Tag: overseas buyers

CaixaBank: Consequences Of Brexit For Spain’s RE Sector

11 September 2017 – CaixaBank Research

The real estate sector has started a new bullish cycle, as evidenced by the evolution of house purchases, which have been growing at double-digit figures for two years now. Whilst internal demand has been boosted by the recovery in employment and favourable financing conditions, overseas demand has been by no means negligible: in Q1 2017, it grew by 14% YoY.

Nevertheless, this positive movement in terms of demand from overseas buyers is masking various different trends. On the one hand, most of the purchases are happening on the Mediterranean Coast and in the islands, with foreigners accounting for more than 30% of total purchases in some provinces.

On the other hand, the evolution of these house purchases varies significantly by nationality. In this sense, the uncertainty surrounding Brexit and the depreciation of the pound are leaving their mark on the acquisition of homes by citizens from the United Kingdom, the main cohort of foreign homebuyers in Spain. In Q1 2017, purchases undertaken by British citizens decreased by 13% YoY. Nevertheless, that decrease was more than offset by the uptick in purchases made by French, German, Belgian and Swedish citizens who increased their purchases at rates equal to or more than 20% YoY in Q1 2017.

The different trends observed between international buyers have generated changes in the relative weight of each country in terms of house purchases, at the same time as reducing the degree of concentration amongst certain nationalities. Although the United Kingdom continues to head up the list of overseas buyers, purchases by that cohort have gone from accounting for 21% of the total in 2015 to 15% in Q1 2017.

Looking ahead, house purchases by British citizens may regain some of their buoyancy if the Brexit negotiations evolve favourably and the pound manages to recover some of its strength. Nevertheless, periods of significant uncertainty surrounding Brexit, or a hard Brexit, could tarnish the recovery, given that house purchases by British citizens have historically been very sensitive to economic conditions in their own country. On a more positive note, the good economic outlook for the other main home-buying countries in Spain, together with the continuation of accommodative monetary conditions and the decrease in the political uncertainty in the Eurozone countries, represent an opportunity for the Spanish real estate sector.

On a more positive note, the good economic outlook for the other main overseas buyers of homes in Spain, together with the continuation of loose monetary conditions and the decrease in the political uncertainty in the Eurozone countries, represent an opportunity for the Spanish real estate sector.

Original story: CaixaBank Research

Translation: Carmel Drake

Engel & Völkers: House Prices Soar In Ibiza

21 July 2017 – Eje Prime

The real estate market in Ibiza is continuing to rise. Demand for high-end housing in Ibiza continues to significantly exceed the available supply, which has led to an increase in the prices registered on the island over the last year, according to a study prepared by the German real estate consultancy firm Engel & Völkers.

In its Ibiza Markets Report, the company explains that over the last year, it has sold homes to clients of 17 nationalities. Although most buyers on the island came from Germany, for the first time in almost ten years, Spaniards were the second largest group of house buyers.

The nationality of the other main house buyers included people from the United Kingdom, France, Switzerland, Italy and the Benelux countries. “Ibiza is still one of the favourite destinations for the international jet set and retains its leadership position in the Balearic Islands as the island with the most private flights”, say sources at the consultancy firm.

One of the most sought-after areas on the Balearic Island is the city of Ibiza and its surrounding areas. The redevelopment of the old town will be completed this year and so new luxury hotels will soon enhance the exclusivity of that area. In this sense, luxury villas measuring 350 m2 saw their prices increase by 14.2% in 2016 to reach €4 million.

Properties range from contemporary designer villas to traditional estates. The asking prices for villas measuring 350 m2 start at €3.5 million, whereby exceeding the figure of €3 million paid in 2015.

Entry prices for villas measuring around 350 m2 in very good locations rose to €2.6 million in 2016 compared to €2.5 million in 2015. “We are convinced that the growth of the real estate market will continue for the rest of the year in Ibiza”, predicted Florian Fischer, Director General of Engel & Völkers España.

The consultancy firm forecasts that the high level of demand will continue, both from domestic and international buyers, for primary and secondary residences on the Balearic Islands, primarily in the most premium segment, where the limited number of exclusive properties will lead to further price increases over the long term.

Original story: Eje Prime

Translation: Carmel Drake

Housing: Which Provinces Offer The Most Attractive Returns?

23 May 2017 – Expansión

Madrid, Barcelona, the Costa del Sol and the Balearic Islands clearly stand out as the most attractive areas.

