100 operations have been signed per quarter for the last seven consecutive quarters, compared with the average of 88 contracts per quarter registered between 2009 and 2014.

In terms of average rents, the real estate consultancy firm notes an increase in four sub-areas of Madrid (the financial district, the centre, the decentralised area and the outskirts). Specifically, overall average rents have increased by around 13% in annual terms, to €15/sqm/month.

BNP Paribas Real Estate highlights the behaviour of the decentralised area of Madrid, which accounted for 42% of the new leases during the quarter and recorded the highest increase in rents, with rises of almost 30% YoY. “The trend seen during the crisis, when most lease contracts were signed in areas inside the M-30, is now being reversed”.

The consultancy firm highlights in its report that the amount of available surface area is still decreasing, in light of the shortage of new offices and the flurry of new leasing activity over the last two years. Specifically, at the end of June, the availability rate stood at less than 15%, with further decreases forecast.

In terms of predictions for the rest of the year, BNP Paribas Real Estate expects the leasing figures in the second half of the year to be in line with those seen during H1, and it forecasts that rental prices will increase “slightly”.

“These figures are backed up by a labour market that is continuing to recover, with the most recent employment figures showing positive results. The number of people registered as unemployed is at its lowest level since September 2009 and that figure is expected to fall further still”, say sources at the consultancy.

Original story: Expansión

Translation: Carmel Drake

Demand For Rental Housing Will Soon Exceed 500,000

19 May 2016 – El Mundo

Demand for rental housing from the population cohort aged between 20 and 39 will exceed half a million within the next few years in Spain, in a market in which 15% of homes are already occupied on a rental basis.

That was one of the findings from the XVII Annual Meeting of Esade Alumni’s Real Estate Club, which focused on the residential rental market in Spain and Europe and its viability from the point of view of operations, financing and capital markets. The meeting was attended by more than 150 specialists from the real estate sector.

The President of Esade Alumni’s Real Estate Club, Eduard Mendiluce, said that residential rental properties represent “an investment in the future” and he made reference to the business models that operate in other European countries, where a couple of companies manage stocks of 200,000 and 300,000 homes.

Eduard Mendiluce, who is also CEO of Anticipa, said that the residential rental market “is here to stay” because it responds to structural changes and he said that we do not currently have a stock of residential homes for rent of the quality that meets demand.

Meanwhile, the Professor of Applied Economics at the Autonomous Universiry of Barcelona, Josep Oliver, explained the reason for that demand. According to data from INE, 42% of young people aged between 20 and 39 live with their parents, approximately five million people, of which 2.3 million have a job. “From this group, we can expect to see a demand for 500,000 rental homes in Spain over the next few years”, he said.

Similarly, the Director of Diversified Industries and Real Estate for EMEA at JP Morgan, Guillermo Baygual, analysed the market from the point of view of investors, who “are looking to obtain returns with minimal risk”.

Within the European framework, he made reference to UK legislation, which most protects the interests of owners and Dutch legislation, which is the most favourable towards tenants. In turn, the CEO of Sogeviso, Pau Pérez de Acha, made reference to social rental housing, given that in Europe the average proportion of rental housing allocated for that purpose amounts to 12%, whilst in Spain, that figure ranges between 0.8% and 2%.

Similarly, the CEO of Immeo, Thierry Beaudemoulin, analysed the German rental market, where just 45% of the population live in their own homes, one of the lowest rates in Europe. (…).

Finally, the Director for Strategy and Business Development at Acciona Real Estate, Luis Morena, also predicted a positive future for the residential rental market.

This will involve the elimination of tax incentives for house purchases; the maintenance cost of home ownership, which is similar to rental cost; and the recovery of the labour market, which is increasing geographical mobility and therefore demand for flexibility in terms of the residential real estate market.

Moreno pointed to insufficient financing to buy a home as another one of the key factors that will influence the increase in the percentage of residential rental homes in Spain in the short term. Currently, 15% of Spanish homes are occupied on a rental basis, whilst in 1970 that figure accounted for 30% of the available stock of homes.

Original story: El Mundo

Translation: Carmel Drake

BBVA Revises Down Its Forecasts For Housing Investment

17 May 2016 – Expansión

BBVA Research, the research service arm of the financial institution, has revised down its growth forecasts for housing investment in Spain to 2.8% in 2016 and 4.4% in 2017, from its previous estimate of 4.2% and 8.2%, respectively, due to political uncertainty, according to reports by Servimedia.

According to the bank’s latest ‘Situation in Spain’ report, “the recovery of the real estate sector is continuing, but at a slower rate than expected”. In addition, the report highlights that the fundamentals of residential demand (the recovery of the labour market and low interest rates) remain “solid”, which means that we can expect to see increases in sales over the coming months.

According to the study, construction activity, which has showed “significant” momentum in the last year, is going to continue to respond to the increase in sales. With this, added BBVA “we expect that residential investment will continue to grow over the next few years”.

