Is Málaga the Silicon Valley of the South? Its Offices Generate Yields of 7.25%

7 January 2019 – Eje Prime

Málaga is positioning itself as the possible Silicon Valley of the south of Spain. The second most populated city in Andalucía and the only Spanish city in the Top 10 for the best quality of life in Europe, according to Eurobarómetro, has attracted several technology giants in recent years. The interest from these companies in moving to the area and the lack of available space have driven up prime yields in the office market in Málaga to 7.25%, making it the most profitable place to own an office in Spain, according to data from CBRE.

The international consultancy highlights that Málaga is “consolidating its position as a city of reference in Spain in the development of the technology sector”. Oracle, Accenture, Microsoft, Huawei, Ericsson, Indra, Atos and Cisco, amongst others, have all opened offices in the city. The meeting point for these companies is the Andalucía Technology Park (PTA), recently included in the catalogue of European Digital Innovation Hubs, compiled by the European Commission, and which recorded a turnover of €1.9 billion in 2019, up by 8%.

In addition, the province is home to other smaller clusters, such as Málaga SmartCity and the ‘Polo de Contenidos Digitales de Málaga’, the first hub with those characteristics in Spain and which aims to accelerate projects and companies related to the digital sector.

The increase in demand for offices in the city also comes in response to the future forecasts for growth in the region. In fact, Oxford Economists names Málaga as the city where the economy is going to grow by the most in Spain over the next decade. The good connectivity of the province abroad and tourism are some of the factors driving those predictions.

In recent years, Málaga has enjoyed a facelift in recent years with improvements in its infrastructures, and the airport and port as anchors for tourism and business. In addition, the population has increased to 570,000 inhabitants in recent years and there are now more than 40,000 companies, of which 87.1% specialise in services.

These drivers have reactivated the office market, which has taken advantage of the boost in demand, on the rise since 2015. Rentals cost €17/m2/month in the city’s best buildings and the occupancy rate in the prime area exceeds 90%.

The shortage of competitive products in terms of location, finishes and facilities, has driven the increase in yields. In comparison with Madrid and Barcelona, the variation in prime yields is great, improving the yields of 3.25% and 4% that were being registered in the two major Spanish capitals at the end of the third quarter 2018.

Moreover, the office market in Málaga also generates higher yields than the market in Bilbao, although it is not far behind with average yields of 7%, as well as those in Sevilla and Palma, which do not exceed 6.75%. The yields in Valencia and Zaragoza amounted to 5.25% and 6%, respectively, in September last year (…).

Original story: Eje Prime (by Jabier Izquierdo)

Translation: Carmel Drake

Ministry of Development: Average Urban Land Prices Rose by 7.8% in Q3

15 December 2017 – El Mundo

The average price of urban land per square metre rose by 7.8% in YoY terms during the third quarter of the year, to €162/m2, whereas it decreased by 2.6% with respect to the previous quarter, according to Land Price Statistics from the Ministry of Development.

In towns with more than 50,000 inhabitants, the average price of land per square metre rose by 5.6% in YoY terms, to reach €287.5/m2

With regards to those towns with more than 50,000 inhabitants, the highest average prices were recorded in the provinces of Madrid (€485.7/m2), Barcelona (€447.6/m2) and the Balearic Islands (€375.1), whilst the lowest prices were registered in Huesca (€48.4/m2), Cádiz (€115.3/m2) and León (€120/m2).

Similarly, the number of transactions completed during the third quarter amounted to 4,545, down by 24.2% compared to the number carried out during the second quarter of the year (5,998) and 2.4% fewer than the number performed during the third quarter of 2016, when 4,656 plots were sold.

By size, in towns with fewer than 1,000 inhabitants, 366 transactions were recorded, up by 3.4% compared to the same quarter in 2016; and in towns with between 1,000 and 5,000 inhabitants, 857 plots were sold, up by 6.1% YoY.

In towns with between 5,000 and 10,000 inhabitants, 763 transactions were recorded (up by 14.2% YoY) and in those towns with a population of between 10,000 and 50,000 inhabitants, 1,591 transactions were signed (+0.8% YoY).

