Tag: land prices

Foro Consultores: Land Prices Soar In Certain Pockets Of Madrid

13 February 2017 – El Confidencial

Land prices are soaring, house prices are rising, the buying frenzy is gaining momentum in some areas and in certain developments…Is history repeating itself? Are we witnessing the gestation of a new real estate bubble, albeit not on a national scale, but nevertheless in certain areas of the country. That is what seems to be happening in some neighbourhoods of Madrid. But, the answer, for the time being at least, seems unanimous: not yet.

Buildable land, in other words, land that is ready to be built upon, is running out and, across Spain, there is barely enough land left upon which to construct the 1.5 million homes estimated to be required to supply the market for the next 8.6 years. In Madrid, the land will run out in just over 6 years, according to the latest report from the appraisal company Tinsa. It identifies a worrying shortage of this type of land in areas of expansion to the north of Madrid, as well as in certain specific points of the metropolitan area, such as Pozuelo, Villanueva de la Cañada, Coslada and Rivas. In some of these areas, according to warnings from Tinsa, there will be no buildable land left within 12-24 months. This situation has, unsurprisingly, led to sharp increases in land prices in certain areas. And these rises are concerning the sector. Where are these first warning signs starting to sound?

Valdebebas

The large real estate development in the north of Madrid, which was launched at the height of the crisis and which has fallen victim to numerous legal setbacks, has become, in the eyes of the residential sector, a clear example of the extent to which land can become a very sought-after, as well as a very dangerous, asset.

“Without doubt, it is one of the areas where land prices have grown significantly. In 2014, they ranged between €750/m2 and €900/m2, whereas nowadays operations are being closed for more than €1,200/m2 and €1,300/m2, and the perception in the market is that land can no longer be sold for less than €1,400/m2”, explained Vicente Quintanilla, Director of the department for Investment and Land at Foro Consultores. According to this expert, “this trend generates significant tension in terms of the prices of new builds, which are being sold for €3,000/m2 in certain developments”. (…).

Pozuelo, Aravaca…

Another market where prices have also risen significantly is the municipality of Pozuelo de Alarcón, where Sareb sold land for around €1,000/m2. (…).

Indeed, the supply of land in Pozuelo has completely run out and families in need of homes are heading to other markets, such as in Boadilla del Monte, a cheaper alternative. According to data from Foro Consultores, the gap in prices is very significant. “To give you an idea, a family home or chalet in Boadilla costs around €450,000 on average, compared with between €700,000 and €1 million in Pozuelo.

Scarce and sought-after plots of land have also seen sharp price increases in recent years. “In El Camino de Barrial, in Aravaca, land prices have risen from €1,200/m2 in 2014 to around €2,000/m2 now. (….).

Boadilla del Monte, at boiling point

Boadilla del Monte is another one of the markets that has experienced a huge boom over the last two years. And there, it has not been due to the scarcity of land, but rather because of the strong demand from families who, as described above, cannot find homes in Pozuelo de Alarcón.

“For family home plots, land prices have increased from €400-500/m2 in 2014 to €800-900/m2 in2016, say Foro Consultores. (…).

Euphoria in Méndez Álvaro and rises in El Cañaveral

In the heart of the capital, where land is noteworthy due to its absence, land prices have increased considerably. In 2014, buyers paid €1,000/m2 and in a recent operation, whereby Adif and Renfe sold a plot to Vía Célere, the price paid amounted to around €1,900/m2. (…).

This increase in land prices is not exclusive to the area to the north of Madrid (…). The price of more affordable land and cheaper homes has also risen significantly in recent months.

Such is the case of El Cañaveral, in the east of Madrid, where “last summer, land prices amounted to around €360-370/m2 and now plots are going for €450-500/m2” (…).

Finally, all of the experts lament the fact that during the crisis, no agreement was reached to manage land, which has resulted in this significant shortage and in the inevitable increase in prices. They advocate greater agility in terms of urban planning, especially where the shortage is leading to a bottleneck in the market.

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

Land Prices In Madrid & Barcelona Have Doubled Since 2012

24 February 2016 – Real Estate Press

The price of urban land in Madrid and Barcelona has more than doubled since the lows of 2012 and is now threatening the recovery of the real estate sector, as property developers are being forced to put homes on the market at prices that consumers are unable to afford.