Nevertheless, the bank warns that the “persistence of uncertainty surrounding economic policy, and the negative surprises recorded throughout 2015, have driven down its forecast for growth in residential investment over the next few quarters”. In terms of investment in construction, BBVA Research forecasts that it will grow by 3.1% in 2016 and by 4.1% in 2017, down from its previous estimates of 3.8% and 5.9%, respectively. (…).

Original story: Expansión

Translation: Carmel Drake

Madrid & Barcelona: Drivers Of The Housing Mini-Boom

4 January 2016 – Expansión

The housing market is now in full recovery mode, driven by the improving labour market and access to credit. House prices rose by 1% in 2015, which represented the first year of positive growth following seven years of decreases. Specifically, the average price per square metre increased by 1% between Q4 2015 and the same period a year earlier, according to Tinsa’s Local Markets Index. This put an end to the decreases seen following the burst of the real estate bubble during which time house prices decreased by 40.7%, compared with their levels in 2007.

According to Tinsa’s report, this 1% increase was driven by a miniboom in the large urban markets of Barcelona and Madrid, which accounted for the majority of the overall upward swing, together with other smaller cities such as Badajoz and Ávila. Thus, the Catalan capital recorded a 8.7% increase, whilst prices in Madrid rose by 3.8%. Significant increases were also registered in Badajoz (5.7%), Ávila (4.3%), Ciudad Real and Cuenca (3.3% in both cases) and Palma de Mallorca (2.2%).

According to the experts, several factors have led to the relatively sharp rise in house prices in these areas, such as the decrease in the volume of stock and the increase in demand. On the other hand, these areas have fewer remaining unsold homes, which means that demand is pushing prices up much more quickly. Unsurprisingly, Madrid is one of the most liquid markets in Spain, according to Tinsa, since it only takes 7.2 months, on average, to sell a home in the province, compared with 10.2 months for Spain as a whole. In addition, Madrid and Barcelona are both highly attractive areas, with demand from overseas savers and other citizens moving from the rest of Spain and overseas to work in the two cities.

Both areas have also seen a marked adjustment in terms of prices in recent years. In 2007, locals in Barcelona used to have to spend 36% of their average incomes on mortgage repayments, making it one of the most expensive cities in Spain; now, they have to contribute just 22% of their salaries, in line with the national average. In Madrid, that figure is one point lower (at 21%) and it only takes 5.3 years of salary to acquire an average home there, compared with 5.9 years for Spain as a whole.

Nevertheless, this is not the case in all of Spain’s large capital cities. Valencia recorded timid growth of 0.6% in 2015, whilst prices in Sevilla fell by 0.3%. The decreases amounted to 1.6% in the case of Bilbao, to 4% in Zaragoza and 6.7% in Murcia, still heavily affected by the surplus stock.

The striking variations between Spain’s major capitals is also reflected by the marked differences that exist between the different types of market in Spain, given that the majority of the country is still experiencing price decreases, or at best, price stability. That is one of the reasons why Tinsa prefers to talk about “a trend towards price stabilisation, which will be consolidated over the coming year”, rather than a general upturn in prices. (…).

Original story: Expansión (by Pablo Cerezal)

Translation: Carmel Drake

GreenOak Buys Building on c/Fuencarral For €21M

28 December 2015 – Expansión

International funds are starting to invest in the residential market. Whilst their first acquisitions (in Spain) involved offices and shopping centres, now many investors are interested in purchasing homes and land for development. Such is the case of GreenOak. This US fund has just completed the purchase of the building at number 77 on Calle Fuencarral in Madrid. The property, measuring around 8,000 m2 in total, contains homes and offices covering a surface area of around 6,000 m2; the ground and first floors are occupied by a shopping arcade measuring more than 2,000 m2.

The aim is to completely renovate this property to convert it into homes. “Our aim is to offer a quality asset at an attractive market price. We do not know the details of the project yet, but it will be high quality, in keeping with the neighbourhood and bearing in mind the (needs of the) residents of Chueca and Malasaña”, explains Javier Zarrabeitia, partner at GreenOak in Spain.

International experience

The fund, which opened its office in Madrid this summer, having channelled all of its investments until then from London, has invested €21 million on the purchase of this building. “It is the first time that we are developing a property in Spain, but we have already undertaken similar projects in Los Ángeles, New York and London. We are a team of 60 people and we all get involved in these types of projects”.

This is GreenOak’s first residential project in Spain, a market in which it has been particularly active in recent months. “We have invested more than €400 million this year and we have the capacity to invest €700 million”, says Zarrabeitia. “We have closed 18 operations this year, and have been heavily focused on the logistics segment, where we now own 350,000 m2 of surface area, primarily in Madrid, but also in Bilbao. We have also purchased four buildings in the Avalon de Madrid complex, another one in La Moraleja and one in Barcelona, as well as the Sevilla Factory shopping centre, with a surface area of more than 16,000 m2”.

The key to this investment whirlwind is the fund’s capacity to invest in operations of different sizes, explains its CEO. “Our smallest investment in Spain amounted to €8 million and the largest will amount to around €40 million, but our capacity is unlimited, and we invest in volumes where the Socimis and other funds do not operate, which gives us a niche to be competitive”.