Finally, in those towns with a population of more than 50,000 inhabitants, the number of plots sold in the third quarter of 2017 was 968, up by 5.7% compared to the third quarter last year.

17.8% more space sold

The statistics from the Ministry of Development also show that the surface area sold until September amounted to 6.3 million m2, worth €765.1 million.

With respect to the third quarter of 2016, the YoY variations represent a 17.8% increase in terms of the surface area sold and an 18% decrease in the value of those plots.

Original story: El Mundo

Translation: Carmel Drake

Servihabitat: Rental Prices Will Rise By 2% Before Year End

26 October 2017 – La Vanguardia

Residential rental prices will rise by 2% on average in Spain during the second half of the year, according to the third edition of the “Residential rental market in Spain” report, compiled by Servihabitat, which also forecasts that the trend will continue to be “positive” into the beginning of 2018, despite the fact that some provinces “have stalled”.

The platform says that greater geographical mobility, the popularity of the rental culture amongst young people and the impact of tourism are the factors that are continuing to drive up rental property prices.

In this way, according to Servihabitat’s data, almost 70% of renters in its areas of operation are aged between 26 and 35 years, a figure that increases to 90% if that range is extended to include people aged up to 40 years old.

Currently, 52.3% of homes that are rented out are found in buildings with 10 or more homes; 66.1% are between 46 m2 and 90 m2; and 56.4% were constructed more than 35 years ago.

The average time that it takes to rent a home from when it becomes available on the market has decreased from just over two months on average in Spain to 1.7 months, in just six months.

Nevertheless, in the autonomous regions of Cataluña and Madrid, it takes a maximum of 1.5 months to rent out a home. In fact, in cities such as Madrid and Barcelona, the lag time can be as short as a few days.

Spain currently has 97,900 rental homes available, down by 17.5% compared to a year ago. In other words, there are currently 2.5 homes on offer for every 1,000 inhabitants or 5.3 properties for every 1,000 households.

Servihabitat believes that the progressive reduction in available homes is explained by a reduction in the average length of time it takes to rent out a home and due to “the shortage of residential stock being allocated to  the rental market”.

Supply is most abundant, taking into account the population and the number of households, in provinces such as Salamanca, Alicante, Ciudad Real, Segovia, Burgos and Cantabria.

The following autonomous regions have a supply of more than 13,000 homes: Andalucía, Comunidad Valenciana, Cataluña, Cantabria, Castilla y León and Castilla-La Mancha.

Spain’s most expensive regions: Balearic Islands, Madrid and País Vasco

On the basis of price per square metre, the Balearic Islands, Madrid and País Vasco are the regions where the average rental price is the highest.

In general, in Spain, the average price of a home measuring between 80 m2 and 90 m2 is €620, up by 3.3% compared to 6 months ago.

The average gross return from rental homes in Spain amounts to 5.5%, a figure that is even higher in the autonomous regions of Cataluña (6.1%), Madrid and the Balearic Islands (5.8%) and the Canary Islands (5.7%).

The study also highlights that the evolution of the rental market in Spain is characterised by “a positive trend, although it displays different behaviours depending on the region analysed”.

In this way, Servihabitat considers that the proposals aimed at increasing the stock of public housing for rent will contribute to a “greater equilibrium” between the purchase and rental markets as residential options in the country.

The Director-General of Servihabitat’s real estate business, Juan Carlos Álvarez, believes that the rental market represents an “attractive prospect for the arrival of new investors dedicated to this activity in Spain”, but he considers that the trend in the future will involve “necessary regulation” to protects both landlords and tenants alike.

He also thinks that this regulation should be accompanied by “a strong commitment” to the rental market by institutions, through a “decided” institutional investment in the rental market.

Original story: La Vanguardia

Translation: Carmel Drake

Bilbao To Build 13,000 New Homes In Growth Areas

16 October 2017 – El Correo

Bilbao is fine-tuning where the city is going to grow in the future. The next General Urban Development Plan (PGOU), the instrument that will regulate the city’s development over the next thirty years, is reserving land on which 13,000 new homes are going to be built, in some of the most prominent areas of the city.