Domestic property developers are being the most active in denouncing the increase in land prices, driven by the scarcity of urban plots and the difficulties involved in obtaining licences for new developments.

In the case of Valdebebas, a development located 21 kilometres from the centre of Madrid, the ‘repercussion value’ per m2 has increased from €700/m2 at the beginning of 2014 to €1,200/m2 last year, with values now reaching €1,600/m2. “Land prices are increasing at an alarming rate in Madrid and Barcelona”.

According to the real estate consultancy firm Irea, the volume of land purchases tripled last year to reach €929 million (representing 7% of total real estate investment). According to the report, the majority of transactions involved plots of land assigned for development, which accounted for €706 million of the investment, whereby multiplying the figure recorded in 2014 by 7x.

Domestic investors accounted for just 1% of this investment, with real estate companies, many linked to international funds, accounting for 43%. Nevertheless, the bulk of the funds were direct investments by funds (38%) and Socimis (18%), which together invested €523 million.

The largest land purchase operations last year were seen in Barcelona and Madrid. In Cataluña, Neinor Homes, the property developer controlled by the fund Lone Star, purchased land worth €200 million, where it plans to construct 1,500 homes. Moreover, Vía Celere invested €78 million in the development of homes in Barcelona (Magòria and El Fòrum) as part of a joint venture with the fund Chenavari. Meanwhile, Corp acquired land in Sant Boi, Arenys de Mar and Molins de Rei to construct 850 homes. In Madrid, the US fund Castlelake bought a batch of four plots of land for residential use in Boadilla del Monte from Sareb, and Grupo Lar and Pimco joined forces to buy a plot of land in the centre of Madrid for €120 million.

The recovery of land prices is being driven by a rise in prices and sales in the wider real estate market, and has led the primary owners of land, namely Sareb and the financial institutions, to reduce their land sales and opt for direct development instead. Sareb will begin work on 13 housing developments imminently, ten of which will be constructed by Solvia, the real estate arm of Banco Sabadell, one of the most active banks in the development segment, with more than one thousand homes under construction across Spain.

Original story: Real Estate Press

Translation: Carmel Drake

Average Land Prices Rose By 9.7% To €156.4/m2 In Q3

16 December 2015 – Expansión

The average price of urban land is starting its recovery. During the third quarter of 2015, the average price of land sold in Spain amounted to €156.4/m2, up by 9.7% compared with the previous year, according to statistics from the Ministry of Development. This increase is five percentage points higher than the one recorded in the previous quarter.

This price increase, the highest in a decade, is due, above all, to the recovery experienced in municipalities with more than 50,000 inhabitants, where urban land prices increased by 58.7% YoY, to reach €331.1/m2, the highest figure since Q4 2012.

This sharp increase has two main explanations. Firstly, there are more operations than before, and they are more expensive. 9.2 million m2 of land was sold, with a value of €790.2 million (representing an increase of 72.3% YoY in terms of surface area and 18.4% in terms of value). With such low starting points, the increases are very significant. Secondly, the volume of transactions is not yet sufficient for us to stop talking about volatility.

Cities in Murcia experienced the highest increase in urban land prices in the third quarter (by 189.2% YoY), followed by cities in Castilla y León (74%), Asturias (69%) and the Community of Madrid (63%).

At the opposite end of the scale, municipalities with more than 50,000 inhabitants in Castilla-La Mancha recorded the highest depreciation in the price of land allocated for the construction of buildings (-27.5%), followed by those in the Canary Islands (-14.7%) and those in the Balearic Islands and PaísVasco, which recorded decreases of 4.1% in both cases, according to the breakdown of the Government’s statistics, which were compiled using data from the Association of Property Registrars (el Colegio de Registradores de la Propiedad).

Historically low prices in Sevilla

The highest average prices in municipalities with more than 50,000 inhabitants, were recorded in the provinces of Madrid (€660.4/m2, the highest price since Q2 2012), Guipúzcoa (€557.1/m2) and Barcelona (€539.1/m2). The lowest prices were recorded in the provinces of Albacete (€36.7/m2), Sevilla (surprisingly, at €128.1/m2, the lowest average price since the Ministry of Development began to compile records in 2004) and Cádiz (€141.6/m2).

