Tag: RE Forecasts

Office Rentals in Barcelona Hit the Bottom

International real estate consultant Jones Lang LaSalle published today the report on rent and investment in offices within Barcelona during the fourth quarter of 2013.

Office Market in Barcelona

The prime rentals on the office market in Barcelona seem to reach the rock bottom level with the price of 17 €/m2/month. After five years of continuous fall, one can speak of adjustment completion assuming the dip down by 40% comparing to rental prices´golden age of the areas of Paseo de Gracia and Diagonal.

The report informs that the short- and medium-term tendency in the office rents will result in price stabilization and future benefit as there might be little supply of this kind of units in Barcelona. The office stock will continue to witness rehabilitation which started 2 years ago.

Jones Lang LaSalle highlights that the availability rate at the end of 2013 was 14.7%. The appearance of the Cornerstone in 22@ project for a short moment increased slightly the availability. However, the indicator will start to go down from the second quarter of 2014 on due to lack of new offices on the market and a rebound in the contracting in the friendlier economic environment.

In the part about transactions, the report emphasizes that in 2013 Barcelona registered the lowest number of the office rent contracts in last 16 years. In the last quarter of the year the contracts involved mere 55.000 square meters which added to the accumulated 122.000 m2 from the previous three quarters equals to 177.000 m2.

According to Jordi Toboso, the CEO of Jones Lang LaSalle in Catalonia “(…) The last quarter of 2013 has been the most vivid over the whole year and the first quarter of 2014 already looks promising”.

Public Administration will play important role in the sector due to its relocation and space rationalization plan for 2014.

Investment Market in Barcelona

As the consultant company claims, the last quarter of 2013 marked rising interest in the real estate investments in Barcelona. Both national and foreign investors turn their eyes to the property in the city center. Precisely, the talk is about all types of investors: opportunistic, value-added and core. If it comes to the individual assets, the demand focuses on portfolios, debts, management companies, etc.

The demand for the office buildings in profitability has not changed and 2013 showed relevant consolidation on the part of the hotel investors about the office property, both empty and with short-term tenant contracts. Conversions became an important part of the market (in 2013 20% of total investment) (…).

In turn, the supply lacks property in profitability that would meet the investors´expectations. The property put on sale by the Regional Government of Catalonia (Generalitat) allowed to test the interest and prices (…).

The major investment demand also provokes conduction of off market transactions (…) however in 2013 they were scarce.

(…) During the last quarter of 2013, only two transactions have taken place: the sale of the building Córcega 289 destined for a hotel by the insurance company Zurich and the sale of the trade premises of Cahispa at 16-18 Roger de Lluria Street to Princess hotel group.

The report informs that the total investment amount in 2013 was 290 million Euros, 8% more than in 2012. If it comes to the profitability, it has slightly gone down in the area of Paseo de Gracia/Diagonal by 6.5%, in hope for the tendency to continue in 2014 in the city center.

Source: Inmodiario

Housing Prices Fell by 7.8% in 2013, Linking Six Years of Adjustment

Property Valuation Society has been the first to make public the housing data summarising the year 2013. And it turned out to be surprising, given that most of the experts have been predicting all December long that the prices of houses will keep dipping down, however, less intensively than they did in a couple of years before the real estate bubble burst. In fact, just the contrary happened. In 2010 the average price of a new house decreased by 3.2%, in the next three years the prices depreciated by 4%, 6.9%, 7.8% respectively. Thus, the average price of a square meter in 2013 marked 2.039 Euros, around 183.500 Euros for a flat of 90 square meters type, which is supposed to rewind to the level from 2004.

In balance with the past exercise, the valuers make it clear that the real estate market has not hit the bottom. “In 2014, the new house supply will remain important, despite the considerable reduction in the number of the constructions started. The recent break of the investment funds into the Spanish real estate market can contribute to the speed up in the absorbtion of the already finished stock, accompanied by certain revival of the sector” – they conclude. Appetite comes with eating, however the one of funds having tried the great discounts (up to 96%) will not fight the bulk of new houses stock without buyers, which is estimated at around 584.000 houses by the Ministry of Development. That is why the valuers claim that the level of supply will continue to taper down until it adjusts to, still very low, the demand. (…) The underscore of decreasing prices will be smaller in big cities and areas under develepment.

Furthermore, the moderation in inflation seems “insufficient” to compensate the decline in the net income in significant number of families, pointing at forecasts that the number of rent-to-own homes will fall again in 2014 in reference to the previous years. “The effect will be worsened by higher unemployment rate and the job uncertainty haunting the people. Buying a house would require a great effort from families” – they add.

In fact, the statistics show how during the six years of fall the price of new houses diminished by 38,9% compared to its top level in 2007, transforming from between 2.905 and 2.039 Euros per square meter into mere between 1.453 and 2.905 Euros, still showing a downward tendency.

None of the autonomous communities is free from the drop-offs. The greatest reduction has been registered in Aragón, reaching 11.6%, while the slighest in Asturias, 2.5%. The data contrasts with the information provided by INE, according to which the new house prices rose in the third quarter by 0.7%, the first optimistic news since the second quarter of 2010 interpreted by experts as a turning point. Nothing could be further from the truth.

Source: Cinco Días

Fitch: there is no real estate recovery, there are bargains.

The credit grading agency Fitch warns that it is still not possible to talk of a recovery of the real estate market. The rise of the foreign investments is due to the big discounts and not to a change in the trend.

“The interest of foreign investors in Spanish real estate properties is seen as a sign of recovery of the market. But we think that the appetite of the foreign investors is due to an opportunistic search for bargains”, the agency points out in its last report on Spain.

To prove this trend, the agency has selected some of the “more relevant transactions” closed with foreign investors, and has validated that the average price per square meter is well below 1000 Euros. “This is more than 40% below the average national price”, it points out.

