Socimis Are The Star Players In The RE Sector In 2015

22 April 2015 – Expansión

The value of companies in the sector has increased by 30% on average in 2015 / The Socimis Merlin, Lar España and Hispania are the analysts’ favourites to benefit from the recovery in the property sector.

The real estate sector is gathering strength on the stock exchange. So far in 2015, (the share values of) companies linked to the property sector have increased by 30% on average on the stock market.

Experts think that now is a good time to invest in these securities, given the strong economic outlook for Spain and the signs of recovery in their businesses. Investment in the real estate sector amounted to €2,463 million during the first quarter (of 2015), i.e. three times as much as during the same period last year. Analysts do not rule out that investment this year may exceed the record high of €11,470 million reached in 2007.

Factors in its favour

“Several factors point to an improvement of the sector: the rise in mortgage lending, the increase in (the volume of) sales, the reduction in the housing stock, and the increase in house prices”, says Victoria Torre, at Self Bank.

Nevertheless, the experts are not convinced: not all companies represent (good) investment opportunities. For Bankinter, it is still too early to back the traditional real estate companies and property developers, whose securities are small in size and have scarce liquidity. For that entity, the best opportunities in the sector are the Socimis (listed real estate investment companies). One of the major attractions of these companies is their returns: they pay out at least 80% of their profits to their shareholders and their returns per dividend can reach 4%.

The favourites in the sector

Merlin Properties is Bankinter’s favourite listed Socimi because it considers that it has an established investment portfolio, visibility over earnings and acceptable levels of liquidity and capitalisation. Juan Moreno, at Ahorro, also backs that company, whose (share price) has increased by 29.88% during the year. “Although (its shares) are trading slightly above our valuation (they closed trading yesterday at €11.76), we consider that the current environment of excess liquidity and low interest rates justify its current prices. The Socimi’s differentiating factor is its size, which allows it to access transactions for which there is less competition”, he explains.

Moreover, the returns on its dividends amount to 3.8%, i.e. the highest in the real estate sector. The six companies that track its value are advising (investors) to buy its shares. UBS gives it an upside potential of 6%, up to €12.41.

Another one of the options preferred by investors is Lar España. The company is a good way of betting on the recovery in the market for shopping centres. “It has just acquired the As Termas shopping centre for €67 million, which will help it to grow and boost its results”, says Remo Bosch, from the firm RBL Asesores. Lar’s share price has increased by 16% in 2015 and it has an upside potential of 10%, according to the consensus of analysts consulted by Bloomberg.

Moreno also thinks that Hispania is attractive. “It is proposing transactions that generate value, such as its agreement with Barceló, which in our opinion will generate €1.90 per share for every shareholder”, he says. He gives its shares a target price of €13.10, i.e. 4.5% above yesterday’s closing price.

Original story: Expansión (by D. Esperanza)

Translation: Carmel Drake

Fitch: House Prices Are Bottoming Out

24 March 2015 – Idealista

…but no rapid rises are expected.

The ratings agency Fitch considers that the decrease in house prices in Spain is coming to an end, but warns that the recovery will be slow. According to the company, one of the main reasons for the improvement in prices is the return of mortgage lending.

Fitch says that Spain faces a slow recovery in the housing market. It considers that prices have practically bottomed out, but rules out any rapid price increases. In fact, it points out that the high level of unemployment, together with the high supply of unsold homes constructed between 2006 and 2007, are two of the factors that will prevent a rapid rebound in prices.

It recalls that house sales increased by 19.6% year-on-year in 2014, according to data published by INE, but that despite that, the number of homes sold amounted to less than half the sales recorded in 2007. The agency expects the number of house sales to increase to move than 400,000 homes this year.

But it also believes that there will be a two-speed recovery. The slowest recovery will be seen in coastal areas and on the outskirts of large cities where there is a larger supply of homes. By contrast, in the centre of large cities, such as Madrid and Barcelona, prices will increase.

Original story: Idealista

Translation: Carmel Drake

Government: Construction Growth Will Return In 2015

18 February 2015 –

2014 was the turning point both in terms of residential housing and construction

The construction sector will be an engine of growth for the Spanish economy once again in 2015. Such was the confidence shown by the Secretary of State for the Economy and Business Development, Iñigo Fernández de Mesa, about this sector, which has been hit so badly by the economic crisis. For Fernández de Mesa, “2014 was the turning point both in terms of residential housing and construction”.

“Construction (activity) has now bottomed out and will return to growth in 2015”, continued the Secretary of State for the Economy and Business Development, who also highlighted that house sales increased by 2% during the second half of last year and mortgage lending also recorded a positive end to the year.

Original story:

Translation: Carmel Drake

BBVA: Declining Interest Rates Boosted Demand For Housing In 2014

3 January 2015 – El Mundo

The financial institution has noted a “clear change in the trend” of mortgage financing and concludes that the expectations of business-owners in the residential construction sector “have improved slightly”.

BBVA Research, the research arm of the financial entity, estimates that 350,000 homes were sold in 2014. It explains that this improvement in the number of transactions was due to the evolution of employment and a moderation in interest rates.

In its latest “Flash Real Estate Spain” report, the bank said that “the evolution of employment, which grew by more than expected, and a further decline in interest rates, continued to favour the recovery in the underlying demand” for housing.

More mortgage lending activity.

According to BBVA, “the increase in the number of sales was also reflected in terms of mortgage financing”, as evidenced by the evolution of loans granted for the purchase of new homes during the month of November, which grew at a year on year rate of 34%.

During the first eleven months of 2014, the number of loans granted for house purchases increased by 45% in year on year terms, “which suggests a clear change in the mortgage financing trend”, said the research service. Data for the third quarter 2014 shows that gross household incomes rose for the second consecutive quarter.

Furthermore, the expectations of business-owners in the residential construction segment “have improved slightly”. Thus, in December 2014, the climate index for the residential construction sector recovered the ground lost in the previous month and ended the year 17.2 points higher than at the end of 2013, in year on year terms. All of the components of this index increased, above all those relating to employment and production.

Original story: El Mundo

Translation: Carmel Drake