IESE: Demand For New Homes In Madrid Will Reach 20,000 In 2019

2 June 2015 – El Mundo

At a conference organised by the College of Civil Engineers before the local elections, Manuela Carmena, who will become the mayoress of the capital provided Esperanza Aguirre does not stand in her way, ruled out Operación Chamartín as a significant objective: “I do not think that we need 17,500 homes, we will talk about that again in 2017 or 2018, but not now”.

Her comments are interesting because just a few days later, professor José Luis Suárez, of IESE, has claimed that, during 2015 and 2016, demand for new housing in the metropolitan area of Madrid will reach 14,000 units and in 2017 alone, it will reach 13,000. Suárez is one of the foremost experts in the Spanish real estate market and during the annual symposium of the Center for International Finance (CIF), he presented the preliminary results of a study about the evolution of demand for new homes in Spain until 2028.

Suárez and his team of researchers are building a model to allow them to predict the demand for new homes in nine large Spanish urban areas. The model is driven by several factors, including the reduction in the number of people per household; financing; the rate of obsolescence of homes in use; the demand for replacement; the acquisition of second homes; employment; investment in housing; the preference for new housing; renovations; the declining population; the over-stock of housing; and rentals.

Although Spain’s “demographic winter” may lead us to expect a decrease in the number of homes, as well as in their average size, the calculations performed by Suárez for the Madrid area show that demand for new homes will reach 20,000 units in 2019. This quantity would mean demand returning to the levels last seen in 2009-2010, years when the trend lines between the purchase of new homes and the supply of new homes intersected. At the height of the bubble, in 2006, more than 40,000 new homes were sold in Madrid and during that same year, more than 60,000 units were constructed.

In fact, the excess stock of housing in Madrid is practically non-existent now. There is still excess supply in Spain, but not in places where demand is high.

Urban planning is one of the areas that the local politicians enjoy the most and where Carmena is undertaking a detailed program. She is committed to renovating and supporting operations in deprived neighbourhoods, such as the so called Operación Campamento, which is sponsored by Chinese capital. Although critics accuse the plans of being neoliberal since they serve individual interests, the fact is that urban planning is anti-liberal by definition and is fertile territory for commercialism.

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Original story: El Mundo (by John Müller)

Translation: Carmel Drake

Election Fallout: Uncertainty May Deter Investors & Delay Large Deals

28 May 2015 – Cinco Días

Experts predict that there will be an impact on the rental market and on the sale of debt portfolios. They warn that Madrid and Barcelona will be affected by anti-eviction initiatives.

The rise of political parties advocating the suspension of mortgage foreclosures, the relocation of evicted families (to vacant properties owned by banks and Sareb), and the end of sales of public properties to private owners, at the elections last Sunday, has put the international investment funds, which have been arriving in Spain in recent years with a renewed hunger for property, on alert.

Experts in the market say that although we are still waiting to see the specific impact of these initiatives by the governments, which depend on pacts that are just as uncertain, the situation will cause funds to reduce their already low purchase offers and to postpone large transactions until they know the results of the general elections, scheduled for the end of the year.

“Madrid and Barcelona are the showcase for the country”, explains Mikel Echavarren, CEO of the real estate consultancy firm Irea, predicting that the expected appointment of Ada Colau (Barcelona en Comú) and Manuela Carmena (Ahora Madrid) as the mayoresses of the two large capital cities, “will cause investors’ interest to disappear for four years” in all areas “that depend on decisions by local councils”.

In his opinion, there are three areas of particular concern. On the one hand, the suspension of evictions – or their delay, because, as Echavarren points out, municipalities do not have the legal power to eliminate them altogether – because that would result in a penalty for the budding rental market and above all “longer timeframes, more uncertainty and lower prices” in the offers made by funds for packs of credit with real estate collateral.

Secondly, proposals such as the one made by Colau to suspend the opening of new hotels in Barcelona, “which is one of the most important hotel markets in the world”. And thirdly, the review of the general urban plans in Madrid and Barcelona.

“Either you have a local council that is “pro-business” or investors pack their bags and take their money elsewhere”, warns the director of an investment fund who asked to remain anonymous, stating that “Anglo-Saxon capital does not understand it when urban development is not encouraged”.

“Any change represents uncertainty and money flees from uncertainty”, says Julio Gil, Chairman of the Real Estate Research Foundation (Fundación de Estudios Inmobiliarios or FEI), bearing in mind that as a minimum “funds will consider their investments in Spain to be more risky and therefore will demand high returns”.

Nevertheless, Gil states that for the time being this support for social rather than economic policies is only being seen at the local government level and, to a lesser extent, at the regional government level, but he thinks that the fear of what might happen in the general elections this year may well “delay several (large) transactions” as investors wait to see the outcome.

“The greatest risk is that we drop off of the radar of investors”, warned sources yesterday at ETC Real Estate, a new platform for the management of debt and mortgaged assets, promoted by TDX Indigo, Equifax and Cobralia.

Its partners expect that funds will lower their asset purchase offers, but argue that the change in the political paradigm will make it necessary to promote alternative means of eviction, such as discounts and “daciones en pago” (delivery of the deeds in lieu of payment), amongst others. A management model they promote, they assure, to the funds and banks to whom they render services.

Original story: Cinco Días (by Juande Portillo)

Translation: Carmel Drake