Next year, the fund will continue closing operations in Spain. “We believe that it will continue to be possible to raise capital for Spain: with very low interest rates, a significant decrease in prices, sellers with needs and growth in the country thanks to the low euro, we expect to see the restructuring of the labour market and banking sector, as well as a recovery in tourism”.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

BBVA Forecasts A 10% Increase In House Sales In 2015

4 December 2015 – El Economista

BBVA Research, the financial institution’s research service, says that house sales will grow by 10% in 2015 and that in 2016, the real estate sector will finally leave behind the recession and will consolidate its growth.

Those were the main conclusions drawn by the latest Real Estate Watch Spain report published by BBVA on Thursday, which says that the sector is showing positive signs and that the available data indicates a significant improvement in demand, in an environment characterised by an increase in credit and the stabilisation of prices.

Moreover, the report explains that the scarce supply of new homes coming onto the market is enabling a significant reduction in the existing stock, to the extent that the supply is even running out in the most active markets.

This year is also seeing a significant improvement in the amount of activity undertaken by property developers, says BBVA, which means that in 2015 the residential construction segment is going to positively contribute to GDP for the first time since the start of the crisis.

The report notes that the recovery in demand, initiated in 2014, has strengthened during the course of 2015. In fact, it forecasts that the current year will end with around 400,000 house sales, i.e. an increase of around 10% compared with 2014.

This rate of sales will accelerate during the fourth quarter and the trend will continue into 2016, say the experts at the bank, who highlight that improvements in the fundamentals of demand are driving this trend.

Specifically, it mentions the recovery of the labour market and the increase in household disposable income, the positive developments in the financial markets and the stabilisation of residential prices, the strong performance of house purchases by overseas citizens, and an environment characterised by financial stability with interest rates on mortgages at historical lows.


Meanwhile, the report sets out that the growth in demand, in the context of a reduction in supply, lends itself to the stabilisation of house prices.

According to BBVA, prices have begun their journey through the recovery phase of a new cycle, a recovery that is currently undergoing a period of stabilisation and one that is happening more slowly than in previous cycles.

By type of asset, the bank observes a similar evolution in terms of both new housing and second-hand housing. Nevertheless, it clarifies that, whilst price decreases have been more intense in the second-hand segment, the recovery has begun more quickly in the new build segment.

Original story: El Economista

Translation: Carmel Drake

Tinsa: House Prices Rose By 0.2% In Madrid In Q3

5 November 2015 – El Economista

According to Tinsa, house prices increased by 0.7% during the third quarter of the year with respect to the same period last year in the Community of Madrid, having increased by 1.5% between January and September. Meanwhile, prices in the city (of Madrid) rose by 0.2% during the same period.

According to Tinsa Research’s general index, it takes an average of 7.7 months to sell a home in the Community of Madrid.

The city of Madrid, where average house prices amount to €2,044/m2, is the “most liquid” regional capital of the five large cities analysed, with an average sales period of 6.1 months.

It is followed by Barcelona, where it takes an average of 6.5 months to sell a home.

In terms of the number of building permits granted, the city of Madrid experienced a slight decrease during the first quarter of 2.6% (1,130 permits) with respect to the same period a year earlier.

By contrast, the level of activity in the second-hand home market increased by 18.7% YoY in the second quarter, to 7,678 operations.

According to the data published by Tinsa, in October, the average price of new and second-hand homes in Spain recorded its first YoY increase for more than seven and a half years, with a rise of 0.8% with respect to the same period in the previous year.

From the peaks recorded before the burst of the real estate bubble, average house prices in Spain have experienced a cumulative decrease of 41%.

During October, the Mediterranean Coast, and the Balearic and Canary Islands were the main drivers of house price growth, registering increases of between 3.6% and 4.2% YoY, respectively.

The group comprising the Balearic and Canary Islands recorded the best YoY increase of any region in October, with a rise of 4.2%, followed by the Mediterranean Coast, with an increase of 3.2%.

The regional capitals and major cities experienced an increase of 0.6% and only the metropolitan areas and small towns recorded slight YoY decreases of -0.6% and -0.2%, respectively.

Since the start of the year, average house prices in Spain have increased by 0.4%, and prices have risen by the most in the Mediterranean Coast, and in regional capitals and major cities.

From the peak prices of 2007, prices have fallen by the most in the Mediterranean Coast, with a cumulative decline of 46.7%.

Metropolitan areas, and regional capitals and major cities, have recorded a similar cumulative decrease since 2007, of 44.4% and 44.5%, respectively.

Average house prices in Spain recorded their first YoY decrease in March 2008 and have continued on a downward trend since then.

The rate of decrease began to slow in the second quarter of 2013 and the General Index has remained stable over the last year.

Although the YoY data recorded in October represents a turning point, Tinsa believes that the stabilisation of prices still needs to be consolidated.

Thus, the evolution of average house prices over the coming months will depend on the behaviour of the economy and the labour market, where a considerable amount of uncertainty still exists.

Original story: El Economista

Translation: Carmel Drake