Specifically, it confirms the construction of 8,500 homes in Zorrozaurre, Punta Zorroza – a project that has not been defined yet – and Bolueta, where a lack of demand has forced the local government to convert a residential tower that was already designed in the plans into VPO (social housing) properties. The remaining 4,500 homes are planned for Elorrieta, Olabeaga, the Irala area –spread across industrial units still pending reclassification – and the “lid” of the Abando underground station.

The preview of the PGOU, which was unveiled to the public on Friday by decision of the local PNV-PSE Government, considers that the figure of 13,000 homes has “the capacity to support a similar number of inhabitants” to the number living in the city today – 342,481 residents, according to the latest report from Eustat. The population, which has been ageing and in progressive decline for the last decade, represents one of Bilbao’s future challenges.

Another challenge facing the next PGOU is the balance of social housing and the rate of growth that respects the environment, especially in the case of mobility. In this sense, the urban planning rules include several operations to eliminate obstacles, which have been requested repeatedly by citizens: the Rekalde section of the motorway viaduct – a project that also depends on the Diputación – and the placing underground of roads in the neighbourhoods of Zorroza and Olabeaga. The latter neighbourhood has opted to “exclusively” develop residential when the goods line disappears.

Original story: El Correo (by José Mari Reviriego)

Translation: Carmel Drake

ST: New House Prices Rose By 3.7% YoY In June

3 July 2017 – Expansión

The average price of new homes in Spain’s provincial capitals amounted to €2,156/m2 in June, up by 3.7% compared to the same month last year, which represents the highest increase since 2007, according to the latest report from Sociedad de Tasación.

During the first six months of this year, the rise amounted to 1.7%.

With this average price, a typical home measuring 90 m2 costs around €194,000.

In the other cities included in the report (those that are not provincial capitals), the average price amounted to €1,560/m2, which represents an increase of 0.3% since the end of 2016.

If we analyse house prices on the basis of the population of each city, new home prices rose by 1.2% YoY in cities with more than 100,000 inhabitants that are not provincial capitals.

The rise amounted to 1% in cities with between 50,000 and 100,000 inhabitants; 1.3% in cities/towns with between 25,000 and 50,000 inhabitants; and 0.3% in cities/towns with fewer than 25,000 inhabitants.

According to Sociedad de Tasación, this data shows that the heterogeneity in the market is continuing, as the sector is still developing “at two speeds”.

Barcelona is the most expensive provincial capital, with an average price of €3,631/m2, followed by San Sebastián (€3,353/m2) and Madrid (€3,306/m2).

In the provincial capitals with the highest tourist influx, rental prices are rising at a double-digit pace.

Sociedad de Tasación reiterated its warning about the possibility of that trend having an impact over the medium and long term and generating an increase in the prices of homes and land, as well as in the number of operations.

Sociedad de Tasación’s Real Estate Confidence Index continued its upwards trend, with a rise of 2.1 points during the first half of the year, to 56.6 points.

The index also continued above its neutral position, which is 50 points.

The Real Estate Effort Index, which measures the number of years of full salary that it takes an average citizen to buy a home, increased slightly with respect to the previous quarter to amount to 7.5 years.

Nevertheless, the figure was one tenth lower than the level recorded in June 2016 (7.6 years).

Original story: Expansión

Translation: Carmel Drake

Banks & RE Firms Sell Affordable Homes In Seseña

10 May 2016 – La Voz de Galicia

Its silhouette – large blocks of toasted brick emerging out of the green fields of Toledo province – attracts attention from the Madrid-Andalucia motorway. The urbanisation of El Quiñón or Residencial Francisco Hernando, as its developer, Paco, el Pocero, named it, is located in the municipality of Seseña (Toledo), which borders Madrid, in an image linked to the real estate bubble whose crash hit it hard, but from which it is striving to break loose.

It wants to show that it is just another neighbourhood in Seseña and that, as such, the ghost town with deserted streets that received its first visitors in the Summer of 2007, when the first half a dozen residents moved in, of the 580 who received the first sets of keys, has gone from being a dormitory town to one where 6,700 people are officially registered, of which 1,600 are under 16 years old.

