Tag: low interest rates

Mapfre to Invest in Property due to Low Interest Rates

7 March 2019 – Expansión

Mapfre has announced its intention to invest in more real estate in light of the low interest rates in the global markets. The insurance group ended 2018 with real estate investments worth €2.9 billion, accounting for 4.3% of its total investments, having invested heavily in the renovation of its asset portfolio during the year.

Given the scarce supply and illiquidity of the real estate markets in Madrid and Barcelona, the firm has already created two companies headquartered in Luxembourg to invest in properties in Paris and Germany. It also plans to acquire real estate in Amsterdam, Brussels, Milan and Luxembourg.

Moreover, it has teamed up with the German real estate fund manager GLL, with whom it aims to invest up to €300 million in properties in some of the main European cities.

The objective of the insurance company is to generate returns of between 4% and 6% p.a. on a recurring basis and to diversify its portfolio.

The firm did also divest some properties last year, in Portugal, Chile and Palma de Mallorca, which together with the appreciation of other assets, resulted in net gains for the group of €47 million.

Most of Mapfre’s investment portfolio comprises public and corporate fixed income securities, which had balances of €49.3 billion and €8.9 billion, equivalent to 56% and 18% of its total portfolio, respectively, at year end 2018. Equities accounted for €2.4 billion (4.9%) and investment funds €1.3 billion (2.7%).

Original story: Expansión (by E. del Pozo)

Translation: Carmel Drake

S&P: House Prices will Rise in Spain by More than in Other Major Eurozone Economies

24 February 2019 – La Vanguardia

House prices in Spain are going to continue rising for at least the next three years, although the rate of growth will slow down as the economy loses momentum and the European Central Bank (ECB)’s monetary policy normalises, according to forecasts from the agency S&P Global Ratings, which points to larger rises in the Spanish real estate market than in the other major Eurozone economies.

According to the ratings agency, house prices in Spain, which registered an estimated nominal rise of 6.6% in 2018, will increase by 4.5% this year, by 3.4% next year and by 3% a year later, although S&P warns that if prices continue to grow by more than the expected incomes of households, then access to housing will continue to worsen over the coming years.

In this sense, as a result of the deep fall in real estate prices in Spain during the crisis, access to housing is still at better levels now than it was before the burst of the real estate bubble, with a ratio of prices with respect to income that is 29% lower than the maximums observed in 2007, albeit 25% higher than the long-term average.

Similarly, S&P considers that the low interest rates applied to mortgage loans for the acquisition of homes will continue to serve to support access to housing in Spain, indicating that, given the rise in inflation between May and October 2018, real rates became negative.

In addition to Spain, the agency forecasts that real estate price will continue to rise across the Eurozone, although at a lower rate than in previous years, with the exception of Italy, where an increase of 0.5% is expected this year, which will accelerate to 1.3% in 2020 and to 1.6% in 2021.

In the case of Germany, prices will rise by 3.9% in 2019, although those increases will moderate to 3.3% and 3% in the subsequent two years, respectively, whilst in France, house prices are predicted to rise by 2.4% this year and by 2% in the following two years (…).

Original story: La Vanguardia 

Translation: Carmel Drake

Fotocasa: Rental Prices Soar by 11%+ in Madrid, Valencia & Málaga

20 November 2018 – Expansión

The rental market has reached cruising speed faster than usual in the main Spanish capitals. The new normal has become double-digit increases, which have been accumulating on a sustained basis now for several months.

Madrid, Valencia and Málaga are leading the trend. In Madrid, rental prices soared by 13.2% in October in YoY terms; meanwhile, in Valencia, they leapt by 13%; and in Málaga, they rose by 11.3%. They are closely followed by Santa Cruz de Tenerife, where rental prices increased by 10.2% in YoY terms. These rises contrast with the overall moderate increase in rental prices in Spain, which were up by just 2.7% on average in October, according to the latest data published by the online portal Fotocasa.

“The average price of rentals in Spain are continuing to rise, but at a much lower rate than they were a year ago, when we were seeing double-digit YoY increases” explains Beatriz Toribio, Head of Research at Fotocasa.

In fact, the 2.7% increase is so heavily influenced by the large capitals that if we eliminate the increases in Madrid, Valencia and Málaga, the market would register a decrease of 3.2%.

Even so, the data for October constitutes a recovery, after a YoY decrease of 4.2% in the third quarter, the most acute reduction since the third quarter of 2007.

The strong tensions in prices in the main capitals are striking”, said Toribio, “above all, taking into account that a large part of them mean that we have now exceeded the maximum prices recorded in 2007 and 2008”.