The Spanish real estate market is enjoying a sweet moment once again. The average price of a home in the country rose by 2% in April with respect to the same month a year ago, which means that so far in 2017, prices have risen by 5% with respect to December 2016, which saw the third consecutive annual rise.

And the outlook for the future is more than promising: Samuel Población, National Director of Residential and Land at CBRE, explains that on average in Spain, price increases of between 4% and 5% are expected, and those percentages will be more marked in Madrid and Barcelona, where increases of around 10% are predicted.

In the case of yields, the panorama is similar. The net return on a rental home (the rate that includes the increase in the price of a home over 12 months as well as the return from renting it out during the same period) now amounts to 8.8% in Spain. On average, rentals in Spain generate returns of between 4.5% and 6% (excluding the impact of capital appreciation), according to Ignacio de la Torre, Partner and Co-Head of the Capital Markets team (at Arcano).

However, the figures reveal that the real estate market is not experiencing a similar boom across the whole of Spain. The best areas for investing in housing are Madrid, Barcelona and their respective suburbs, as well as Málaga and the Costa del Sol, the Balearic Islands and Alicante. Valencia, influenced by the latter, is also recovering and in Valladolid, Zaragoza and A Coruña, we are starting to see signs of improvement, according to José Luis Ruiz Bartolomé, Managing Partner at Chamberí AM.

In Madrid and Barcelona, house prices are rising due to an increase in demand in the context of limited supply, given that the construction of new housing is still a long way below the levels that the country can absorb. 60,000 homes are currently being constructed in Spain, compared to the 150,000 that the economy is capable of digesting.

Typical buyer profiles

The profile of a typical buyer in the city is a family with children and a stable income. They are looking for a home with between three and four bedrooms, measuring between 110 m2 and 140 m2. In the case of investors, they tend to buy properties with 2-3 bedrooms, according to Población. On the other hand, the average tenant is a young person, without children, who does not take out a mortgage either due to a lack of stable employment or because of the effect of the rental culture that is starting to spread amongst the new generations.

Jesús Martí, real estate analyst at Invermax, added that buyers, and above all renters, are increasingly focused on the proximity of their future home to their place of work when it comes to deciding where to live.

The profile of a typical buyer on the coast is a foreign investor. Ignacio de la Torre, Chief Economist at Arcano, says that 15% of the total market for house sales in Spain involve buyers from overseas and that percentage increases to 30% in the case of Málaga.

When it comes to choosing a property for investment, the experts advise buyers to not get carried away by apparent bargains. It could be that the sales price of a property seems cheap, but in that case, it will probably also be hard to generate stable rental income from it.

It is worth considering that just one month’s delay in the payment of rent by a tenant can significantly harm the profitability objectives of a property.

Original story: Expansión (by R. Martínez)

Translation: Carmel Drake

Registrars: House Prices Rose By 7.7% YoY In Q1

18 May 2017 – El Mundo

Homes are becoming increasingly expensive. House prices rose by 7.7% during the first quarter of 2017 in YoY terms, according to the real estate statistics published by the College of Property Registrars. With respect to the last quarter of 2016 – i.e. looking at the QoQ variation – the increase amounted to 4.1%. With these new increases, the cumulative adjustment since the peaks of 2007 continue to fall and now amount to 22.8%.

On the other hand, 113,738 house sales were recorded between January and March, representing the highest quarterly figure since the first three months of 2011. The increase amounted to 21.8%, with respect to the previous quarter. In interannual terms, the positive trend continued: prices rose by 14.4% with respect to the same quarter in 2016.

On this occasion, contrary to the trend seen in recent years, new house prices performed in line with the general increase, accounting for 18% of the total number of sales, with a significant QoQ rise of 27.5% (20,490 sales), whilst the sale of second-hand homes rose by 20.6% compared to the previous quarter, to reach 93,248 operations.

Purchases by overseas buyers reach peak levels

The weight of house purchases by overseas buyers remained relatively stable during the first quarter of the year to account for 13.1% of all registered sales. That corresponds to sales of around 15,000 properties per quarter. In cumulative YoY terms, foreigners accounted for 13.3% of all purchases, a historical maximum, and corresponding to more than 55,000 house purchases per year by overseas buyers.

