Tag: real estate bubble

RE Experts: Now Is A Good Time To Buy A Home

1 August 2016 – El Economista

The Professional Association of Real Estate Experts (APEI) thinks that now is a “good time” to buy a home because the prices of second-hand homes “are not going to fall any further”, but it warns of the risks ahead if the political uncertainty persists. Those were the views of the President of APEI, Óscar Martínez, who highlighted that “there has been movement” in the market over the last two years and that “price increases have been widespread”.

According to the latest data from Eurostat, house prices rose in Spain by 6.3% (in Q1 2016), the highest increase since 2007, and by 4% across Europe. “There are not many new builds, which will push prices up further still”, forecasts Martínez, who thinks that now is a “good time” to buy.

In this sense, he predicts that the prices of second-hand homes are not going to fall any further and that the trend is going to be towards “stabilisation or slight increases”, above all in places where there is a shortage of housing, given that there are “very few new builds”.

Similarly, he advises homeowners to hold onto their properties unless absolutely necessary, given that “it is true that if you sell cheaply, you buy cheaply, but if you are thinking about investment, now is not the time to sell. Now is the time to sell only if strictly necessary, to change home, for example”.

The recovery will continue at a slow pace

In general, homes in good condition are more expensive than they were in 2013, when prices had decreased by 45% compared with the peak of the real estate bubble, in 2007, according to APEI, which currently represents a network of around 1,300 real estate agencies all over Spain.

The average price of private housing per square metre now stands at around €1,600/sqm, compared with €2,085/sqm in 2007, which meanst that prices now are very similar to those recorded in 2004, according to data from INE.

“Properties below that price generally have very few options for sale”, explained the President of APEI, who stated that “they are typically properties in bad locations or of poor quality, which are sold or attempted to be sold very cheaply. In other countries, those kinds of properties would be demolished”.

Regarding investments by groups, the President of APEI said that they are underway in large capitals, such as Madrid and Barcelona, but they are not been seen in the smaller capitals yet.

Meanwhile, Martínez thinks that, after the summer, and if the unemployment rate continues to fall, the recovery will continue, although at a “slow” pace, but he warns that the threat now comes from political instability. “If this insecurity persists, it will cause delays in the recovery”, he predicts.

Original story: El Economista

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

Blackstone, Cerberus, Arcano & Others Head To The Beach…

30 May 2016 – El Confidencial

(…). Just over a year and a half ago, the large real estate investment funds were concentrating their activity in Spain’s two large (regional) capital cities (namely, Madrid and Barcelona). Nevertheless, the saturation of operations and a gradual increase in prices (there is no sign of a bubble in either city, but there are increasingly fewer bargains to be had) has forced investors to explore new locations, in cities that are one step down in terms of size and population, but where there is significant latent demand, and above all, very attractive prices for operations with payback periods of five or seven years. Valencia and the Valencian Coast are in the spotlight, according to sources from an important real estate consultancy firm headquartered in the city, which has participated in some of the largest transactions completed in recent months.

Blackstone, Cerberus, and even the Real Estate division of managers such as Arcano, have been exploring and closing operations in the Valencian market for more than 12 months now, primarily acquiring debt portfolios secured by well-located residential properties and focusing on upper-middle class segments of the population with a certain amount of liquidity and the capacity to borrow. The assets acquired include not only finished promotions, but also urban land, such as the case of a group of plots located in Nou Campanar, which Sareb has just sold to the US fund Castlelake. The land used to be owned by Juan Armiñana, one of the local property developers who made his fortune during the real estate bubble and was destroyed following the crash, leaving behind a small empire of bankrupt companies and millions of euros of debt from the banks.

The presence of a fund like Castlelake in this type of operation is striking because two years ago, no-one would have imagined such a fund exploring operations beyond Madrid or Barcelona. Last year, Sareb sold it 76,000 sqm of residential land in the Madrilenian town of Boadilla del Monte for around €13 million. In the cae of Nou Campanar, the consideration has been lower, given that the plot of land measures just 12,000 sqm and has a buildability of 40,000 sqm.