This sustained increase in prices in the rental market is mainly explained by strong demand. On the one hand, the increase in house (sales) prices in the major cities means that the proportion of people who are ending up renting is increasing – a change in trend that is also being influenced by the preferences of young people to rent. On the other hand, the dynamism of tourism in these cities, together with the appearance of new accommodation platforms, such as Airbnb, in an environment characterised by low interest rates, have made rental an attractive option for investors. That, taking into account the scarce supply available in cities such as Madrid, is pushing prices up.

By contrast, rental prices are falling in cities with less economic dynamism, many of which are located inland, with acute problems in terms of depopulation and ageing demographics. Such is the case of Huesca, where prices fell by 25.7% in October, followed by Vitoria, with a decrease of 23.1% and Soria (-21.5%).

Although the rental market is more elastic than the purchase market against possible macroeconomic shocks, a significant slowdown in economic growth could have a negative impact on the real estate market.

Original story: Expansión (by I. Benedito)

Translation: Carmel Drake

Teleno Real Estate Buys a Residential Building in Madrid for €16M

12 June 2018 – Idealista

The real estate consultancy firm BNP Paribas Real Estate has advised on the sale of a residential building in the north of Madrid, worth €16 million. The property comprises 59 homes, 42 storerooms and 96 parking spaces. Teleno Real Estate is the company that has acquired the asset; it has been advised by Jesús Segado and Javier Escudero, partners of Smart Invest.

The asset is located in the north of Madrid. The firm that has undertaken the purchase, the former Tauro Real Estate, invests in the purchase of real estate assets and is led by José María Xercavins. Tauro Real Estate was acquired in April by the Israeli millionaire, Teddy Sagi (pictured above), who paid €180 million for the company. Currently, it owns 600 flats in Madrid and Barcelona.

David Forteza del Rey, Head of Residential Investment at BNP Paribas Real Estate, explains that “these types of operations confirm the continued dynamism of the residential market, which is still offering attractive returns for investors in a low-interest rate environment”.

Last month, the consultancy firm also advised the investment fund Eurostone on the purchase of two real estate assets, in that case in the upper area of Barcelona, on Calle Tuset and Calle Aribau. Those properties have surface areas of 4,786 m2 and 7,461 m2, respectively. The first is a residential asset with a commercial premise on the ground floor. The property on Calle Aribau contains homes for residential use and tourist rental (…).

Original story: Idealista 

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

Moody’s: House Prices Will Rise By 8.6% Over Next 3 Years

3 November 2017 – El Economista

An increase in the proportion of the active young population and the greater affordability of housing will boost house prices in Spain by 8.6% over the next three years, according to forecasts from the ratings agency Moody’s, which has analysed the impact of demographic trends on prices in the residential real estate sectors of seven large European markets.

In the case of Spain, the risk rating agency forecasts a rise in house prices of around 5.6% in 2018, but then limits that increase to 1.4% per annum in each of the following years, until 2020.

“Low interest rates, an improvement in economic conditions and the higher proportion of the active young population will serve to boost the housing market”, says Greg Davies, analyst at Moody’s, adding that in the last decade, the proportion of young workers has increased by 8%.

The agency indicates that the current environment of low interest rates and the economic recovery, which is reducing the still high level of youth unemployment, are contributing to the affordability of housing in Spain, although it says that salary growth is still low, which is preventing some young professionals from buying a home, something that Moody’s expects to improve over the next few years.

In this sense, the agency points out that in 2014, around 14% of full-time workers in Spain earned less than 2/3 of the median income, compared with just 7% in Italy and 9% in France.

On the other hand, Moody’s underlined that Spain has experienced a decline in the demand for new build homes, whereas there has been a lot of activity in the second-hand market. Construction activity in the country currently represents just 40% of the volume recorded in 2007, reflecting, amongst other factors, the sovereign deleveraging, including the banking sector, which has led to a substantial reduction in residential investment.

Original story: El Economista

Translation: Carmel Drake

RE/MAX: The RE Recovery Is Spreading Across Europe

12 June 2017 – El Mundo

The real estate market is growing, not only in Spain, but also in Europe, according to the Housing Report compiled by RE/MAX Europa. This improvement is being reflected in high levels of demand and rising prices, a trend that looks set to continue over the coming months in the property sector of the Old Continent. The good borrowing conditions and the incentives, especially for those buying their first home, are two of the main factors that are driving this growth.

Specifically, in Spain, house prices are stable, with potential for growth. “The increase in wages in Spain, the access to financing, as well as the political stability are posited as the most important factors for driving this upward trend in prices”, explain RE/MAX Europa.

