Tag: price tension

Large Investors Manage Only c. 3% of Spain’s Rental Homes

28 May 2018 – Cinco Días

In recent months, a new name has been added to the list of alleged culprits to blame for the fact that rental prices in large cities are rising at a dangerously accelerated pace – they increased by between 10% and 18% last year. They are what the experts call the large owners of rental home portfolios. And are otherwise known as Socimis, investment funds, servicers and, to a much lesser extent, public companies.

But, how many homes are we talking about (…)? And what percentage do they represent over the total stock of rental homes? Taking into account that no official figures are compiled for the number of rental homes in Spain, and that we only talk about percentages of the total number of households (…) the truth is that the task seems complicated.

Nevertheless, according to the calculations performed by Cinco Días and after having requested data from the large funds, the resulting figure is so small, both in absolute and relative terms, that it seems to have almost no or limited influence on the evolution of rental prices. The figures compiled by CBRE reveal a balance that ranges between 2% and 4% of the total stock of rental homes. “It is possible that they have an influence at the local level in areas where more homes managed by those kinds of companies are concentrated, but it is clear that they cannot be blamed for what is happening to rental prices”, explains Sandra Daza, Director General at Gesvalt.

Thus, the statistics compiled by the Government and Eurostat reveal that approximately 22% of Spanish households live in rental properties, a figure that has increased considerably from 15% before the outbreak of the crisis (…).

Multiple factors

In this way, if we take as the reference the most recent figure for the number of households during the first quarter of this year, according to the Active Population Survey (EPA), of the 18.55 million households in Spain, 4.07 million were rental homes.

Of that volume of household-homes, a total of 114,000 homes are in the hands of the 15 largest investors, which together account for just 2.8% of the total stock of rental homes (…).

As Samuel Población, the National Director of Residential and Land at CBRE, explains, the increase in this regime of tenure over buying is driven by several factors. The new labour market, with more instability and lower salaries, is forcing many households to rent, plus all the demand that was expelled from purchasing during the crisis (…).

This increase in demand has not been accompanied by a parallel rise in the supply to the same extent and that is what is causing most of the tension in terms of rental prices, together with the effect of tourist apartments in certain neighbourhoods of large cities and higher visitor numbers. Not even the fact that one out of every five homes purchased is destined for rent to make the investment profitable has managed to generate more homes for rent.

“The current rise is a consequence of the large gap between demand and supply”, says Wolfgang Beck, CEO of the Socimi Testa Residencial, one of the largest owners of this kind of asset (…).

“It does not make sense to attribute the rise in rental prices to the funds. They have a long-term focus and are actually responsible for increasing the stock of rental homes on the market”, says Javier Rodríguez Heredia, Head of the Residential team at the housing manager Azora.

“Establishing regulations that provide certainty for institutional investors to make it attractive for them to enter the sector would result in the creation of a rental home stock commensurate with the needs of the country”, he said (…).

Original story: Cinco Días (by Raquel Díaz Guijarro & Alfonso Simón)

Translation: Carmel Drake

CBRE: House Prices Will Rise by 6% in 2018

25 May 2018 – Expansión

Good omens for the Spanish residential market. After experiencing a serious setback five years ago, with a significant decline in demand and, as a consequence, a decrease in prices, the housing market is now well on the road to recovery, with a positive outlook for the year ahead. In this sense, for 2018, the predictions are optimistic, with an estimated increase of 6% in average house prices at the national level, according to data compiled by the real estate consultancy firm CBRE.

“We expect strong growth over the next six to twelve months, which will reach 6% compared to the current YoY rise of 5% and, then growth at a lower intensity from then on of between 3% and 5% for 2019”, says Álvaro Martín, Head of Research at CBRE.

This growth rate of 6% will be more acute in the large cities such as Madrid and Valencia, as well as in tourist towns such as Málaga and the Balearic Islands, where the YoY increases will reach up to 10%, according to the consultancy firm.

“In large cities such as Madrid and Barcelona, we have seen price tension but prices are still 50% lower than the average prices over the last ten years”, explains Samuel Población, National Director of Residential and Land at CBRE España. According to estimates from the consultancy firm, house prices in Madrid will increase by between 8% and 10% this year with respect to 2017.

Despite these price increases, the absolute values are still well below those seen during the real estate boom. In this way, although house prices have been rising at the national level since 2014, the intensity of that growth has been moderate, with YoY increases of around 5%. “In recent years, price rises of between 5% and 6% have been recorded, but during the boom, those figures reached 12%”, recalls Población.