The funds are exploring “prime” areas of the city of Valencia, both in the centre and along the seafront, as well as along the Patacona beach area, where there is still some undeveloped land and several developments for sale, in the hands of financial institutions. In the same way, local investors, such as the Zriser Group (Pablo Serratosa) are looking to launch a residential development in the vicinity of the Ciudad de las Artes y las Ciencias. (…).

Five year payback periods and returns of 20%

The logic behind these investments tends to have a common element – payback periods of just over five years with average returns of 20%. These deals are conceived from a purely financial point of view, but they include agreements with construction companies when they involve land development and sales plans. (…).

Original story: El Confidencial (by Víctor Romero)

Translation: Carmel Drake

SIMA’s Director Confirms That The RE Recovery Is Underway

10 May 2016 – Fotocasa

The Director of Madrid’s Real Estate Fair (SIMA), Eloy Bohúa, praised the “good” impressions in the real estate sector at the start of the 18th Fair, which he considers will serve as “confirmation of the recovery”.

With more than 200 exhibitors, 25% more than last year; a larger surface area, up by 30%; and more diverse international presence, with exhibitors from 12 countries, SIMA began with a “good prospects”, boosted by positive feelings at the Investment Forum, the pre-cursor to the fair, which more than 300 people attended. (…).

Bohúa explained that 2015 was the year of recovery, although the first signs of recovery were actually seen in Autumn 2014. He expects the “confirmation” of the recovery to be seen this year, but said that “we must be cautious and ensure that the sector does not repeat the same mistakes of the past”, something that “is present in everyone’s minds”.

During the opening of SIMA 2016, the acting Ministry of Development, Ana Pastor, observed that the real estate fair was “busier than ever”, and noted that data in the real estate sector “is continuously improving”.

In this vein, she said that growth in the sector amounted to 4.5% in 2015 and that 50,000 jobs were created in the sector last year (…).

This recovery was reflected at SIMA in data such as the supply of properties at the fair, which this year depended less on the Community of Madrid than in previous years. Whilst in recent years, it was customary for the supply in Madrid to account for 60% of the total supply at the fair, this year that figure amounted to less than 50%.

In addition, for the first time since the burst of the real estate bubble, the supply of off-plan projects for sale at SIMA exceeded the number of turn-key products, in such a way that the proportion of new projects to property developments (stock) this year was 60%:40%.

68% of the developments marketed at the fair relate to primary residences, of which 83% are unsubsidised and 17% have some kind of protection/subsidy; the remainder are holiday homes.

Markets operating at different speeds

In terms of the stock left in Spain, Bohúa explained that it is different in major capitals, where the recovery first started, given that there “sales are growing”, and the stock “is being drained off very quickly”. By way of example, he said that he estimates that around 5,000 new homes are left, which means the stock will run out within eight months.

And in the major capitals, there is “minimal stock that is not significant in terms of the market”, which is why Bohúa thinks that “now is the time to start new projects in response to a thriving demand”.

Other areas of the Peninsula are experiencing a different situation – particularly where the recovery is happening “more gradually”, i.e. in smaller population nuclei. In the holiday home segment, there is “a lot of activity and a great deal of interest from buyers and investors” in certain areas, such as along the Costa Blanca and the Costa del Sol, but again “the stock is not being absorbed at the same speed along the entire coast”, which means there the markets are operating “at different speeds”.

Investor appetite continues despite uncertainty

Regarding the possibility that the political uncertainty may affect real estate investments and purchase decisions, Bohúa acknowledges that uncertainty affects all economic sectors and “we are seeing slow downs and delays in decision making, but that is only natural because investors want certainty”.

Nevertheless, he said that investor appetite is “still high”. (…).

“There is no risk of investors fleeing from Spain because the fundamentals of the Spanish economy are in place”, he said. (…).

Original story: Fotocasa

Translation: Carmel Drake

Colau Warns Of RE Bubble Danger In Barcelona

3 March 2016 – Público

The mayoress of Barcelona, Ada Colau, has warned about the imminent “danger of a real estate bubble” in the city, driven by an increase in the price of rental housing since 2014-2015.