Amongst those that financed Pocero’s mega project – a PAU containing 13,000 homes of which only 5,096 have been constructed in two phases – at the height of the boom, was the former Galician savings banks. In fact, one of the financing operations, by Caixanova, is now under the spotlight of the National Court, along with the allegedly irregular loans that the FROB sent to the Anti-Corruption Prosecutor at the time. The Town Hall highlights that the neighbourhood currently has an occupancy rate of 80% and that the “reactivation” of the real estate sector has been felt “over the last year or so”, when the banks started to put the stock they holds in Seseña on the market. “The population has grown very fast”, say sources at the Town Hall. And the census confirms this: El Quiñón has more than doubled in terms of the number of inhabitants in five years, from 3,280 residents in 2011 to 6,700 currently, who represent 30% of the municipality’s total population (22,500).

Slow start

But the start – which is now happening – is slow and not free from difficulties. The key factor for Seseña to become an object of desire for potential buyers once again is prices, which have decreased by more than 50%. At the moment, for example, Aliseda has several two bedroom homes for sale for €85,000, although in 2012, other real estate arms of banks such as Santander and Sabadell ended up selling homes off virtually at cost, for less than €60,000 (…).

Original story: La Voz de Galicia (by A.B.)

Translation: Carmel Drake

Arcano: House Prices Rose By 6.9% In Q1 2016

26 May 2016 – El Economista

House prices accelerated their growth in Spain during the first quarter of 2016, increasing by 6.9% with respect to the same period last year, according to Spanish Real Estate Macroeconomic analysis performed by the independent financial advisory firm Arcano.

The study shows that the recovery is being seen in every autonomous region, regardless of the political colour; both in the new and second-hand housing segments; and in terms of both housing and land. Following a decrease in house prices of 38% in nominal terms and 50% in real terms, Arcano believes that the increase, which began in 2014 “should be maintained due to the positive underlying forecasts for demand, supply and accessibility”.

Specifically, the analysis highlights that the sale of homes in Spain continued to grow at double-digit rates during the first quarter of the year, increasing by 10% YoY, favoured by “significant” demand from foreigners, who now account for 13% of all house purchases in Spain.

Moreover, Arcano explained that another pillar of this data for the recovery of the residential sector is based on the “favourable” macroeconomic environment in Spain, especially the “historical” 12% decrease in unemployment and the subsequent 3.3% improvement in employment and 1.1% increase in wages, following several years of stagnation.

“The economic improvement is allowing pent-up demand for housing to flourish”, says the report, which adds that the recovery of the real estate sector in Spain “is continuing, led by strong fundamentals and a favourable macroeconomic environment in Spain”.

It also helps that house purchases are recovering not only due to necessity on the part of buyers, but also due to investment, given their “attractive” prices in comparison with other assets, explains Partner and Chief Economist at Arcano, Ignacio de la Torre.

In addition, mortgage loans have become cheaper, reaching average levels of 2.38% during Q1 2016, generated by the fall in Euribor. In turn, the number of new mortgages signed in February 2016 rose by 16% YoY, following their increase of 20% in 2015 and 2% in 2014.

In terms of the supply of housing, Arcano says that “it is still very limited”, above all the supply of new vacant homes, which is “practically” non-existent in many areas with high populations and GDP, such as Madrid, Barcelona, Sevilla and Valencia.

Specifically, 46,000 new homes were constructed in 2015, compared with 641,000 in 2007. And although it is true that new housing permits are recovering, they are still a “long way below their historical levels”.

Original story: El Economista

Translation: Carmel Drake

Madrid’s City Centre Lacks New Homes & Land

11 May 2016 – Expansión

The reactivation of the real estate market is being hampered by two key problems: firstly, the lack of available land and secondly, the lack of definition surrounding the Town Hall’s urban planning policy.

Despite the political and economic uncertainty, the market for land in Madrid broke records in 2015, achieving investment volumes of €940 million, which represented an increase of almost 10% compared with the previous year, according to data from the real estate consultancy Knight Frank. This trend is similar to the pattern being observed across the sector as a whole.