By nationality, the British continued to lead the ranking, accounting for 14.5% of all purchases made by foreigners, although their continued fall over the last few quarters (during the previous quarter, they accounted for 16.4% of all purchases made by foreigners) has brought the figure to a new historical low over total purchases by foreigners. The French rose to second place with 9.6%, followed by the Germans (7.7%), Belgians (6.9%), Swedes (6.3%) and Italians (6.1%). These first six nationalities accounted for more than half of all house purchases by foreigners.

Average mortgage amounted to €116,182

Mortgage debt to buy a home increased by 3.6% compared to the previous quarter, to reach €116,182, whilst the number of fixed rate mortgages continued to rise sharply, in line with previous quarters, to account for 38.7% of all new contracts, compared to 31% in the previous quarter, a new maximum in the historical series.

This situation leaves variable rate mortgages at their lowest figure to date, especially, Euribor, which was the reference rate for just 60.3% of all mortgages. The average initial interest rates on new loans decreased slightly to reach 2.3% from 2.4% in the previous quarter.

The terms of new mortgage loans remained relatively stable, recording a slight increase of 0.7% compared to the previous quarter, and an average term of 23 years and four months.

Access to housing saw a slight deterioration: the average monthly mortgage repayment during the first quarter amounted to €536, representing a QoQ increase of 2.2%, whilst the percentage of that repayment over wage costs rose to 28.3% from 27.6%.

Original story: El Mundo 

Translation: Carmel Drake

The Real Estate Recovery Cools Off In Valencia

12 May 2017 – Las Provincias

The recovery will have to wait. The signs of reactivation that were seen in the real estate development sector in the Community of Valencia in 2015 cooled off again in 2016. Although the number of operations involving land purchases grew by 38% last year, from 511 to 826, the fact is that they involved smaller spaces. This means that the surface area sold to property developers decreased by 10.6% from 2.3 million m2 to 2 million m2, according to data from the Ministry of Development.

The only exceptions were in the tourist areas to the south of Alicante and in the city of Valencia. “The area to the south of Alicante is still the most active place, with significant property development activity (c. 2,000 homes under construction), led by a significant recovery in purchases by non-residents. The typical buyer at this initial stage of the recovery can afford to acquire a home with own funds or with a significant down payment, representing more than 40% of the property value”, said the Director of Sales and Marketing at Solvia (Banc de Sabadell), José Peral.

In 2015, demand for buildable residential land increased along the Alicante coast, primarily in the coastal tourist towns that spark the most interest in the international market, such as Xàbia, Dénia, Benidorm, Calpe and Orihuela-Costa. Thus, in some of these areas and, in particular, in the latter, the supply of available land decreased considerably and transaction prices increased, which is why some property developers have started to move to the northern coast of Alicante, for example, to Finestrat.

Nevertheless, this trend, which started in the south of Alicante is now moving to other areas. For example, the new build market in the city of Valencia did an about-turn in 2016 after several years of inactivity, according to Peral. Currently, a great deal of activity is being undertaken: a lot of projects are already underway, building permits have been granted for others, and others still are in the pre-sales process.

This situation explains the focus being placed on these markets by the new players arriving in the Community of Valencia, such as the fund Neinor Homes, which is constructing its first projects in the Valencian neighbourhood of Malilla and in Playa de San Juan de Alicante.

In terms of the capital’s metropolitan area, there has been a slight uptake in demand for buildable residential plots of land in towns with more than 20,000 inhabitants. It is also worth noting the number of transactions involving plots of land (…) for family homes, involving small and medium-sized local property developers.

Original story: Las Provincias (by A. Castillote and Á. Mohorte)

Translation: Carmel Drake

Tinsa: House Prices Rose By 6.1% YoY In Large Cities In April

10 May 2017 – Expansión

House prices are continuing to rise sharply, boosted by an acceleration in the large cities and in the Balearic and Canary Islands, according to the latest estimates from the appraisal company Tinsa. Specifically, the price per square metre of properties rose by 2% in April with respect to the same month last year, according to figures published yesterday.

Although those figures are seven-tenths lower than those registered in March for the country as a whole, we cannot speak of a slowdown, given that the general trend over the last few years has been increasingly bullish. Moreover, the data also reveals a growing acceleration in several key markets, such as the large cities, where prices rose by 6.1%, and the Balearic and Canary Islands, where property prices rose by 4%.