The town hall has submitted a report about the increase in rental prices in Barcleona, whose results show an increase of more than 6% in rental housing across the city as a whole, especially where tourism is most concentrated. The neighbourhoods most affected by the rises are Les Corts (8.7%), Sant Martí (8.6%), Sarrià-Sant Gervasi (6.9%) and Eixample (6.7%). “Rental prices in Barcelona have risen by more than in any other city in Spain”, she said.

In light of this increase, the mayoress has asked both the Generalitat de Catalunya and the Spanish State to act to limit future rental price rises, especially in areas where tourism demand is the highest, and to modify housing regulations to “avoid a new speculative cycle”. “We want to raise the alarm because the housing laws have not been modified and that is facilitating new speculation about the housing market, which means that rental prices are increasing in areas where income levels have not improved”, she said at a press conference.

Colau made reference to Germany as an example of good practice in the protection of the right to housing, given that there, the “State allows limits to be placed on rental prices”, depending on the income levels in the areas where prices are on the rise. “We urge the relevant authorities, at both the Catalan and Spanish level, to follow the European example regarding limitations on rental prices in places where there is significant residential demand”, she said.

The mayoress also acknowledged that progress has been made in the battle against evictions and the increase in rental housing in Catalunya, thanks to the approval of law 24 2015, by popular initiative. But, according to Colau, this regulation still needs to be applied to “put an end to mortgage foreclosures and to put a stop to the speculation”. Even so, she considers that “collaboration with the State is necessary” and she took the opportunity to denounce the limited profile the housing crisis is having in the investiture debate.

The mayoress and the councillor for housing, Josep Maria Montaner, announced that the Town Hall has increased the number of homes in the city’s public housing stock by 255, thanks to acquisitions from financial institutions. It is the second batch of homes that the banks have transferred or sold to the town hall, below market value, to increase the city’s pool of rental housing and to resolve the social emergency. Specifically, 50 flats have been transferred in 8 years, 131 homes have been purchased below the market price and the right of first refusal has been granted on another 28 homes.

With these, the municipal government has now obtained 455 homes from the banks for inclusion in the public housing stock, during the course of its mandate (in addition to the 200 granted by Sareb and the 50 from CaixaBank). (…).

Original story: Público (by Laura Safont)

Translation: Carmel Drake

Ministry Of Development: House Prices Rose By 1.8% In 2015

26 February 2016 – Expansión

The residential market is continuing to show signs of stabilisation and is now bracing itself, gradually, for an undeniable improvement. To this end, we have now received official confirmation of the real estate recovery. The news was announced yesterday by the Ministry of Development: house prices increased by 1.8% last year.

It is the first YoY increase in house prices for eight years and the third consecutive quarter of positive growth. The average appraisal value per square metre of free (unsubsidised) homes amounted to €1,490.10/m2 (in Q4 2015), which represents a positive QoQ variation of 1.0%. In real terms, excluding inflation, (unsubsidised) house prices increased by 2.1%.

The average home now costs 29.1% less than in the first quarter of 2008, at the peak of the real estate bubble. On the other hand, compared with the minimums recorded in the third quarter of 2014, prices have now recovered by 2.4%. New homes (those that are less than five years old, according to the Ministry, led by Ana Pastor) became 1.1% more expensive last year, taking their average value to €1,738/m2, whilst second-hand homes decreased in value by 1.8%, to €1,481/m2.

By region

The appraisal value of residential properties is now on the increase in 14 regions, in particular, in the Balearic Islands (5.4%), Madrid (3.4%), La Rioja (3.2%), Cataluña (3.0%), the Canary Islands (3.0%), Castilla y León (2.6%) and Navarra (2.2%). By contrast, Cantabria (-4.0%), País Vasco (-1.3%) and Murcia (-0.1%) are still recording decreases. The highest house prices in towns with more than 25,000 inhabitants were recorded in San Sebastián (€3,133/m2), Getxo (€2,699/m2), Barcelona (€2,553/m2), Ibiza (€2,513/m2), Sant Cugat del Vallès (€2,505/m2), Madrid (€2,504/m2) and Pozuelo de Alarcón (€2,490/m2).

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Bank Of Spain: Residential Yields Rise to 8.6%

23 October 2015 – Expansión

Now is the most profitable time since the burst of the real estate bubble to buy a home. At least that is according to official figures: the average gross annual yield of homes currently amounts to 8.6%, a level not seen since 2007, the year when prices and sales peaked in the residential market. That is the latest data published by the Bank of Spain relating to the first half of the year.

The total gross yield on a residential property “is calculated as the estimated gross income from rental plus any capital gain”. In other words, it takes into account not only the amount an investor would obtain each year from renting out a property, but also the gain that he would make by selling it after twelve months.

This indicator, which is key for buyers looking to acquire homes as safe investments, soared during the second quarter of 2015. In March, the gross annual return on homes increased to 6.180% and in June, it rose again, by 2.41 points to the aforementioned figure of 8.6%.

That means the residential yield is five times greater than the return currently offered on 10-year debt (1.75%). Bank deposits offer a return of 0.5%, according to the body headed by Luis María Linde.

What does this mean? Put simply, it means that now is an ideal time to invest in rental property, for both small and large investors. (…).

We are living in an impasse of high returns with minimal risk. House prices are beginning to rise (by 2.6% in 2015, according to Servihabitat) and so are rental prices, although at a more moderate rate (by 1%, according to the IESE index and Fotocasa).

Moreover, the percentage of citizens choosing to rent rather than buy has increased significantly, from 9.6% during the real estate boom to its current rate of 15.4%, according to data from the Bank of Spain. Over the last three years, the rental market has welcomed one million new homes and as such has grown by 42.5%. For this reason, investors looking for higher returns have launched searches for properties in areas that are well established and have high demand, to lease them out.

Eight year high

8.6% is the highest figure seen since September 2007, when the return on buying a home reached 12.1% per year. At that time (eight years ago), the residential sector was immersed in a spiral of hyperinflation and credit. The bubble was about to burst, but politicians and businessman alike were in denial, as they tried to sustain the over-heating of the real estate sector. In other words, to mislead buyers.

It was then that the residential market started to decelerate, in other words, to deflate. During the next quarter, the return on homes decreased to 8.5% and from then on, the figure did not stop falling; it entered negative territory in the third quarter of 2008 and reached its negative low (a return of -11%) in September 2012.

Now the situation is radically different. After years of depression, stigmatisation and hangovers, the recovery of the residential sector has finally begun. Gradually and in a moderate way, homes are getting more expensive, sales are recovering and the mortgage market is reactivatin. (…).

The phenomenon happening right now is something that rarely happens, even during changes in the cycle because investors are finding find bubble-like returns, but without the bubble itself.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

House Prices Rise By 9% In Madrid In 1 Year

13 October 2015 – Expansión

Average house prices in Madrid amount to €2,937/m2, which represents an increase of 8.9% compared with a year before, according to a report published last week by the real estate consultancy Aguirre Newman. Despite this increase, house prices in the capital are still 37% lower than their peak in 2007 (€4,657/m2), the year the crisis started and the real estate bubble burst. The consultancy says that the current increases in house prices is being driven by growth in prime areas, given that prices have remained stable in all other areas.

The most expensive neighbourhoods for buying a house in the capital are: Almagro (Chamberí), El Viso (Chamartín), La Piovera (Hortaleza), Goya and Castellana (Salamanca) and Justicia (Centro), where property developments are currently being sold for prices of between €6,500/m2 and €7,000/m2. At the other end of the scale, the cheapest homes in Madrid are found in the districts of Villaverde, Villa de Vallecas and Carabanchel, with prices of between €1,600/m2 and €1,800/m2.

In terms of the municipalities closest to the capital, average house prices are highest in Pozuelo de Alarcón and Majadahonda, reaching up to €3,944/m2. The most economical municipalities are Móstoles and Pinto.

Average prices in Spain

By contrast, Tinsa published another study at the end of last week, which revealed that the price of (unsubsidised) homes decreased by 0.4% in September with respect to the same month last year, which confirms “the stabilising trend in terms of prices”, according to the Local Markets Index. The appraisal company indicated that this is the slowest rate of decrease since March 2008 (-0.3%), which marked the first YoY price fall in the series, which was launched in 2001. Average house prices in Spain have recorded a cumulative decrease of 41.9% since their height. By region, prices in the Balearic Islands and Canary Islands performed the best in September.

