Spanish Real Estate Sector Strong Despite Political Risk

9 October 2019 By the end of this year, Spain will have had four elections in as many years. While it doesn’t reach anywhere near the level of Italy, which has had 45 governments since World War II, the uncertainty would normally be expected to impact growth.  In addition, Catalunya’s independence movement did, in fact, have a temporary, but major impact on growth in Barcelona.

Nevertheless, market sources say that major real estate players have learned to live with some level of political risk.  And things are not just complicated in Spain.  The United Kingdom is going through the long, drawn-out and self-inflicted trauma of Brexit. Italy is still having its usual political problems and the United States are going through the never-ending turbulence of having Donald Trump as their president.

Spain, in terms of economic and legal stability, is still seen as a relatively safe harbour, especially, since all of the main Spanish political parties are committed to remaining in the eurozone.

Original Story: Cinco Dias – Alfonso Simón Ruiz

Adaptation/Translation: Richard D. K. Turner

Deutsche Hypo: Spain’s RE Market Records Highest Growth in Europe

7 May 2019 – Cope

The Spanish real estate market recorded the highest growth in Europe during the first quarter of 2019 (3.8%) with respect to the previous quarter, to reach 199.3 points, according to the Deutsche Hypo Estate Economy Index (Reecox). Moreover, the Spanish real estate sector is forecast to grow by more than the European average this year (2.1%).

The Director of Deutsche Hypo’s branch in Madrid, María Teresa Linares, says that “the formation of a stable Government will be fundamental for ensuring economic consolidation and the adoption of the reforms necessary over the long term”.

The Reecox index reflects the quarterly evolution of the real estate markets in Germany, France, Great Britain, Poland, Spain and the Netherlands on the basis of five variables.

Original story: Cope 

Translation/Summary: Carmel Drake

Criteria Raises the Price of the Plots for Hard Rock Café Complex in Tarragona

8 October 2018 – El Confidencial

Criteria, the holding company of the investment companies owned by La Caixa, has increased the price of the plots on which Hard Rock Café Entertainment World is set to be built. The new leisure and casino complex is due to be constructed in Tarragona, next to Port Aventura. That is according to explanations provided by sources in the real estate sector to justify the delay in the project, formerly BCN World, which constitutes the largest foreign investment pending in Cataluña and which will involve the disbursement of €2 billion in total.

Criteria had closed an option to sell the land worth €110 million. But that was in December 2014. Now that Hard Rock Café, a multinational from the United States of America specialising in hotel and restaurant complexes linked to casinos, wants to exercise the option, Criteria is claiming that the real estate market has recovered in the last four years and so the price needs to be updated.

Sources at Criteria declined to comment but other sources in the real estate sector explained that a new due diligence process is being carried out to determine the magnitude of the price increase. The new price is expected to amount to around €140 million, a claim that has been rejected wholeheartedly by the Hard Rock Café, which alleges, and rightly so, that the delays incurred by the project (…) which now amount to more than three years, cannot be attributed to the company.

According to the original plan, the project should have been ready by 2015. But, partly due to the withdrawal of investments, and partly due to the political instability in Cataluña, the complex has suffered various delays.

Hard Rock Café is the only company that survived the bidding process for the gambling licences and is now the main party responsible for developing the complex. The forecast investment in Tarragona amounts to €2 billion for the construction of Hard Rock Entertainment World, which will have two hotels and 1,100 rooms, a shopping area with 75 shops – which will be operated by the British giant Value Retail, owner of Las Rozas and La Roca – and a 10,000 m2 casino. The project is expected to create more than 11,000 jobs and will be carried out in phases: the first amounting to €600 million.

When the initial investor withdrew, which was led by the businessman Enrique Bañuelos, La Generalitat subrogated the option to purchase the land, as a way of ensuring the continuity of the project. But that operation is neutral. La Generalitat would only perform a transfer and the final investor would have to pay the price of the plots. The Administration does not want to assume the surcharge that the new valuation would now result in.

Different positions

Each party defends its position. For Hard Rock Café, it cannot make its company or the other investors responsible for the delays incurred and therefore, does not want to assume the additional cost.

Meanwhile, Criteria has renewed the sale option, which had a term of 18 months, on up to four occasions to ensure that the investment would not go to waste, and considers that its efforts should also be rewarded.

An agreement must be reached between the parties soon (…). This project is key for Cataluña and will only serve to turn around the foreign investment figures that have been negative for the Catalan Administration since the independence process entered its critical phase.

Licence in May

In May 2018, Hard Rock Café obtained the licence for the project, which includes the gambling licence for the casino, granted by La Generalitat. That administrative permit arrived a year late due to the political instability in Cataluña. Now, Hard Rock Café, which is owned by a tribe of Seminole Indians (Florida) has three years to submit its plans. La Generalitat expects the building work to begin in 2019. The negotiations with Criteria could mean more delays if the positions fester, warn sources in the real estate sector.