Nevertheless, there are exceptions to that moderate rise: such as the case of towns like Madrid, Barcelona and Palma de Mallorca, where new build house prices have risen by 23%, 34% and 13%, respectively with respect to the historical minimums recorded at the beginning of 2014. Meanwhile, in the second-hand segment, the increases registered amount to 28% in Barcelona, 27% in Palma and 21% in Madrid (…).

Transactions

The price rises are being accompanied by an increase in demand, which, currently, is focused on those buyers who are looking for homes to reposition themselves or as investments.

“House sales have grown at a constant rate since 2015, but they have been very oriented towards the second-hand market, which accounted for 90% of transactions in 2017, due to the lack of supply in the new build segment and the absorption of much of the unsold stock”, says Población (…).

The consultancy firm predicts that demand for housing will continue to grow, with more than 575,000 transactions being closed in 2018, up by 8% compared to the previous year.

Of those operations, foreign buyers will retain an important role, above all, in the market for second homes. “The bulk of that demand is concentrated around five provinces, with established tourist infrastructure: Alicante, Málaga, Barcelona, the Balearic Islands and Tenerife, which accounted for more than half of the average annual volume of transactions by overseas citizens between 2006 and 2017”.

Another buyer cohort will be investors who buy properties to let them out, taking advantage of the growth in the rental market, which currently accounts for around 22.5% of the total stock of Spanish households. “The expansion of the rental market is attracting lots of investors, something that wasn’t happening ten years ago, given that they can now achieve returns of between 4% and 6% on average”, says Martín. By city, in Madrid, the average gross return amounts to 4.7% p.a., compared with 5.4% in Barcelona and 5.8% in Sevilla.

“If we also consider gains from the appreciation in property values, we see yields of up to 9% in the large cities”.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Idealista: Rental Prices Rose By 1.8% In Madrid In Q1

8 May 2015 – El Confidencial

The property crisis; the difficulties faced by thousands of citizens when it comes to buying a home; and the havoc wreaked by evictions have all resulted in a significant boost to the (residential) rental market in Spain. Over the last seven years, many citizens and families have been forced out of the property market and, given their need or desire to become independent or start a family, their only exit has been through the home rental market.

Thus, although owned homes still win by a landslide over rented homes – 78% to 22%, i.e. a very similar level to the one seen at the end of the 1980s – the fact is that in recent years, the balance has tipped a little less towards the property side and although, many experts consider that it is unlikely that we will reach the levels seen in other parts of Europe, where rental properties account for 50% of the residential market in some countries, it is clear that something is changing. “The rental market is here to stay and not just as a lifestyle option, but also as an investment”, says Fernando Encinar, Head of Research at idealista.com.

The rental market in the Community of Madrid is showing the first signs of recovery, as too is the sale and purchase market. Similarly, some areas are sparking greater interest than others in terms of demand, which, in turn, is starting to create a certain amount of tension in terms of prices.

The differences between neighbourhoods are clear. It does not cost the same to rent a flat in the centre of the capital or in the neighbourhoods of Chamberí and Salamanca, where the price per square metre is around €14/m2 (€1,120 for an 80m2 flat) as it does in Villaverde, Carabanchel or Puente de Vallecas, where the price per square metre barely exceeds 8€ (640€ for an 80m2 flat).

These price differences are explained, in part, by the location of the homes – clearly, it does not cost the same to live in the centre of the city as it does in the suburbs – but also due to the excess supply, in places such as Carabanchel and Vallecas, and the strong demand, in areas such as Sanchinarro and Las Tablas, where the experts detect a lot of activity due to the presence of Telefónica and the future arrival of BBVA.

(….)

The tension in terms of rental prices is palpable. Madrid ended the winter with a quarterly increase in rental prices of 1.8%, taking the average price per square metre in the capital to €11.60, however, that represents a cumulative decrease of 15.8% from its record high of €13.80/m2 in 2008.

Moreover, during the first three months of the year, the increase in rental prices was generalised, with rises in almost every district in Madrid, with the exception of Villa de Vallecas and the neighbourhood of Salamanca, according to the data from idealista.com, which also reflects significant increases in the districts of Barajas (5.8%), Retiro (4.7%) and Hortaleza (3.6%).

(….)

Original story: El Confidencial (by Elena Sanz)

Translation: Carmel Drake