During the third quarter of 2015, 4,192 transactions were closed, up by 9.8% compared with the second quarter 2015 and 2.4% fewer than in Q3 2014, when 4,293 plots were sold.

447 transactions were recorded in municipalities with fewer than 1,000 inhabitants, an increase of 1.1% compared with the same quarter a year earlier; in municipalities with between 1,000 and 5,000 inhabitants, 694 plots were sold, down by 20%. In towns with between 5,000 and 10,000 inhabitants, 554 plots were sold, down by 2.5% YoY. In towns with between 10,000 and 50,000 inhabitants, 1,738 transactions were recorded, up by 22.6%. And in cities, 769 plots were sold, down by 23.7%.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Cogesa Paid c. €2,200/m2 For The Final Plots In Montecarmelo

25 September 2015 – El Confidencial

Some people regard it as an Urban Planning Action Plan (‘Programa de Actuación Urbanística’ or Pau) for “rich people” only. But, Montecarmelo, the smallest of the three new neighbourhoods in the north of Madrid – together with Sanchinarro and Las Tablas – has become the talk of the sector. And it is no wonder. The neighbourhood has starred in the most expensive land operation to be closed since the burst of the real estate bubble, and although it did not trigger alarm bells per se, it did raise concern amongst the main players in the market, for whom the memories of the worst excesses undertaken during the boom are still fresh and vivid.

Less than three months ago, at the beginning of July, the company Cogesa, which forms part of Grupo Dragados and is led by Enrique Pérez, the brother of Florentino Pérez (the President of Real Madrid Football Club), paid an “exorbitant” amount for the final few residential plots in Montecarmelo. Specifically, Cogesa paid just under €2,200/m2 for the land, i.e. significantly more than the figure (€1,400/m2 – €1,500/m2) the experts consulted by this newspaper consider should have been paid for the launch of a profitable development, unless, of course, it is developed as a cooperative.

Montecarmelo, which is located next to Monte del Pardo, the Colmenar motorway and the M-40 ring-road, was conceived at the beginning of the 1990s. With more than half a million square metres of land allocated for residential use – 8,500 homes, both unsubsidised and subsidised – it became the destination of choice for hundreds of young couples who saw the neighbourhood as a good place to live that allowed them to travel into the city centre each day to work. It was born as a commuter town (neighbourhood), just like Sanchinarro and Las Tablas, but is now witnessing the “overheating”  of land prices that seems to be happening once again. (…).

Knight Frank…estimates that there is only around 50,000 m2 of buildable space left in the development, i.e. 5% of the total, since the remaining 95% is under construction or has already been built. (…).

Cogesa’s bid took the other participants in the tender completely by surprise: Construcciones Amenabar and Grupo CP, two companies that have been involved in previous projects, as well as Momentum and the cooperative DMS have said as much…none of the other offers even came close to the figure that was put on the table by the Grupo Dragados’ company, to acquire the last large plot for sale in Montecarmelo. The company already has a presence in the neighbourhood, with around one thousand homes in several developments. At one of them, Las Terrazas de Montecarmela, the company has been selling homes for just under €3,000/m2.

“Cogesa already has interests there. It owns several plots, which means that by paying the amount it has done for this plot, it has also increased the value of its own portfolio there” says an expert consulted by this newspaper. (…).

However, the most recent land operations are raising concerns that the segment is “overheating”. In fact, the numbers do not add up for some developers. “A those prices, they would have to sell the homes for more than €3,500/m2, and not only is it going to be difficult to find buyers willing to pay that much, the figure also leaves minimal scope for profit. A logical price would have been €1,400/m2-€1,500/m2, because even if the cost of the land attributable to the final price of the homes was 50%, they could be sold at €3,000/m2 and not lose money”, explains a source at one developer, who prefers to remain anonymous.

“At these prices, the only thing that would make sense is a development on a cooperative basis, a formula that this company has adopted in the past. The developers need to make a profit of between 15% and 20%, however, in a cooperative, the manager does not earn any more than 10% and the risk is diluted amongst the cooperative”, says Ernesto Tarazona, Partner and Director of Residential Property and Land at Knight Frank, who believes that the lack of supply in the area benefits any project that is undertaken in Montecarmelo. (…).

