The 2008 Crash Lasted 7 Years and Industrial Property Prices Fell by 40%: What will Happen in this Crisis?

By last year, industrial assets had recovered only 17.5% of the value that they lost during the 2008 real estate crash, after dipping to minimum levels in 2014. According to the College of Registrars, the average transaction price was €527/m2 at the end of 2019.

By last year, industrial assets had recovered only 17.5% of the value that they lost during the 2008 real estate crash, after dipping to minimum levels in 2014. According to the College of Registrars, the average transaction price was €527/m2 at the end of 2019.

Like other asset segments, the 2008 financial and real estate crisis hit the industrial market hard. The average transaction price of industrial assets went from €792/m2 to €471/m2, whereby losing 40.5% of their value.

The decrease in prices lasted 7 years, from their peak in the fourth quarter of 2007, to when they bottomed out in the third quarter of 2014. “From that moment, transaction values ​​remained stable for two and a half years, until in the second quarter of 2017, when they began to rise slowly at a rate of between 5% and 6% year-on-year,” says Antonio Ramudo, Data Scientist at Brainsre.

Thus, by the end of 2019, according to the Registrars, with respect to the minimum levels reached in 2014, only 17.5% of the value lost during the crisis had been recovered, with an average price of €527/m2. The current crisis is showing signs of exceptional severity throughout the world, but it is true that the industrial segment is being hit less hard thanks to the dynamism of e-commerce during this time of lockdown.

Variation in prices

The autonomous regions with the most expensive industrial products are also those that suffered the greatest decreases in absolute values. As such, the gap between the maximum prices of 2008-2009 and the minimum prices reached after the fall was greater.

In this way, the regions with the highest average transaction value at present are the Balearic Islands (€1,513/m2), the Community of Madrid (€1,371/m2), País Vasco (€1,263/m2), the Canary Islands (€1,190/m2) and Cataluña (€1,111/m2).

They represent the three most important industrial centres in the country plus the islands, which due to the scarcity of this type of product tend to have more expensive prices. All regions are currently well below the maximum values ​​they reached before the bubble burst in 2008.

Impact of the fall and recovery

With a 61% loss in value, the Canary Islands was the region that suffered the largest drop in prices during the last crisis. Aragón, Cantabria, Galicia and the Balearic Islands were the other autonomous regions that suffered the greatest price decreases, with more than 55% being knocked off their value”, says Antonio Ramudo.

Pontevedra was the province whose prices suffered the most as a result of the 2008 crisis, with a decrease of 70%, from €809/m2 in the third quarter of 2008 to €243 euros/m2 in the first quarter of 2014. Many industrial estates along the Vigo – O Porriño axis witnessed that fall, which lasted for more than 5 years. Huesca was another province that suffered badly during the previous crisis, and with minimum and maximum prices similar to those of Pontevedra, it suffered a 69% decline in transaction values.

50% decreases in Madrid and Cataluña

Nor were the large capitals spared from the crisis. Prices in Madrid fell by 50%, in Barcelona by 52% and Sevilla, which suffered the most, by 66%.

After the 2008 crisis, “36 of the 52 provinces that make up Spain saw a decrease in their average transaction prices of more than 50%. Extremadura was the autonomous region that got off the lightest, although transaction values there still fell by 40%. Nevertheless, it is worth noting that it has always been the region with the lowest prices, so the margin for loss was also lower”, says the Data Scientist.

And amongst the provinces, those that fell by the least were the ones that reached the lowest maximum prices, and therefore had the least to lose: Jaén, Granada, Cáceres, Albacete and Palencia all suffered decreases of less than 40%.

“It is interesting to see also how the various regions have been recovering after leaving behind the crisis of 2008. The islands are the regions that have recovered the best thanks in part to the shortage of product there. In the Balearic Islands and the Canary Islands, 27% and 30% of the value lost has been recovered, respectively”, says Ramudo.

Recovery

Murcia is the mainland region where prices have recovered the most, with 28% of the value recovered with respect to their maximum prices. Madrid has recovered by 22% and Barcelona by 11%. Up to 21 provinces have recovered by less than 20%.