Original story: El Confidencial (by Marcos Lamelas)

Translation: Carmel Drake

Offices & Logistics Assets will Drive Spain’s Real Estate Sector over the next 5 Years

20 September 2018 – Eje Prime

Spain is consolidating its position as one of the most powerful real estate markets in Europe. The Spanish real estate sector has been strengthened in recent years by the creation of employment and, in particular, by investments undertaken in the office and logistics segments. Looking ahead, it is expected that the scarce supply of these assets will lead to a rise in prices, especially in Madrid.

The sector expects the office business to maintain an upward trend over the next five years in light of the outlook for the creation of employment in Barcelona and Madrid. During this period, both cities are predicted to generate around 200,000 to 300,000 jobs, respectively.

Good news is also expected in the logistics sector. Above all thanks to the boom in e-commerce, the market for industrial centres and warehouses in Spain is currently one of the most powerful in Europe. Despite the great demand for assets, in cities such as Barcelona and Madrid, the rate of available stock stands at just 4%, which is pushing rental prices up. For DWS, the challenge until 2022 will be to “adapt existing buildings to the new needs of companies”.

In terms of the rest of Europe, an increase of 2% per year is expected in the prime office market. Together with Madrid and Barcelona, other areas that will see an increase in demand for such spaces until 2022 include Berlin and the financial district of Paris.

Logistics will be, undoubtedly, the most dynamic segment of the European real estate sector over the next five years. It is expected that, in light of an availability rate for industrial spaces of 5% in most of the large cities, rents will rise by 2.2% per year, on average. Germany, the UK and Poland are expected to lead that growth.

Original story: Eje Prime 

Translation: Carmel Drake

Ibiza’s Real Estate Market is a “World of its Own”

11 July 2018 – Diario de Ibiza

The real estate market in Ibiza is not encouraging (for the majority): the available stock of homes “is residual”, the majority of homes bought there are rented out, the peak prices reached in 2017 have been exceeded…and all of this is being compounded by a distinct shortage of land. All in all, it is a troubling scenario for those wishing to live on the island all year round.

Tinsa’s Regional Director for the East and South of Spain, José Antonio López, warned on Wednesday that the lack of land, combined with the demand for housing “is generating a dangerous melting pot” in the Balearic Islands. As such, he is asking the administration to get involved to facilitate the availability of land for property developers.

Those were the words used by López in response to a question from participants at a Proinba-Tinsa real estate meeting held in Palma on Wednesday, where the situation of the residential real estate market was discussed, in particular, the market on the coast.

López warned that this situation may “lead to serious problems” on the islands, where “young people need primary residences” and they “need options”. “For this reason, land is required, and the administration needs to get involved”, said Tinsa’s Regional Director, before adding that the supply of urban land with building permission is “almost non-existent”.

What’s more, “the supply is going to decrease” and with the “surplus demand”, we are seeing “dangerous growth that cannot be met”. In this context, “rental is not an option because those circumstances are also being taken advantage of”. In fact, according to data from Tinsa, in areas such as Ibiza (town), many people are buying to let (…).

Based on data from Tinsa, the average monthly mortgage payment on the Balearic Islands is very high, €792, well above the average for Spain as a whole, €543/month. The financial effort being made by families on the islands is also greater, given that they spent 22% of their household income on mortgages during the first year, compared with the national average of 16.8%.

Ibiza and Formentera set a new record

Of the 12 coastal municipalities analysed on the Balearic Islands, Sóller leads the increase in prices over the last year, with price rises of 21%. Ibiza and Formentera towns came in close behind, with 17.8%, followed by Santa Margalida (17.7%), Palma (14.7%) and Llucmajor (13.8%).

Palma is one of the top five most expensive capitals in Spain, with an average price of €1,951/m2, and in the last year, its growing trend has exceeded the average for the autonomous region.

By contrast, the municipalities that have grown by the least are Sant Lluís and Mahón (3.7%), Ciutadella (4.5%) and Manacor (7.1%) (…).

Ibiza is “recovering too quickly”

According to data from Tinsa, the real estate sector on the coast in Mallorca is “clearly recovering”, whilst in Menorca, there are “signs of recovery” and in the case of Ibiza, there may even be an “excessive recovery”, in López’s opinion.

Prices have been “rising rapidly” on the white island, on a consistent basis for the last few years, and the YoY variation is well above the average. In fact, current prices have already exceeded the maximums seen in 2007.

On the basis of all of these indicators, the Regional Director at Tinsa said that Ibiza’s real estate market could be considered “a world of its own, set apart from other islands and provinces” (…).

Original story: Diario de Ibiza (by E.P.)