It could be implied that, in spite of the discounts, the boom of the operations with foreigners has revived the market up to a point of “stabilization”. Fitch does not agree with this, as “the volume of purchases has not reduced until now the excess offer in order to see a real recovery”, as expressed by the report, carried out by the analysts Carlos Masip and Juan David García.

On the other side, the agency points out a remarkable detail: the properties “which have been recovered by the moneylenders have lost, in average, around 71,5% of its original value. This is nearly double the national average: according to the main valuation company, Tinsa, the value of properties accumulates a descent of 39% since the peak of the real estate bubble.

Also, these seized properties are being sold more and more frequently. In the first half of

2013 the securitization funds got rid of 44% of this type of assets, opposite to the 31% of the previous semester, according to Fitch.

Banks are the ones managing the portfolios of properties of these funds. (…)

Those institutions analyzed by Fitch that sold more in the first half of the year were BBVA and CatalunyaCaixa, which also was the one to sell the highest percentage, more than 80% of the total portfolio.

Finally, Fitch stresses that “the average period to sell the seized properties is around 15 months from the seizure date”, a bit less than in 2012, but still a very long period, due to the difficult situation of the real estate market.

 

Source: Expansión

2013: the perfect storm for properties.

(…) This will be the worse year in history for the property market. These are not surprising news, but they are important. Above all if we compare them with the Government´s opinion, as it continues to assure that it is a good moment to buy a property.

The real estate consulting company Horizone made it very clear yesterday, as it presented its annual report on the situation and the prospects of the real estate market. The conclusions are obvious. To start with, the building industry will destroy another 100.000 jobs in 2013. That is, 10% of the total occupation within the sector, which reaches one million workers. “No matter what measures are taken, the destruction of jobs is irreversible”, Julio Gil, managing partner at Horizone, declared.

Also, the price of properties will continue decreasing steadily. At least, a fall of 30% in all regions. “We cannot know how much property prices are going to fall, as they depend on the transfer policies of the financial institutions”, Gil assured. From the point of view of the demand the intensity of the fall will be linked “mainly to the job market”.

According to Horizone, there are other factors with push prices down: “the oversupply of properties (between 800.000 and 850.000), the increase of the VAT, the scarce financing to individuals and the mortgage interest rates, which continue to rise even though the euribor continues to fall”. As for the stock, it will scarcely diminish in the next few months.

At the end, the capacity of the real estate companies depends on their financers. Also, the marketing policy of Sareb is not clear”, Gil added. This is why small and medium sized developers will continue to disappear, in his opinion.

The director of Horizone believes that the effect of the bad bank in the real estate market “will not be very high in 2013. Any influence will only be seen at the end of the year”. In fact, “all institutions are on the loo-out”.

Anyhow, the demand would reach minimum levels, especially in the first six months of the year, “due to the advance of the purchases made in 2012, the worsening of the tax conditions and the macroeconomic deterioration”, the report details.

“It will be the worse since statistics started to be worked with”, it stresses.

Another negative figure within the sector would be the offer. Less than 44.000 properties will be authorized and 95.000 will be built, while “the number of finished properties will be below the 119.980 reached in 2012”.

With this scenario in view, the real estate future will be even blacker. “The only subsector that could hold the drain of unemployment would be the restoration”, Gil assures. But the restoration will not work “if the corresponding financing is not there”, he added. (…)

Finally, Gil proposed “the temporary suppression of the reservation of plots” intended for subsidized housing, which are not built.

Conclusion: in the real estate sector, the best thing about 2013 is that 2014 could be even worse.

Source: Expansión

Housing prices will fall another 20% before reaching their minimum level, according to Standard & Poor´s.

Housing prices have still a long way downwards ahead. The risk agency Standard & Poor´s considers there will an adjustment of 20% based on the ratios “price-revenue” and “price-rent”. Its forecast is in line with those published this weekend by The Economist, which considers that prices in Spain are overvalued by 20%.

The agency foresees that the nominal price of properties in Spain has dropped by 7,8% this year and another 6% in 2014, and therefore does not predict improvement signals in the real estate market on the short term in view of the high number of assets pending to be sold.

In a report on the residential sector in Spain, the company believes that four years will be needed before Spain achieves a balance between the offer and the demand of real estate assets.

In fact, the recession in Europe is pushing down real estate prices in most markets, which means that in Spain, along with the increase in unemployment, the tax consolidation and the tensions in the financial markets, the recovery of the residential real estate market is still far away.

The firm, as well as The Economist, indicates that Spain is still affected by an excess offer of assets with an estimated number of unsold properties of 700.000.

According to the Financial Sector Evaluation Program of the IMF, the real estate stock will reach one million properties this year.

Even though interest rates have been reduced, the growth of mortgage loans is diminishing. The agency also stresses the recent liquidity injection in Spanish banks, the disinvestment of financial institutions in real estate assets and the subsequent decrease of prices this year.

In a scenario very much affected by the precarious Spanish labor market conditions, Standard & Poor´s claims that, even though the debt rate of Spanish families is decreasing, the deleverage process will be slow.

In view of the correlation of the real estate offer and demand in Spain, the agency believes that there could be a certain degree of overvaluation of the real estate assets before prices reach an equilibrium.

The forecast of Standard & Poor´s join those made by other experts. The consulting agency R.R. de Acuña & Asociados are more aggressive as they believe that the price of properties will face a drop of 30% or even more during the next five years -between 2013 and 2018-. Fitch, on the other hand, published a few days ago a report which foresees an additional drop of 15%. Arcano Capital mentions a correction of 10% during 2013, while there are no figures from the Spanish National Mortgage Association, although there is talk of reaching the minimum level this year.

Source: El Confidencial