Original story: Expansión

Translation: Carmel Drake

INE: Home Foreclosures Drop By 6.5% To 17,800 In Q1 2015

8 June 2015 – Cinco Días

During Q1 2015, 30,952 mortgage foreclosures (i.e. procedures to force the sale of properties resulting from unpaid mortgages) were recorded in Spain’s property registries. Of those 30,952 procedures, 17,780 related to homes, i.e. 6.5% fewer than during the first quarter 2014. The foreclosure of individuals’ primary residences amounted to 8,802, i.e. 6.9% fewer, according to data from INE.

The statistics institute highlights that not all mortgage foreclosures are the result of the legal removal (eviction) of owners from properties, and that in some cases, a single property is subject to several foreclosure procedures. The Bank of Spain has other statistics relating to evictions.

In general, non-payment results in foreclosure after a period of between six and 12 months, therefore the foreclosures completed during Q1 2015 related to mortgages that stopped being paid during the first half of 2014. Moreover, in addition to the 17,780 home foreclosures, INE recorded 10,316 other (foreclosure) processes involving premises, garages and offices and 1,361 relating to rural properties.

Most of the mortgages that result in the seizure of homes were signed during the last few years of the real estate bubble: 21.1% were signed in 2007, 15.2% in 2006 and 11.8% in 2008. Mortgages signed in those three years account for 48.1% of all foreclosures, although we should take into account that at that time, more than 100,000 mortgages were being granted per month, compared with current volumes of 20,000 per month. In relative terms, the worst year is still 2007, with 0.3% of the mortgages that were signed that year being foreclosed during Q1 2015, followed by 2008, 2009, 2013 and 2012 (between 0.21% and 0.25%).

By region, the effect of the real estate bubble is also leaving is mark: the highest rates of home foreclosures form a rainbow in the shape of the Mediterranean Coast. Andalucía leads the ranking (with 0.29% of the mortgages foreclosed last quarter), followed by Murcia (0.25%), Valencia (0.25%), Cataluña (0.23%). In the País Vasco, the rate is 0.02%.

Original story: Cinco Días

Translation: Carmel Drake

The Economist: Homes In Spain Are Still Overvalued By 8%-18%

22 April 2015 – El Confidencial

Five years ago, housing in Spain was overvalued by more than 50% and every year since then, the Economist has considered that house prices still need to decrease further.

House prices in Spain have decreased by between 30% and 50% – the range varies depending on the source consulted and the type of assets being considered. According to the statistics and the experts, this decrease has now come to an end. But, what if prices are still inflated?

That is what the weekly British publication The Economist thinks; and it has been warning against the overvaluation of house prices in our country for the last five years. The publication says that house (prices) in Spain are still inflated by between 8% and 18%. By almost 10% on the basis of the net income of citizens and by almost 20% if we take into account the relationship between the price of house sales and rentals. This overvaluation comes despite the fact that the publication calculates that prices have decreased by 31.3% since the peaks recorded in the fourth quarter of 2007.

In 2010, The Economist created an index that was based, precisely, on the relationship between the sales price of properties and rental, and the net income of citizens in different countries to calculate reasonable house prices. Then, homes in Spain were overvalued by more than 50% and in every year since then, the publication has considered that house prices still need to decrease further.

Having said that, our country is not unique in this sense. Not surprisingly, homes are much more overvalued with respect to the average earnings of their citizens in countries such as Canada (by between 35% and 89%), France (25%-29%), Belgium (50%-55%) and Australia (39%-61%).

However, the data from The Economist reflects that if any further decrease takes place, then it will come in dribs and drabs – prices (in Spain) have decreased by just 0.2% in the last year, the smallest decline recorded in any of the countries analysed, and below those registered in Greece (6.1%), China (-5.6%), Singapore (-3.9%), Italy (-3.8%) and France (-2.1%).

By contrast, Ireland, a country that had a very similar real estate bubble to that experienced in Spain and where prices have decreased by almost 40% from their peak levels, heads up the ranking for highest price increases with a 16.2% year-on-year rise, followed by Turkey (16%) and Hong Kong (11.9%).

Original story: El Confidencial (by Elena Sanz). Refer to original story for table showing ‘The Economist House Price Indicators’ by country.

Translation: Carmel Drake