Original story: El Confidencial (by Elena Sanz)

Translation: Carmel Drake

IPE: Urban Land Prices Will Rise By 10% In 2015

17 June 2015 – Expansión

Land will be the next market to be affected by the change in the economic cycle. That is the main conclusion drawn by the first Land Pulsometer, prepared by the Institute of Business Practices (IPE). The average price of urban land will grow in 2015 “by almost two-digit figures”, according to the study coordinator, José Antonio Pérez, Director of Real Estate at IPE.

In this way, if in 2014, each square metre cost €147 on average, by the end of 2015, it will be worth €160/m2, the highest figure since 2012. “It is a clear turning point” says Pérez, who says that “investment in land has a threefold economic impact, due to its direct, indirect and induced effectcs”. That means, every euro spent on land leaves a final economic footprint of three euros.

This recovery will take place because prices will increase “at double that rate” on the coast and in the major cities, i.e. at around 20%, “especially on the Costa del Sol, in Levante, the Balearic Islands, the Canary Islands, Madrid, Bilbao, Barcelona and A Coruña”, says Pérez.

These forecasts come a day after the Ministry of Development published its official statistics, which confirmed the beginnings of an upwards trend – from very low figures – in the market for land. During the first quarter, the average price of urban land (per square metre) increased by 5.9%, and in cities (with more than 50,000 inhabitants), the increase was 37.8%. (…)

According to the report, the number of transactions involving buildable plots of land will increase by 5.04% in 2015. Andalucía will account for 22% of operations, followed by Cataluña (16%) and Castilla-La Mancha (11%). (…)

Andalucía and Madrid will generate the most value: €579 million and €508 million, respectively, which means that the two regions alone will account for 42% of the national activity, which will amount to €2,593 million, i.e. 0.25% of GDP. The total impact (direct, indirect and induced) of the market for land will be €7,780 million.

The average price of land in Madrid, the highest in Spain, will exceed €300/m2, followed by the País Vasco and Balearic Islands, where it will exceed €250/m2. (…)

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Ministry Of Development: City Land Prices Soar By 38%

16 June 2015 – Expansión

The cost of land increased significantly in the year to March, especially in Castilla-La Mancha (381%), Asturias (176%) and Castilla y Leon (99.7%). The experts do not seen any signs of a new bubble…yet.

The price of urban land has increased significantly in Spain’s major cities. During the first quarter of 2015, land prices increased by no less than 37.8% YoY in municipalities with more than 50,000 inhabitants. The price per square metre rose from €220/m2 to €304.3/m2 in one year. And the number of plots of land sold in the major cities was 596, down by 1.3% from the first quarter last year, according to the Land Price Statistics published by the Ministry of Development, which are prepared using data from the College of Property and Commercial Registrars.

And land prices in large cities in certain regions have gone through the roof. That is the case of Castilla-La Mancha, where prices grew by 381% with respect to Q1 2014, Asturias (176%), Castilla y León (99.7%) and País Vasco (60.8%). The highest decreases in urban land prices were recorded in Galicia (-42.7%) and Murcia (-20.2%).

The average increase in Spain was 5.9%, a rate that is much less marked than that observed in the large cities. Not surprisingly, the average price across the country is €149.9/m2, less than half its value in the large cities.

The significant increase in the price of land in major cities raises fears of a small over-heating effect, due to the strong outlook for the sector, but the experts do not think that we are witnessing the birth of a new boom. We should remember that the Spanish real estate bubble had a clear spur in the price of land: between 1990 and 2007, house prices increased by 288% and land prices rose by 762%, according to a report from BBVA. (…).

The role of the banks

Julio Gil, Chairman of the Foundation for Real Estate Studies, offers an alternative view and points to the significant impact that the banks have on the market. “There were very few transactions and so the statistics are greatly affected by the intervention of financial institutions in the market for land. They are operations that relate more to the value of debt to property developers than the real price of land in the market”. In other words, the difference is because “before no one wanted to providing financing for land and now the financial institutions are funding it again. (…).

The highest prices in towns with more than 50,000 inhabitants were recorded in the provinces of Madrid (€546.2/m2), Barcelona (€448/m2) and the Balearic Islands (€353/m2). This explains why there is more interest in developing land, for both tertiary and residential use, above all in the central areas of large cities and on the outskirts, in high-class areas. (…).

Finally, the number of transactions completed during the first quarter of 2015 amounted to 3,465, i.e. a 4.4% YoY increase.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake