Property Developers Search For Buildings To Refurbish

3 May 2016 – Cinco Días

For the third year in a row, 2015 closed with an increase in the number of building permits, although the level of housing construction is still a long way below that recorded at the height of the boom. So great is demand in places like Madrid that investors/property developers are now allocating almost one out of every five euros to the acquisition of buildings in the centre of the capital for renovation and whereby bringing more new homes onto the market in prime areas.

The slight slowdown in construction detected by the Bank of Spain during the first quarter of the year does not seem to be affect real estate activity that much, but does affect other sub-sectors. In fact, the main market indicators show how the pull of demand for housing is continuing to strengthen and how that has driven the launch of new developments. Above all in places where most of the stock has now been absorbed and there is none left, or the surplus that remains unsold does not match what buyers are looking for.

A recent study compiled by the consultancy firm Knight Frank also shows how the recovery in housing has reduced auto-promotion, or the construction of homes by cooperatives, in favour of traditional property developers by 8%, and the banks have played an important role in the phenomenon as they have started to finance the most solvent developers with the most robust projects once again.

Nevertheless, although it might seem like the real estate business has returned to the high road once again, the fact is that the recovery has only fully arrived in certain, very specific enclaves and one of them is Madrid, and it has done so in a nuanced way and at different speeds.

“Madrid is the most sought-after area for investors in search of residential products, specifically, it receives 19% of all real estate investment. Andalucía, Valencia and Cataluña are the following most popular autonomous regions, accounting for 16%, 15% and 14% of total investment, respectively” says the report. (…).

And, in the meantime, the appetite to buy homes in the prime areas of the major cities is such that investors and property developers are starting to opt mainly to buy buildings that need refurbishing in the centre of cities, to then bring new homes onto the market that better suit the demands of buyers. In 2015, investment in entire buildings accounted for 19% of the total, whilst land purchases represented 81%.

Type of home

(…). In general, the typical buyer profile nowadays is a family with medium to medium-high purchasing power, looking for a home to reposition or improve the one they currently own “in locations with services, transport, urbanisations with common areas and quality in the design of the materials and finishes”. Thus, the most sought-after product is now a three-bedroom house, with an average price of between €230,000 and €450,000.

Does the market in Madrid offer that product in sufficient quantity so as to not generate perverse tensions in terms of prices? The conclusion of the study by the aforementioned consultancy firm is….that the supply is still insufficient. The municipality of Madrid has around 3,000 new homes registered as available. Only 30% of those are located inside the M-30, where the scarcity of land is most acute and prices are highest. 20% are located in the area between the two main ring roads (the M-30 and the M-40) and the remaining 50% are in the PAUs and new developments, some of which are located beyond the M-40. Demand for housing is distributed in a relatively similar way, which according to Knight Frank avoids major imbalances between supply and demand (…).

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

Pozuelo Consolidates Its Position As The Richest City In Spain

2 March 2016 – Expansión

Families living in Pozuelo have the highest incomes in Spain (€70,298) and Parla has the highest active population rate, at 70.5%. The cities with the highest average incomes in Spain are the Madrilenian suburbs of Pozuelo and Majadahonda – €56,164 – and Sant Cugat del Vallès, in Barcelona – €52,881 – which quintuple the average income in Torreviaje (Alicante) – €13,977 – the lowest.

The figures relate to 2013 and have been extracted from the Urban Indicators study published yesterday by the National Institute of Statistics (INE) for the European Urban Audit project, which compiles information about the living conditions in European cities and in the case of Spain, includes information about the 109 largest towns, on the basis of population density and the size of the urban centre.

After Torrevieja, the lowest average incomes are found in Sanlúcar de Barrameda and La Línea de la Concepción, both in Cádiz, with averages of just over €17,000.

The four cities with the highest active population rate in Spain are located in Madrid. Behind Parla, the ranking includes Fuenlabrada (69.4%), Torrejón de Ardoz (67.7%) and San Sebastián de los Reyes (67%). By contrast, the towns with the lowest active population rates are located in the North of the country. The lowest rate is in León (50.6%), followed by Ferrol (51.4%), Gijón (51.5%) and Avilés (52.1%).

The study also shows that the richest city in Spain, i.e. Pozuelo, is the one where unemployment is lowest, at 9%, followed by Las Rozas (10.2%), San Cugat de Vallès (10.4%) and Majadahonda (10.7%). These figures come in stark contrast to the rates of 42.3%, 40.1% and 39.4% registered in the towns with the most unemployment, namely Sanlúcar de Barrameda, La Línea de la Concepción and Jerez de la Frontera, all in Cádiz. (…).

If we consider employment by sector, then Elda (Alicante), Rubí (Barcelona) and Torrejón de Ardoz are the towns with the highest proportion of jobs in the industrial sector, whilst Pozuelo de Alarcón, Benidorm (Alicante) and Girona are the employment leaders in the services sector.

Barcelona is the city with the highest number of overnight tourists, with more than 18 million, followed by Madrid, with just over 17.5 million, Benidorm with 13 million and Palma de Mallorca with 8 million. Finally, the cities with the largest average household size were Pozuelo, Melilla and Ceuta, and those with the lowest were Huelva, Salamanca and Torrevieja.

Original story: Expansión (Mercedes Serraller).

Translation: Carmel Drake

Tinsa: Madrid & Barcelona Lead Housing Market Recovery

1 July 2015 – Expansión

Tinsa’s IMIE Local Markets report says that Cataluña (with an increase of 1.3%) and Madrid (+0.6%) were the only regions that recorded house price increases during the second quarter 2015 with respect to the same period in 2014.

However, the speed of recovery is very different by region. In Navarra, Cantabria, Asturias, Valencia and Extremadura, YoY declines of more than 5% have been recorded, whilst in others, prices have also increased: Galicia and Castilla-La Mancha (by +0.6%, respectively) and País Vasco (+0.3%).

These figures have left Spain’s average price index in negative territory. It recorded a decrease of 2.9%, although that represented a slow down from the decline of 4.5% that the market ended the year (2014) with.

By province

There were YoY increases in six provinces, namely: Barcelona (+3.4%), Cuenca (+1.2%), Tarragona (+0.8%), Madrid (+0.6%), León (+0.4%) and Huesca (+0.3%). “With the exception of Barcelona and Madrid, where the evolution of prices in recent quarters seems to underpin the trend, we will have to wait and see whether this trend is consolidated in the other provinces”, says Tinsa in its report.

Meanwhile, there were decreases of more than 5% in 15 provinces. “If we analyse the behaviour of prices over the last four quarters, the province of Barcelona is the market that is displaying the clearest signs of recovery”, says the report. Madrid, Vizcaya, Girona and Toledo are the next best performing provinces in this ranking.

By capital

If we analyse data by capital city, we see that increases have been recorded in seven capitals. From highest to lowest, these were: Huesca (+5.2%), Barcelona (+4.9%), Málaga (+2.6%), Madrid (+2.5%), Guadalajara (+2.4%), Palma de Mallorca (+0.9%) and León (+0.4%). Meanwhile, prices in the cities of Burgos and León remained stable.

Decreases of more than 10% were recorded in four provincial capital cities (Córdoba, Almería, Oviedo and Ávila) in YoY terms and the reductions exceeded 5% in eleven capital cities during the last year.

Effort

Another interesting finding from the report is the level of gross financial effort required for the acquisition of a home, which has reduced between buyers since 2007. Specifically, it has decreased from representing 33% of annual income to 23%.

“If instead of taking into account the payment of the average mortgage, the calculation is performed on the market value of the home, according to Tinsa’s data, then buyers that have to make the greatest effort to buy a home are those in the Balearic Islands, where a borrower needs 12.2 years on average to pay off his property, versus the Spanish average of 5.8 years”, explains the document.

Finally, another important indicator is the average time it takes to sell a home in Spain, which currently stands at 10.6 months.

Original story: Expansión (by M. G. Mayo)

Translation: Carmel Drake

ST: Housing Becomes Investor Safe Haven Once More…

20 January 2015 – Cinco Días

…in the face of stock exchange volatility.

Experts forecast more sales in the future but do not expect significant price rises.

Refurbishments, rental and tourism are the three key niche areas for housing.

The housing market is preparing to emerge completely renewed from its worst crisis in recent history. Or at least that is the view of the latest study conducted by one of the main real estate valuation companies, Sociedad de Tasación. All of the parameters that drive the market are in better shape today than they were a year ago and that, coupled with the challenges facing this activity, means that forecasts are much more optimistic.

The CEO of Sociedad de Tasación, Juan Fernández-Aceytuno, said today that property prices are showing a clear trend towards “stabilisation”. Particularly, in used homes, where the growth in demand has caused smaller price decreases and even the first annual price increases. “In resale homes, we are seeing very clearly that prices have bottomed out, whereas for new homes, if all of the other variables fall in line with our expectations, then prices should reach their minimum levels at some point this year”, said the CEO of the real estate valuation company.

Refurbishment and rental

Speaking of variables, Fernández-Aceytuno, cited three key parameters: employment, purchasing power and finance. Continued improvement in the labour market will be crucial for ensuring that demand for housing continues to increase, now that the banks deem determined to re-establish the flow of credit. “In fact, all indicators show that, as at the end of previous crises, demand is building, as potential buyers wait for prices to come down to the desired level or to the level that they consider they can afford. As soon as that happens, sales will increase” said the CEO of Sociedad de Tasación.

This indicates that over the short to medium term, the market will see more sales without necessarily having to raise prices. And this does not even take account of the fact that some of the circumstances that occurred in the early 2000s, when the last boom in property prices began, are now repeating themselves.

And it is now, like then, that experts believe that housing is regaining its traditional appeal as a safe haven in the face of low returns on deposits and the high volatility of the stock market. With the euro, oil and other commodity prices all in decline, it is inevitable that investments in property and gold, amongst others, become more attractive, explain analysts. In addition, uncertainty exists overseas.

“We see more clouds on the horizon outside of Spain that within it. We are concerned by the situations in Russia and Greece, by terrorism, by how the deflationary situation in Europe will develop in the face of economic and price growth in the US. In Spain, the evolution of the economic situation is critical”, noted Fernández-Aceytuno.

Asked whether international investors seem concerned about the rise in political groups such as Podemos, the CEO of Sociedad de Tasación was keen to minimise the effect that such factors have on the decision-making of companies investing in Spain. “As you would expect, they ask about Podemos, Cataluña and corruption, but we are not aware of any project that has been halted for any of those reasons”, he said.

In terms of future challenges, refurbishment, rental and tourism are the three areas in which experts at the real estate valuation company expect to see the highest growth. In refurbishment, because 90% of existing homes do not meet the requirements of the 2006 technical code. In rental, because buy-to-let is one of the fastest growing trends in the market given its high yields (depending on the area, yields can exceed 6%). And finally, tourism because statistics show that up to 12 million travellers will stay in houses instead of hotels every year, “tourism represents a huge niche in which hotels can compete by buying homes, refurbishing them and offering them up for rent”.

Original story: Cinco Días (by Raquel Díaz Guijarro)

 Translation: Carmel Drake