Tag: overheating

Blackstone May Cease Investing in Spain if the Rental Legislation Changes

27 February 2019 – Idealista

The senior director of Blackstone’s real estate division, James Seppala, has indicated at a meeting that his firm will continue investing in the Spanish real estate sector, but only provided that the regulatory framework for the rental sector remains stable. The declarations come at a time when the Spanish government is negotiating approval, with support from Podemos in extremis, for a royal decree that seeks to modify the Urban Rental Act (LAU) and to limit rental prices.

At a meeting organised by Bloomberg (…), Seppala added that his firm will continue to back the real estate sector, especially in Madrid, Barcelona and their metropolitan areas, which offer returns of between 6% and 7%. He is convinced that there is no risk of prices overheating in those areas (…).

Original story: Idealista

Translation: Carmel Drake

INE: House Sales Soared by 23% in January

15 March 2018 – Expansión

The real estate sector is aiming high in 2018 off the back of the economic recovery. Having surpassed the barrier of half a million homes sold in 2017 and whereby made a return to pre-crisis levels, in January, house sales soared by 23% YoY, to reach 47,289 units. It is the best data for a decade, since May 2008, according to the latest data published by INE. That, combined with the 4.5% recovery in prices in February, as estimated by Tinsa’s price index, indicates that the time is ripe for consolidation in the sector. “The consolidation of credit, the improvement in the economic context and the strong outlook for the sector and the economy, in general, explain this reactivation in demand for housing”, explains the Head of Research at Fotocasa, Beatriz Toribio. With respect to December, sales in January soared by 46.8%.

Forecasts for the real estate sector point to increases of 5% in terms of prices and 10% in terms of sales, in line with the forecast evolution of the Spanish economy. Even so, the number of operations recorded is still well below the more than 100,000 homes sold per month in the years prior to 2008, when the real estate bubble burst. Prices have also continued to recover, and whilst in the centre of some cities, they have now recouped their losses, there are still many areas of the country where house prices today are 65% lower than they were in 2007.

On the one hand, the large capitals and coastal areas are leading the increases in prices, boosted by interest from investors, the tourist boom and a shortage of stock and of new homes. In fact, the overheating of prices in many areas is leading to a displacement of demand towards less central areas of those cities.

In terms of sales, the 23% increase is backed by double-digit growth in 13 autonomous regions. Asturias, the Community of Valencia and Murcia lead the rises, with increases of 56%, 40% and 39%, respectively. Nevertheless, only Valencia remained in the top 3 in absolute terms. That community was, after Andalucía, the one where most house sales were recorded in January (7,409 units). Andalucía was the area where most homes were sold, 8,988 units, up by 31% compared to January 2017. The third region on the podium was Cataluña, which recorded 7,334 sales, although at a rate that was well below the average, of 8%. In this regard, Toribio said that although “the political situation may have slowed down activity in the Catalan real estate market, it has not paralysed it completely”.

Meanwhile, in Madrid, 6,526 homes were sold, up by 14%. Together with Cataluña, La Rioja, Aragón and Extremadura recorded the lowest increases in transaction numbers, up by 8%, 5% and 1%, respectively. The geographical differences expand further as you zoom out of the photo. By province, Álava grew by the most (56.5%) and several provinces saw their sales figures fall. Specifically, in Ciudad Real sales decreased by -19.4%, in Zamora by -10.3% and in Badajoz by -7.4%.

The composition of that growth was also uneven by segment, with a clear predominance in terms of second-hand housing. Of the total number of transactions, just 8,272 were new homes, compared to 42,745 second-hand properties, in other words, 17.5% of the assets sold were new and 82.5% were second-hand. Nevertheless, both segments are evolving in parallel, with growth of 23.5% for new homes and of 23% in the case of second-hand dwellings.

Original story: Expansión (by I. Benedito)

Translation: Carmel Drake

Experts Rule Out Risk Of RE Bubble In The Short Term

10 May 2017 – El Confidencial

The fact that the Spanish real estate market is enjoying happier times is more than clear. And all of the players in the sector are aware of the fact: property developers, consultants, construction companies…Nevertheless, the “overheating” that some say is threatening certain segments of the market, is falling well short of a full-blown real estate bubble, for the time being at least. At least that is according to the speakers who participated in the “Real Estate Investment Opportunities” day organised by El Confidencial and Colonial.

Real Estate Market Forum

Indeed, Juan José Brugera, President of Colonial – which is currently evaluating its transformation into a Socimi – stated that the market is “a long way from a bubble. What we are seeing is the launch of projects”. In this sense, he pointed to the German market by way of example. “It is very stable. (…) What you have to do is take a risk and invest. With this stability in terms of value, your investment will be rewarded”.