In this way, the rise in house prices in Spain’s provincial capitals and large cities has accelerated by six-tenths with respect to the same month last year, to reach its highest rate since the outbreak of the crisis. This increase is being spearheaded by some of the prime areas of Madrid and Barcelona, where supply is constrained and demand is rocketing. Nevertheless, over the last few months, the price rises have been spreading to more and more neighbourhoods, given the strong buyer pressure in the most sought-after areas.

Meanwhile, property prices in the Balearic and Canary Islands are rising at a rate of 4%, driven by two main factors. On the one hand, the high level of demand from overseas buyers. On the other hand, the purchase of homes as investments, given that owners can rent them out easily for short-stays for most of the year, which raises their yields. Prices in these regions have fallen by 27.8% since 2007, i.e. by one-third less than the average.

On the other hand, this situation contrasts with the weakness in house prices along the Mediterranean Coast, in metropolitan areas and small towns, where there the stock of homes for sale is greater and demand is lower. (…).

Two speeds

(…). By way of illustration, house prices in the Mediterranean region are still 46% lower than their peak levels of 2007. (…).

In metropolitan areas, prices are still falling, with a decrease in property prices of 2.6%. That data also represents a slowdown of more than two points with respect to last month and is a kick in the teeth for a market that has seen its price plummet by 45.9% since the real estate bubble burst. The reason is precisely due to the fact that the crash in the market made house prices in the centre of large cities more affordable, which meant that most buyers did not have to move tens of kilometres away to buy a home.

Original story: Expansión (by P. Cerezal)

Translation: Carmel Drake

Tinsa: House Prices Rose By 5.5% In Large Cities In March

19 April 2017 – Expansión

The latest statistics confirm the continuation of the good vibe in the housing market, which is advancing at cruising speed thanks to the boost from large cities. Last week, the appraisal company Tinsa reported that the average appraisal value of residential properties experienced a YoY increase of 2.7% in March.

The YoY price rise amounted to 5.5% in large cities, which account for 40.8% of the market, according to the weighting that Tinsa applies to calculate the statistics. Major cities saw their positive evolutions accelerate in March. Although the average price in January was 1.5% higher than at the end of 2016, the increase during the first three months of the year amounted to 3.5%, thanks to the fact that the rise in March was 2.2 points higher than in February.

Once again, the most marked price increases were recorded in the Balearic and Canary Islands: up by 7% on average. In both cases, the increase in demand for holiday homes and in purchases made by overseas investors, are spurring on the recovery in the real estate sector.

Something similar is happening on the Mediterranean Coast, which saw prices rise by 1.9% YoY, despite the huge surplus of new unsold properties in certain provinces in the region, above all in Castellón.

The cities and the coast are the two segments where the housing market has performed the best traditionally, due to the high level of demand. In the case of provincial capitals, due to the creation of new households and, above all, the marked increase in purchases made by investors. Those two variables, combined with the strong rise in the rental market, mean that Madrid and Barcelona are continuing in their role as the real engines of the housing market.

In aggregate terms, the residential market is following the positive trend with which it started the year. The growth of 2.7% is almost one point above the figure recorded in February (1.8%). These increases are in line with Tinsa’s forecasts for 2017. The Head of Research at the appraisal company, Jorge Ripoll, revealed his predictions: growth will be almost flat this year, “ranging between 0.1% and 2%”. This is a moderate estimate, compared to those published by other analysts. Overall, the consensus amounts to around 5%.

The other two real estate sub-markets analysed by Tinsa experienced a YoY decrease in prices in March. The metropolitan areas and “other municipalities” saw reductions of -0.5% and -0.6%, respectively, over the last 12 months.

“During the first quarter alone (January, February and March), average prices in Spain rose by 3.2%”, according to Tinsa’s report. “The cumulative decrease since the peaks of 2007 now stands at 39.4%”. In other words, it has fallen below 40% for the first time since June 2014.

The largest decrease in prices since the peaks of 2007 was recorded on the Mediterranean Coast (down by 45.5%), followed by metropolitan areas (-44%) and then the provincial capitals and large cities (-42.1%). In the Balearic and Canary Islands, where historically, prices have decreased by the least, the cumulative reduction amounts to 24.2%.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Lucas Fox: Luxury Home Sales Soared By 31% In 2016

27 February 2017 – Expansión

Luxury homes enjoyed a buoyant 2016. Sales soared by 31% thanks to the boost from foreign investors, above all in cities such as Barcelona, where the purchase of high-end residences increased by 69%, according to the latest report from the real estate company Lucas Fox, which specialises in high-end homes. In Madrid, the increase amounted to 12%.