Specifically, since 2015, the sales prices of family homes, as well as of flats and apartments, have increased by 4.5% on average in urban areas, where the average price per square metre has risen from €1,651/m2 to €1,727/m2. House prices in urban areas are expected to increase by 1.8% in 2017 and by 1% in the case of properties located in small towns.

And the picture is even more buoyant in the rental market. Prices per square metre have risen by 9.8% in the large cities and by 7.7% in small towns. In this way, the average monthly rental cost in a Spanish city amounts to around €800/month, whilst in the smaller towns, that figure stands at around €600/month.

The recovery of the real estate sector at the European level is based, above all, on low interest rates and, therefore, loans that are accessible to the public. This situation is “currently being seen in almost every country in Europe”, said the study. “That is resulting in higher demand, which is driving up prices in almost every segment and area”, it adds.

In Slovakia and Estonia, for example, thanks to these favourable conditions, there has been a significant increase in the construction of new homes, said RE/MAX Europa. In Malta, there has also been growth in the rental market, due to the rising number of overseas employees living on the island. Markets such as Portugal, Greece and Scotland “have been recovering really well over the last few years and are now showing clear signs of stable growth, with the prospect of more transactions in the future”.

Cities are improving

The experts at RE/MAX confirm that between 2015 and 2016, sales prices rose for apartments and family homes. In particular, prices per square metre rose significantly in the case of urban apartments, specifically, by 13% in certain cities in Lithuania, Germany and Luxembourg. The sales prices of houses in small towns also rose and are expected to increase by 4% in 2017 in Austria and Estonia. Nevertheless, prices are predicted to remain stable in France, Greece and Switzerland.

Rental prices also increased in 2016. Specifically, by 10% for urban apartments in The Netherlands, Romania and Spain, and by 16% in Malta. The experts at RE/MAX predict that rental prices will increase or remain stable in the majority of Europe during 2017.

One of the most important criteria in determining differences in prices is location. According to Michael Polzler, CEO of RE/MAX Europa, “the sales prices of apartments vary by 64%, depending on whether a property is located in an urban area or in a small town. For family homes, that difference amounts to 44%”.

Original story: El Mundo

Translation: Carmel Drake

Axiare’s Profits Rose By 156% In Q1 2017 To €13.1M

12 May 2017 – Expansión

The listed real estate investment company (Socimi) Axiare Patrimonio recorded a net profit of €13.1 million during the first quarter of 2017, up by 156% compared to the same period last year, according to a statement filed yesterday by the company with the CNMV.

Revenues from gross rental income grew by 36%, to €13.4 million. In comparable terms, rentals grew by 4.9%.

So far this year, the Socimi has signed new lease contracts covering a surface area of 93,400 m2: 16,200 m2 relating to offices and 77,200 m2 to logistics facilities, which represents a new record.

At the end of the first quarter, the occupancy rate of Axiare’s portfolio amounted to 92.6%.

During the first quarter, Axiare signed new lease contracts for offices covering a surface area of 4,485m2, which also represents a new record.

In the logistics segment, it signed two new contracts, covering a surface area of 26,165 m2, whereby increasing the occupancy rate of the segment to 97%. Moreover, lease contracts were renegotiated for 23,456 m2 of space.

Since the end of the first quarter, Axiare has signed lease contracts for offices and logistics facilities spanning more than 63,000 m2.

So far this year, Axiare has invested €157.9 million on the purchase of four properties, to take its real estate portfolio to a record figure of more than €1,500 million.

Offices

75% of Axiare’s portfolio comprises offices, whilst 16% corresponds to logistics assets and 9% to other assets, primarily retail parks.

In addition to the €93 million raised in March through a capital increase, Axiare has obtained bank financing amounting to €119 million, whereby benefitting from the current low-interest rate environment.

According to the Socimi, with these funds, the company plans to continue with its policy of investing in real estate assets with strong potential for generating value.

Original story: Expansión

Translation: Carmel Drake

The Real Estate Recovery Takes Hold In Portugal

15 December 2016 – El Mundo

After several years in crisis, the Portuguese real estate market is booming once again thanks to public auctions of properties and the arrival of overseas buyers, attracted by the tax exemptions and the quality of life.

In Lisbon, Luis Morais, a 43-year old IT teacher, has just acquired an 80 m2 apartment in Sintra, a city close to the capital, for €49,000 in a public auction. The bidding started at €33,000. “It is a bargain” said the IT teacher. “We are not going to live there, we just want to rent out the apartment to supplement our income”, explained Teresa, his partner, aged 36, who teaches mathematics.

The property was confiscated from a family with lots of debt and was owned by the public bank Caixa Geral de Depositos, which decided to auction it off. Like Luis and Teresa, many Portugese people are now choosing to invest in property rather than leave their money in the banks, which are still fragile following the crisis.