Some regions have recovered almost none of their value: Castilla-La Mancha is currently at values ​​close to the minimums reached in 2015, and prices in Castilla y León are now the lowest they have been for the last 15 years.

“In general, it could be said that since the falls after the crisis slowed down in 2014 and 2015, transaction values ​​have remained fairly stable in almost all regions. Although, there has been some slight price growth since 2017 in places with more demand, thanks in part to the boom in the logistics segment, a leading product in the sector in recent years”, concludes the analyst.

Duration of the fall

Unlike the coronavirus crisis, the 2008 crisis reached different regions in Spain at different times; maximum prices were reached in Cataluña, Aragón, Castilla-La Mancha and Castilla y León in 2007, with the Aragonese region peaking first, in the first quarter of 2007, before starting a prolonged 10-year price drop.

Most regions began to register price decreases between 2008 and 2009, with the tardiest ones, Galicia and País Vasco, seeing their prices fall in 2010. Extremadura was the territory where the recovery after the crisis began first, since during the third quarter of 2012, after three years of decline, prices there bottomed out and began to rise. Prices in the Balearic Islands and La Rioja bottomed out in 2013, and in the rest of the regions between 2014 and 2015.

If we talk about the duration of this crisis, from the beginning and until the end of the price decreases, we see significant asymmetry between regions, from the shortest, less than 4 years, in Extremadura, Balearic Islands, La Rioja and Galicia, to the longest, 8 years, in Andalucía and, 10 years, in Aragon.

Madrid and the País Vasco, regions with important industrial centres, suffered falls that lasted 5 years, while Cataluña took almost 7 years to stop its fall.

The end of 2019

The provinces that closed last year (2019) with the highest average transaction values were the Balearic Islands (€909/m2, although that figure represents a recovery of only 7%), Bizkaia (€827/m2), Madrid (€837/m2) and Santa Cruz de Tenerife (€773/m2).

“The reason why these provinces recorded the highest average transaction values is due to factors such as scarcity and the limited nature of the industrial product, such as in the Balearic and Canary Islands, the long industrial history and constant demand in País Vasco and the importance of Madrid as a logistics centre”, describes Ramudo.

By contrast, the provinces that ended 2019 with the lowest average transaction values were Cáceres (€252/m2), Ciudad Real (€260/m2), Jaén (€261/m2) and Palencia (€262/m2). The lack of demand and their isolation, since they are located far away from the major industrial centres, make industrial assets unattractive products in these provinces.

The Crisis will Cause GDP to Fall by More than 10% in the Islands and by 8% along the Mediterranean Coast, but those Areas will Lead the Recovery in 2021

The Balearic Islands (-17%) and the Canary Islands (-13%), as well as the entire Mediterranean coast (-8%), are leading the falls in GDP during this crisis but are expected to recover more quickly in 2021.

The Balearic Islands (-17%) and the Canary Islands (-13%), as well as the entire Mediterranean coast (-8%), are leading the falls in GDP during this crisis but are expected to recover more quickly in 2021, boosted by the engine of the Spanish economy but also the sector most affected by the crisis, tourism.

BBVA Research’s Regional Observatory estimates that the recovery this year will depend on “the duration of the restrictions, how they impact the capacity used and the public policies to mitigate them.” In this way, after the strong GDP contractions of 2020, the Balearic Islands and the Canary Islands will be the autonomous regions with the highest growth rates, of 9.6% and 7.8%, respectively. However, their absolute GDPs will still be 5% below the levels reached in 2019.

The Bank of Spain Warns of House Price Decreases and Fewer Sales After Coronavirus

The supervisory body has also warned about the risk of payment defaults by families and companies, although there is a bank ‘cushion’ of €93 billion to cover a default rate of 13%.

The Bank of Spain’s spring Financial Stability Report warns that the impact of the health crisis on the real estate market will be significant, “at least in the short term”. It recalls that the market was already in a phase of deceleration, in terms of both activity and transactions, as well as prices, after the notable expansion of recent years.

However, it offers some hope by stating that the degree of recovery will depend on the extent to which the economic and financial effects of this upheaval persist. It also underlines that house sales contracted in 2019 in both the new build and, to a greater extent, second-hand housing segment. For its part, the growth in average house prices moderated, although the “high degree of geographic heterogeneity” continued.

The German Giant TUI Hopes to Bring Tourists to Spain from Mid-June

The world’s largest tour operator, TUI, is planning to start bringing tourists to Spain from the United Kingdom and Germany in the second half of June.

The world’s largest tour operator, TUI, planning to start bringing tourists to Spain from the United Kingdom and Germany, the main source markets, from the second half of June, according to Vozpópuli.

Brits and Germans can now book ‘all-inclusive’ packages in the main holiday destinations in the country, such as the Balearic Islands and the Canary Islands, through the tourism giant. TUI operates its own airline and holds agreements with numerous hotel establishments throughout the country.

Four out of 10 Logistics Owners have Suspended Investment Operations

According to a survey about the effects of COVID-19, conducted by the consultancy CBRE, 62% of those consulted consider that the path towards some kind of normality will begin in the last quarter of the year.

According to a survey conducted by the consultancy CBRE with the main owners and property developers of the industrial sector about the effects of Covid-19, 62% of those consulted consider that the journey “towards some kind of normality in the sector” will begin in the last quarter of the year

Meanwhile, 23% predict that the industry will not resume its normal activity until 2021, and the remaining 15% consider that the recovery will begin in the third quarter of this year.

E&V: The Costa del Sol Enjoys a New RE Boom

12 March 2019 – Europa Press

According to a report about the real estate market for 2018-2019 compiled by Engel & Völkers (E&V), demand is growing along the Costa del Sol from domestic and international investors alike.

The improvement in the economy, better financing conditions, high rental yields and the reactivation of new construction projects all confirm that there is a boom underway on the Andalucían coast once again.

The real estate agency forecasts a moderate increase in prices and transaction volumes of around 7%-10% during 2019. Málaga is the driving force, thanks to its cultural offering and robust infrastructure, but new build projects have resumed all along the coast in recent years.

In this climate, in 2018, 60% of operations were closed by foreigners looking for second homes, with average prices of €3,000/m2 in Málaga capital and maximum prices of €8,000/m2 in the city centre.

Marbella has also re-emerged as an investment destination after years of paralysis, where overseas buyers account for 80% of all purchases. There, clients seek modern villas equipped with the latest technology, which have views of the sea or are located close to a golf course.

Original story: Europa Press  

Translation/Summary: Carmel Drake

Andalucía’s Property Market is Operating at Four Speeds

3 March 2019 – ABC Sevilla

According to INE, more than 100,000 homes were sold in Andalucía in 2018, a figure not seen since 2008. That figure represented an increase of 13.1% YoY, but growth was far from uniform across the region.

The main driver was the province of Málaga, where almost 32,500 homes were sold last year, up by 5% YoY. In fact, Málaga, along with Barcelona, Madrid, Alicante and Valencia accounted for almost 40% of all house sales in Spain as a whole in 2018 (with 235,000 sales between the five provinces).

Elsewhere in Andalucía, 17,626 homes were sold in the province of Sevilla, up by 19% YoY. Its rate of growth was higher than in Málaga since the recovery started there two years later.

In this sense, Francisco Martínez-Cañavate, President of Fadeco Promotores (pictured above), points out that “there is a lot of demand in the province of Málaga; then there is a second speed in Sevilla; a third in Cádiz, Granada and Almería; and finally a fourth in Córdoba, Huelva and Jaén”.

Original story: ABC Sevilla (by E. Freire)

Summary/Translation: Carmel Drake

INE: Mortgage Lending Rose by 16.5% YoY to €42.7bn in 2018

27 February 2019 – La Vanguardia

Last year, 345,186 mortgages to purchase homes were signed in Spain, up by 10.3% compared to 2017, but the banks again refrained from fully opening the financing tap: the average loan amount increased by just 5.6% to €123,727, according to data presented on Wednesday by Spain’s National Institute of Statistics (INE).

The growth in the average amount is only slightly higher than the increase in house prices (which rose by 3.9% on average last year, according to data from the Ministry of Development, albeit by much more in the large cities and their metropolitan areas, where the bulk of demand is concentrated). “The banks are adopting a conservative strategy, that’s for sure”, said Oscar Gorgues, Manager of the Chamber of Urban Property in Barcelona – “because they are still very mindful of the excesses of the boom years. For that reason too, we can say that the real estate market is healthy and there is no risk of a bubble”.