The general feeling in the sector in Madrid is that investors are interested in undertaking operations, there are buyers waiting, but that the effort required to progress with any new property developments is enormous. Although in recent months, we have heard a lot about the fact that the recovery in the real estate sector is uneven and varies significantly  by area, in the case of Madrid, that description applies perfectly.

The municipality of Madrid currently has a stock of around 3,000 new homes (…). It is absolutely essential that more land is made available, say all of the stakeholders in the sector, to avoid an excessive hike in prices. But in certain areas, such as the north of Madrid, the supply has almost run out, despite recording higher demand and having a population with greater purchasing potential.

Property developers are back

Average operations involving investors and property developers range between €12 million and €15 million, whilst those involving cooperatives involve higher volumes, of €25 million, according to Knight Frank in its report about the land market in Madrid. And yet, if any sector has run into real problems with the new team at the Town Hall of Madrid then it has been the cooperatives. The most notorious cases were those involving Domo Gestora, with its plot on Raimundo Fernández Villaverde, and Ibosa, with its Metropolitan project in Cuatro Caminos. (…).

Property developers are continuing to request more land to enable them to work in a healthy way in this market. “For a long time, our land legislation has left a lot to be desired (…)” said Juan Antonio Gómez-Pintado – Chairman of the Association of Madrilenian Property Developers, Asprima. Although uncertainty has increased, with the change of party at the Town Hall of Madrid, slow urban planning is not a new phenomenon in the capital. In 2015, for example, the first occupancy licences were finally delivered for the first homes at El Cañaveral (Vicálvaro), almost 20 years after the agreement was signed between the Administration and the former owners.

In turn, future developments, such as Valdecarros, Los Ahijones and Berrocales are still in their very early stages. “To generate reasonable, sustainable and economically viable urban development, there needs to be a substantial modification of the current urban planning model, involving the phasing of developments, the streamlining of urban planning procedures and the resizing of certain areas to make them viable in the current market”, said Pablo Méndez, Head of Investment Madrid at Aguirre Newman. But, Méndez added, whilst working on new developments, we should also remember to focus on the three Rs: “Regeneration, refurbishment and renovation” from the exiting urban legislation.

Despite all this uncertainty, the outlook for 2016 is promising, according to Adolfo Ramírez Escudero, Chairman of CBRE España (…).

Original story: Expansión (by Loreto Ruiz-Ocaña)

Translation: Carmel Drake

The Housing Stock Is No Longer A Problem In 36 Provinces

9 February 2016 – Cinco Días

Improvement of the housing situation goes on. The increase in housing sales continues to drain the stock of new homes for sale, though perhaps at a slower pace than might be expected. The latest data of the Confederation of Construction Products Manufacturers Associations of Spain (Cepco) states that at the end of the third quarter of 2015 the surplus for sale amounted to a total of 507,477 homes, 5.14% lower than at the end of 2014.

In aggregate terms it still seems a figure too high to think that in 2016 many homes will be built, although we must remember that from the peak reached in 2009 (when it amounted to 687,953 homes) the stock has decreased a 26,2% in six years.

But in the real estate market what is of importance is the analysis by territory, since while in some provinces the increase in transactions have been reflect double digit figures for months, in others the activity remains still quite weak.

This is one of the factors that explains how – if those data are currently analysed by province stock, we can see that there are already over 36 of them below 1,500 houses per 100,000 inhabitants, a level considered by sector experts to be acceptable. Among them we find Madrid, Barcelona and Valencia, the three major population and activity centres in the country, but the three Basque provinces, Navarre, where there is no longer a housing surplus, the four Galician provinces, and other areas washed by the Cantabrian Sea also lead the classification

Likewise, the stock volume in all the Andalusian provinces (except for except Almería) in both Extremadura (Badajoz surplus has no surplus) or five of the nine provinces of Castilla y León and the two archipelagos is not worrisome.