In his opinion, “a bubble is something else. It is an excessive value, but, one of the characteristics of the European property sector is that financing is very tight in terms of size and type. I don’t see a bubble, what I see is a more professional management of the assets, where the ability to generate value is what will determine prices, provided the markets are not affected by global circumstances”.

The CEO of the consultancy firm JLL in Spain, Enrique Losantos, also rules out the risk of a bubble. “Given current prices, you could be forgiven for thinking that the market is overheating, but the fact is, there is still a long way to go, especially for those investors who know how to extract value from the portfolios of assets that are coming onto the market and which should be invested in and managed to adapt them to the demands of the current market. These players will be able to obtain returns, even in the double digits (…)”.

Who will control the large rental stock?

Meanwhile, Ignacio de la Torre, Chief Economist at Arcano, said that “there is not a bubble at the moment, but if we continue at this rate, there will be one”, especially in the residential market. He highlighted the significant interest that certain assets have sparked in Spain, such as, for example, rental homes, especially amongst institutional investors. “When everything was clogged up, it seemed like Spain was going to go bankrupt, but then investors with large risk appetites entered the market to inject liquidity and the economy started to work again. Now, those hedge funds are starting to recycle the assets they bought and as the market for rental homes increases, so institutional investors are entering the segment, which is what is happening in other countries too. In the future, insurance companies and pension funds are expected to become the owners of the large stock of rental housing in Spain. (…).

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake

Funds And Developers Compete To Buy Land In North Madrid

9 June 2015 – El Confidencial

Land is no longer the most toxic asset in the market, rather it has become one of the most sought after by investors. Although, not all plots or all locations are of interest, it is clear that the number of transactions, especially in Madrid, has reached “cruising speed” during the last few months. But, what are investment funds and property developers looking for exactly?

“Land has to be ready to build on (‘suelo finalista’); it is imperative that we can begin to build on it within a period of six months”, says Roberto Roca, Investment Director, Head of Spain at Orion Capital Managers, a fund that has closed two of the largest shopping centre transactions centres in Spain in the last year: the sale of Puerto Venecia (Zaragoza), the largest shopping centre in Europe, for €451 million and the sale of Plenilunio (Madrid), for a record figure of €375 million.

(…)

The market for land in Madrid is in full swing, to the extent that some experts agree that there is “overheating” in certain specific areas.

“Most activity is concentrated within the M-30 and on buildable land. Also, outside of the M-30, to the North of Madrid, from the A-6 to the A-1, i.e. the area comprising the urban developments of Arroyo del Fresno, Sanchinarro, Montecarmelo and Las Tablas”, says Ernesto Tarazona, Director of Residential Property and Land at Knight Frank.

However, in the South of Madrid, “despite the decreases, prices have not dropped enough…to reflect the real demand in the area”, concludes Tarazona.

(…)

One of the most active players in the market is Neinor Homes – the result of Lone Star’s purchase of the real estate arm of Kutxabank – which has €1,000 million to spend on land in Spain, and which regards Madrid as one of its main targets. The company led by Juan Velayos has just bought four plots in Alcobendas and another one in San Sebastián de los Reyes – both towns to the North of Madrid – for almost €65 million. This has been the largest land transaction so far in 2015, both in terms of square metres acquired, as well as surface area purchased. The plots are completely established and ready for construction, with a total surface area of 70,000 m2 and a buildable area for the construction of almost 600 (unsubsidised) homes. The vendor was a private group, i.e. the land did not used to belong to the Public Administration.

This transaction comes after the recent purchase of three other plots of land, one in Madrid and two in País Vasco for €22 million. According to a statement from BNP Paribas Real Estate, which advised on the deal, the first plot – with a buildable area of 6,400 m2 – is in the Legazpi neighbourhood and has been granted a special plan, approved by Madrid’s Local Council, to build a 20-storey tower block. The other two plots are located in Gexto and Urduliz.

Meanwhile, the cooperative manager Ibosa is finalising an agreement with an investment fund, which will allow it to pay €70 million to buy 40,000 m2 of land from the Valdebebas Compensation Board, which will allow the construction of 1,000 homes (of which 100 will be social housing).

Nevertheless, the largest land-related deal in Madrid is undoubtedly the possible future auction – maybe after the summer – of the Ministry of Finance’s plot of land on Calle Padre Damián, which already has 4,000 individuals calling at its door.

Original story: El Confidencial (by E. Sanz)

Translation: Carmel Drake