Overseas investors are also buying properties in public auctions, such as the case of a three-storey office building in the entre of Lisbon, which was put on the market for €5.1 million.

From recession to recovery

After several years of crisis, the real estate market in Portugal began to improve in 2013 and the recovery accelerated in 2015, thanks to low interest rates, which drove up sales by 27%. Between 2008 and 2012, house prices fell by 30% in Portugal, but they are now soaring again thanks to overseas buyers, attracted by the quality of life in Portugal and the tax exemptions on offer.

The phenomenon is being felt in Lisbon above all. “In two years, prices have risen by 20% and they are still increasing, there is still room for growth” said Pascal Gonçalves, President of Libertas, a property developer.

Recently, a 160 m2 apartment in the popular neighbourhood of Alfama was sold for €420,000, which is twice as much as it was worth ten years ago. And in the heart of the capital, in the neighbourhood of Chiado, a 100 m2 2-bedroom home was recently sold for €900,000, a price that would have seemed very high just a few years ago.

No risk of a bubble

In Oporto, the largest city in the north of the country, the real estate sector is also performing well. “I have doubled my turnover in a year, and I now earn four times as much as when I worked as a biologist”, explained Isabel Leitao, aged 33, who has been working as an estate agent for six years.

During the first nine months of 2016, the activity of the network of real estate agents Century 21 has soared by 36%. Its President for the Iberian Peninsula, Ricardo Sousa, expects “prices to stabilise in Lisbon because they are out of step with the incomes of Portuguese people”.

Nevertheless, according to the Minister for the Economy, Manuel Caldeira Cabral, there is no risk of a real estate bubble. “Prices have increased in Lisbon, but they are still much lower than in Paris or London”.

The average price of an apartment in Lisbon has increased to €3,607/m2, according to the ad website Imovirtual. (…).

Original story: El Mundo

Translation: Carmel Drake

Bank Of Spain: Housing Yields Soar By 10.9% In Q1 2016

18 July 2016 – Expansión

(…). According to the latest data from Bank of Spain relating to the first quarter of this year, the average gross annual return on housing amounted to 10.9% in Q1 2016. Three months earlier, the same indicator amounted to 8.8%, which gives an idea of how much the pace is speeding up.

This gross yield figure measures the combined effect of the appreciation in house prices, plus the income obtained from putting those houses up for rent, before tax. In other words, the figure takes into account not only the amount that each investor obtains from renting out his/her property, but also the amount that he/she would earn from selling it after twelve months, which is the most important information for investors.

Specifically, house prices rose by 6.3% YoY during Q1 2016, whilst rental income generated additional returns of 4.6% over and above the value of the asset. And that profit may increase over the coming years, given that Fotocasa calculates that rental prices increased by 4.8% YoY in June, the second highest rise since 2006.

Moreover, this figure is more significant in the context of depressed interest rates, where investments presented as alternatives to fixed income options are shining. For example, housing yields are six times higher than the returns on 10-year Spanish public debt, which is the reference rate used by the financial supervisor; moreover, housing has also offered a safer refuge against uncertainty than the stock exchanges in recent months. (…).

This gap between housing yields and the returns on other assets means that now is a great time to invest in rental housing, for both individual buyers and investment funds, given that the cost of mortgages are also at historical lows.

In fact, the College of Property Registrars indicates that last year, 12.71% of house purchases were made by legal persons, which shows the interest that housing is sparking amongst companies, due to the double returns it offers.

The business model of these businesses and individuals is clear: obtain fixed income from renting out the asset, for an amount that comfortably exceeds the associated operating costs, and also benefit from the appreciation in the property value, so that they can more than double their returns.

Overall increases

In addition, it is a pretty safe bet, given that house prices are rising in most autonomous regions (and the improvement in the labour market should prolong this rise) and rental prices are rising four times as quickly as purchase prices, according to data from Fotocasa. (…).

The percentage of citizens who prefer to rent rather than buy is increasing, from 19% to 21.2% of Spaniards in 2015. In the last three years, the rental market has absorbed more than 1 million homes and is 42.5% larger. For this reason, investors looking for high returns have thrown themselves into the hunt for properties in established locations, with demand, in order to rent them out.

Location and quality

In fact, the experts recommend paying special attention to the location and quality of housing, because Spain is no longer a homogeneous market…but rather a market evolving at two or three speeds, in which prices have not bottomed out yet or are stable in certain cities and neighbourhoods, whilst prices are clearly recovering in others. (…).

Original story: Expansión (by P. Cerezal)

Translation: Carmel Drake