The ‘crown’ of Madrid

On the contrary, where there is oversupply of new homes is in three of the five provinces bordering Madrid: Toledo, Ávila and Cuenca, while Guadalajara y Segovia are below the psychological limit of 1,500 houses per 100,000 inhabitants. Precisely this proximity to the capital and the construction of new transport infrastructure were the factors that spurred housing construction in these three provinces, when it was thought that the locations closer to Madrid could end up becoming dormitory towns for thousands of citizens working in the capital.

Not that close to the big city, but also influenced by the construction maelstrom, Ciudad Real appears as one of the provinces with more stock, at the same level as Teruel or Lérida. However, no province comes close to the alarming situation of Castellón which with 4,650 homes per 100,000 inhabitants leads the ranking made by the building materials manufacturers.

These differences in supply of new homes from one province to another is what has favoured that while building cranes have reappeared in the landscape of some large cities, neither have they arrived nor are they expected in others due to oversupply of new construction still for sale or rent. Nevertheless, in the absence of knowing the closing data published by the Infrastructures Department, 2015 will be the first year of the last seven (since 2008) in which the volume of homes started exceeds that of finished homes. This is because Cepco confirms with figures from the colleges of surveyors how from past January to October the building of 39,781 homes was started and 37,497 were finished. The areas with more economic growth and better jobs are the ones concentrating the higher volume of building certifications, which has made both variables to cross again.

A year to strengthen the sector’s recovery

Developers, builders and ultimately all subsectors that depend to some extent on the real estate business, have started this 2016 with the hope that it will become the year in which the recovery takes place. The main research services made their projections for 2016 and 2017 with a focus on labor market performance, the financing flow and the evolution of interest rates.

In this scope, except in the event of major surprises derived from a global catastrophe, all estimates agreed that the purchases of homes continue to rise at moderate rates, prices would not increase far beyond what is considered reasonable (between 3% and 5% except in places with occasional shortages of supply) and certifications to start promotions would focus on areas with less stock.

In such market analyses, only a few remember that 2016 would begin after an electoral process, so that the composition of the new government was mentioned as a risk factor, although it is not defined as a determining factor. Now, 50 days after the elections, given the direction the negotiations between the parties are taking, some experts are beginning to recognize that perhaps the political factor in making the projections was underestimated. The figures for the next few months will tell.

Keys and data

Housing Lists: Visiting each of the new building developments and quantifying the supply of homes would be the best method to calculate the stock, but it is certainly the most costly in human and technical resources. TINSA is the only company that has so far made such an ambitious study, although not a pure housing list.

Calculations: Cepco uses the methodology of the Infrastructure Department, which is subtracting sold homes from finished homes.

Population: To calculate the rate per 100,000 inhabitants, the data quarterly published by the INE are taken into account.

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Aura Ree

Ceprede: Demand For Housing To Grow By 85,000 Units p.a.

8 July 2015 – Europa Press

According to the Centre for Economic Forecasting (‘Centro de Prediccón Económica’ or Ceprede), despite the forecast decline in the population, demand for housing will grow by 85,000 units per year, on average, over the next few years, due to an increase in the creation of smaller households.

The calculations made by Ceprede take into account forecasts from the National Institute for Statistics (INE), which point to a reduction in the Spanish population of more than one million people by 2030.

By contrast, Ceprede predicts that the number of households will increase at an average annual rate of around 145,000 units per year, due to a decline of more than thirty basis points in the ratio of the average household size, from 2.5 people in 2015 to 2.2 in 2030.

Specifically, whilst the population comprises 46.4 million people in 2015, the number of households stands at 18.3 million. Whereas, in 2016, the number of inhabitants will begin to decline moderately, to 46.3 million, and the number of households will increase slightly to 18.5 million.

This trend in terms of the decreasing population will continue until 2030, by which point the population will have shrunk to 45.1 million and the number of households will have increased to 20.6 million.

In this way, Ceprede says that the gap between the net increase in housing stock and new homes will gradually narrow over time, as the accumulated stock of housing is absorbed. This will result in an increase in demand for homes, but at a very moderate rate – around 85,000 units per year.

Meanwhile, the ratio of homes per household will continue at its current level of 1.4 until 2019, at which point it will decrease by ten basis points to 1.3, where it will remain until 2030.

Original story: Europa Press

Translation: Carmel Drake