The study attributes this mini-boom to the declining demand for properties in London following the Brexit referendum. That “has caused citizens from outside the EU to be more interested in Madrid and Barcelona, and the trend is set to continue in 2017”.

Foreign investors will continue to be the main driver behind Spain’s luxury residential sector. They now account for 65% of the market, according to the real estate company. The remaining 35% are Spaniards.

Buyers from the UK and Ireland accounted for 11% of overseas purchasers in 2016, whilst French buyers accounted for 5%. Purchasers from the Middle East were the cohort that grew by the most, to account for 8% of all luxury residential property purchases. Scandinavian buyers accounted for 6%.

In terms of buyer motivation, 30% acquired a property as a primary residence and 43% as a second home. It is worth remembering that 75 million tourists visited Spain last year, a historical record. There was also a considerable increase in the number of buyers who purchased properties for investment purposes (22% of all purchases by overseas buyers). Finally, 3% bought because they were looking to obtain a Golden Visa, in other words, the permit to reside in Spain that is granted to real estate investors from outside the EU.

In fact, Lucas Fox estimates that demand for Spanish properties from buyers outside the EU, including from the USA and the Middle East, “will cause the current bullish trend to continue throughout 2017, thanks to the Golden Visa program”.

During the first three quarters of 2016, foreigner buyers spent just over €47 million on new build and recently renovated properties, which represents a YoY increase of 9%. The apartments that are most in demand are those located in classic buildings in prime areas, measuring between 150 m2 and 200 m2 and worth between €1 million and €1.5 million.

Original story: Expansión (by Juanma Lamet)

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

Banks Accelerate Sales From RE Cemeteries

25 October 2016 – El Mundo

The skeletons of half finished construction sites are one of the symbols of the crisis in the real estate sector, which fell to its knees in 2008. (…). Countless developments fell victim to the crash in activity, zero demand and the closure of the financing tap.

That gave rise to a vast catalogue of half finished developments (…), which can still be found across the Community of Valencia, one of the largest real estate cemeteries in Spain. This group of toxic assets was transferred into the hands of the banks and Sareb, and they are now putting their feet down on the gas to get rid of the properties, which are still weighing down heavily on their balance sheets. The entities have been hovering over these real estate supplies for too long now; they need to get rid of them.

Nevertheless, the operation is more complicated than it might seem at first glance: it means convincing local property developers to work together with the financial institutions to reactivate the failed projects, complete the unfinished homes, sell them and recover all or some of the money tied up in the stock. According to market sources, the major stumbling block in attracting businesses to take this step once and for all, is the conditions of the agreements being offered. Although the demands relating to financing, the marketing of homes and the selection of customers and prices, amongst other aspects, have been eased compared to previous years, they are still too harsh and risky for property developers. Some of the most active entities in this sense are Solvia, Sareb and Santander, which together have been managing around 100 suspended developments in three provinces since the outbreak of the crisis and which now want to relaunch them again in collaboration with business people in the sector.

Sabadell’s real estate subsidiary has around 50 unfinished developments located in Castellón, Valencia and Alicante. Its sales team is combing the market looking for possible investors who may be interested in resuming construction at these sites. From Elche, Alicante, Elda, Los Montesinos, Albatera, Orihuela, Santa Pola, Mutxamel, Sax, to Finestrat, etc, the province is littered with buildings and urbanisations, owned by Solvia, whose construction stopped dead with the collapse in property development activity. The same thing happened in Valencia.

The marketing strategy for these types of assets is not exactly easy, given that the investment involves effectively bringing projects back from the dead. Sources at Solvia state that “those interested in these types of assets are local property developers and construction companies with average profiles who are looking for these types of assets to complete the building work”.

The target market comprises professionals who are experts in their immediate environment and who have sufficient capacity to complete the construction work and then put the properties up for sale. Solvia, in addition to managing sales to property developers, also provides marketing services once the development has been completed. And all of that with the hook of financing from Sabadell. Sareb, Santander and Solvia manage suspended developments between them that may supply up to 1,300 homes in the region. Not all of the offers will be successful. The developments that cannot be sold will probably be demolished. The projects that have more chance of success are those located in tourist areas along the coast and whose target is overseas buyers. (…).

Original story: El Mundo (by F. D. G.)

Translation: Carmel Drake