Translation: Carmel Drake

Hispania’s Manager, Azora, Prepares Hotel Vehicle For Portugal

23 October 2017 – El Confidencial

The largest hotel Socimi in Spain may soon have a replica in Portugal. Azora, the manager of Hispania, is working on the creation of a new vehicle to enter the Portuguese market, on the basis that, over the next few years, it expects to see a repeat there of the recovery that the Spanish real estate market is experiencing at the moment.

The Director-General of Hispania, Cristina García-Peri, revealed Azora’s plans at the Barcelona Meeting Point conference, which was held in the Catalan capital last week. “We are looking at the Portuguese holiday market”, said the director, who also highlighted the opportunities that the country’s two major cities, Lisbon and Porto, have to offer.

Sources consulted by El Confidencial confirm that Azora’s strategy is aimed at constituting a new vehicle, given that Hispania’s mandate focuses solely on the Spanish market. As such, the firm is currently making contact with several funds to define the terms of the project.

The example of what Azora has done with Hispania is the best endorsement that the manager can show investors to attract them towards this new proposal, given that the firm founded by Concha Osácar and Fernando Gumuzio considers that the Portuguese market is very similar to the Spanish market and therefore, they already have a wealth of knowledge in terms of both the product and the environment.

Following in Hispania’s footsteps

Created three and a half years ago, Hispania has become the largest owner of hotels in the country in that short space of time, with 36 establishments and more than 10,350 beds. Most of its properties are located in the Canary and Balearic Islands.

Moreover, in the summer, the Socimi acquired a plot of land in Teguise (Lanzarote), where it is going to build a new five-star establishment with 225 rooms, which it will integrate with the existing Occidental Playa and Barceló Lanzarote hotels, to create a mega-resort with 1,033 rooms, the largest in Hispania’s whole portfolio.

Despite the success achieved with its tourist business, in the spring, Azora made a proposal to the Socimi’s shareholders, led by George Soros, to activate the divestment period for the vehicle and whereby renounce the option of converting it into a permanent entity.

This decision has meant that the company has activated a formal process to sell its entire office portfolio. To this end, it has been holding exclusive negotiations with the insurance company Swiss Life for several months now and it has also started to divest its 754 residential properties, one by one.

In terms of Hispania’s hotels, which account for the bulk of its portfolio, it has until December 2020. Until then, the Socimi will focus on continuing to acquire assets, as well as improving and actively managing the ones it already owns to allow it to increase its rate of return on these investments from 10% to 12%.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake

BBVA: Housing Market Makes A Strong Start To 2017

10 May 2017 – Europa Press

BBVA’s latest report highlights the “positive” evolution of the real estate market at the beginning of 2017, given that house purchases are still being “backed” by mortgage financing, construction is continuing to grow and house sales are maintaining their upwards trend.

At least that is according to the “Real Estate Observatory of Spain”, compiled by BBVA Research, the financial entity’s research service and BBVA’s Real Estate area, which states that the recent review of the macroeconomic scenario by BBVA, which forecasts GDP growth of 3% this year, introduces “an upwards bias into the forecasts for 2017”.

In this sense, the entity highlights that house sales maintained their growth rate, supported by the “strong performance” in terms of employment and mortgage loans, whilst construction activity also “remained dynamic”.

According to data from the General Council of Notaries, during the first two months of 2017, 72,371 homes were sold, up by 13.9% compared to a year ago, but in line with the average for 2016 as a whole.

Amongst the factors that BBVA points to as reasons for the improvement in the real estate sector, are the labour market in Spain, which “has continued to improve”, as reflected by Social Security sign-on data, such as the Active Population Survey (EPA). According to the EPA, the number of people in employment grew by 0.6% during the first quarter of the year.

In addition, credit conditions remain “favourable” for households. Interest rates are at minimum levels: the mortgage rate for new operations remains at around 2.2%; meanwhile, the 12-month Euribor rate hit a new minimum in April, closing at -0.119%.

The mortgage market supports residential demand

Moreover, the mortgage market is continuing to drive residential demand. New loans to buy a home rose by 23.5% YoY during the first quarter, excluding refinancings, according to data from the Bank of Spain.

In turn, during the first two months of 2017, almost 12,800 housing permits were granted (20.3% YoY).

Finally, BBVA highlights that the dynamics in the market for land “are still positive”, given that during the first two months of the year, the number of transactions involving land rose by 12.8% YoY, which represents an increase in the traded surface area of 8.8% in one year.

Original story: Europa Press 

Translation: Carmel Drake

Värde Buys Vía Célere To Become Spain’s Largest Residential Property Developer

27 February 2017 – Real Estate Press

Värde Partners has purchased Vía Célere, the real estate company owned until now by the President of Asprima, Juan Antonio Gómez Pintado (pictured above). The operation was closed on Friday, however, the consideration paid has not been revealed. Gómez Pintado will manage the fund’s real estate activity in Spain. As a result of this deal, Värde has consolidated its position as the largest residential property developer in Spain.