The data from INE shows that after five years of recovery in the real estate sector, the number of mortgages granted is still 71% lower than the 1.24 million mortgages granted by the banks in 2007, the last year before the burst of the real estate bubble.

According to real estate firms, the caution on the part of the banks means that the main factor causing families, and especially young people, to rent, is the fact that it is impossible for them to obtain a mortgage loan. By contrast, according to the real estate firm Forcadell, around one third of homes are now purchased without a mortgage, in operations undertaken by investors (…).

According to data from INE, the value of all of the new mortgages constituted to purchase homes last year amounted to €42.7 billion, up by 16.5% compared to 2017, due to the combined effect of increases in the number of operations and the average loan amount (…).

Original story: La Vanguardia (by Rosa Salvador)

Translation: Carmel Drake

Forcadell: 370,000 m2 of Office Space was Leased in Barcelona in 2018

13 February 2019 – Eje Prime

The office market in Barcelona is breaking records. In 2018, 370,000 m2 of space was leased in the city, up by 8.8% compared to 2017. According to the consultancy firm Forcadell, that trend was due to three main factors: interest from international companies, demand from tech companies and the boom in coworking.

Up to 60% of the surface area leased in 2018 corresponded to companies from overseas. According to the report from the consultancy firm, the interest from those companies in Barcelona is attributed to the city’s “entrepreneurial and innovation eco-system”, which is complemented by a commitment to technology, which has attracted companies such as Everis, Oracle and Indra.

In just one year, coworking operators have doubled the amount of space leased in Barcelona, renting out a surface area of 46,700 m2 in 2018. According to this report, the Catalan capital is the European city that has seen its office space increase by the most in percentage terms.

Original story: Eje Prime 

Translation: Carmel Drake

Fotocasa: Second-Hand House Prices Record Their Highest Increase Since 2006

24 January 2019 – Expansión

Second-hand housing is continuing to spearhead growth in the residential market. Not only because it accounts for more than 80% of all house sale operations, but also because it is the segment where prices are increasing by the most.

The price of second-hand homes rose by 7.8% at the end of 2018, recording the highest increase in 13 years, since 2006, before the crisis, according to data published yesterday by Fotocasa. Taking into account the fact that the online portfolio started monitoring house prices in 2006, it is the largest annual increase in the historical series. Although the prices of second-hand homes have not stopped growing in month-on-month terms for 27 months – more than two years – in 2018, they rose at a rate never before seen.

The awakening of latent demand, investor appetite and the profitability of rental properties in the context of low interest rates explain why interest has returned to property purchases, with the consequent impact on prices”, explained Beatriz Toribio, Head of Research at Fotocasa.

Despite the increases, the average house price stands at €1,869/m2, the level last seen in 2013, when the residential sector had not yet started to recover. House prices peaked in April 2007, when the price per square metre reached €2,952/m2, 36.7% higher than it is now (…).

Even though prices are still well below their historic maximums, the evolution of the market varies by area. Although the increases were widespread across almost the whole country in 2018, Toribio explains that “the intensity of the increases is very different, and there are even areas where slight decreases were registered”. Madrid is the province where prices increased by the most, specifically, by 19.5%, followed by Las Palmas (13.8%), Santa Cruz de Tenerife (12%), Alicante (11.3%), Barcelona (10.5%) and the Balearic Islands (10.4%).

The Spanish market continues to grow at various speeds, with large cities driving prices and sales. Guipúzcoa, Barcelona and Madrid are the most expensive provinces in Spain, with prices per square metre of more than €2,880/m2.

By contrast, the provinces that are suffering from depopulation and ageing demographics are recording significant price decreases (…). Toledo is not only the province that has recorded the largest decrease in prices since the peak (-55%), it is also the cheapest, with prices of €948/m2. It is followed by Ciudad Real, where second-hand homes are going for €990/m2.

Original story: Expansión (by I. Benedito)

Translation: Carmel Drake