Vía Célere currently has two property developments underway and owns land for the development of around 1,000 homes, in Madrid and Barcelona. It also owns several developments overseas, specifically, in Brazil, Bulgaria and Poland.

Vía Ágora, which owns Vía Célere and the property development companies that operate outside of Spain, recorded revenues of €83.4 million in 2015, with a net profit of €6.12 million, according to the latest accounts filed. The group’s property development activity in Spain accounted for €49 million of this revenue, with a profit of €3.5 million.

Värde already controls the property developers Dos Puntos and Aelca, along with 40% of La Finca, and with this new acquisition, it is fulfilling the objective of reaching the size that ensures a high rate of sales growth (…). The fund also manages the servicer Aliseda.

In addition to Värde, the funds Lone Star and Castlelake have also made strong commitments to the Spanish residential real estate market in recent times.

Original story: Real Estate Press

Translation: Carmel Drake

Fotocasa: Second-Hand House Prices Remain Stable In January

9 February 2017 – El Economista

Second-hand house prices remained stable during the first month of 2017, at €1,649/m2, compared with December 2016, according to data compiled by Fotocasa.

Specifically, the real estate portal said in a statement that this data shows “once again” that second-hand house prices are stabilising and are leaving the losses of recent years behind them.

Meanwhile, the Head of Research at Fotocasa, Beatriz Toribio, confirmed that the second-hand home segment is proving itself to be one of the “main engines” behind the reactivation that the real estate market is experiencing and that is being reflected in prices.

During January, the price of second-hand homes rose by 1.6%, to record four consecutive months of YoY increases of more than 1%.

According to Fotocasa, average house prices in Spain have recorded a cumulative decrease of 44.1% since their historical peak of €2,952/m2 in April 2007.

Currently, 12 autonomous regions have recorded decreases of more than 40% since their peaks of nine years ago. The regions that have seen the highest price decreases are: La Rioja (-58.1%), Aragón (-53.1%), Navarra (-52.8%) and Castilla-La Mancha (-52.6%).

In January, the average price of a second-hand home rose in seven autonomous regions, namely in: Extremadura (+1.3%), Castilla-La Mancha (+0.9%), Navarra and the Canary Islands (+0.4%), Castilla y León and País Vasco (+0.3%) and Cataluña (+0.2%).

By contrast, Murcia (-2.2%) was the region where house prices decreased by the most, followed by Aragón (-0.9%), Madrid and the Balearic Islands (-0.6%), Galicia (-0.5%), Cantabria (-0.4%) and La Rioja, Asturias and Andalucía, where prices decreased by -0.1%.

The most expensive autonomous region was still País Vasco, at €2,706/m2, followed by Madrid (€2,241/m2) and Cataluña (€2,095/m2), whilst the cheapest regions were Castilla-La Mancha (€1,048/m2), Extremadura (€1,105/m2) and Murcia (€1,120/m2).

Original story: El Economista

Translation: Carmel Drake

Pontegadea: Global Political Uncertainty May Impact RE

30 January 2017 – Expansión

Speaking last Thursday (26 January), Roberto Cibeira, CEO at PontegadeaAmancio Ortega’s investment vehicle – highlighted the “significant uncertainty” that exists in the real estate sector regarding the UK’s exit from the European Union. “Depending on what Brexit looks like, the economy will evolve, along with the demand for space. Companies are being very cautious”, said the Director, who was participating in the Third Real Estate Meeting, organized by the IESE.

The UK is one of the top five most important countries for Pontegadea on the basis of turnover; it accounts for a significant proportion of the firm’s business. “London is London, it is always going to be there. We are hopeful and are waiting for opportunities to invest”, said Cibeira, who indicated that the company will continue to focus on the countries in which it already has a presence (Spain, USA, Canada, Mexico, France, UK, Italy, Portugal and South Korea), although growing in Asia “is also a possibility”.

Moreover, the Director said that Pontegadea’s debut on the stock market “goes without saying”, although he did not want to comment further and said that the real estate market in Spain is characterised by three features: “A shortage of supply, a lot of overseas investors and a great deal of competition”.

The Trump Administration

Pontegadea’s CEO was guarded in his comments regarding Donald Trump’s arrival at the White House. “If the country’s economy performs well, then it will be good for everyone. People are still waiting to find out about Trump’s economic policies. The decrease in taxes is good for companies operating in the US and is regarded as a good thing in the short term”, he said.

Regarding the real estate market in the country, the Director said that “it is beginning to explode. But that there has to be a limit to these rent hikes”. The words of Cibeira relate specifically to the rents for stores on Fifth Avenue in New York, where rental prices have risen to $5 million/year per 100 m2.

Original story: Expansión

Translation: Carmel Drake