Tinsa: House Prices Rise in Madrid & Palma by 17% & 15%, Respectively, in Q1 2018

5 April 2018 – Expansión

The boom continues with an average price rise of 3.8% during the first quarter of 2018 / Rises in large capital cities and tourist areas boost house prices in a market that is still operating at several speeds. Nevertheless, Cataluña is showing signs of a slow down.

Madrid and Palma de Mallorca led the growth in house prices during the first quarter of the year, according to data published yesterday by the appraisal company Tinsa. Specifically, the city of Madrid saw price increases of 17% with respect to the same period last year, followed by the capital of the Balearic Islands (14.7%), Barcelona (11%), Pamplona (10.4%) and Logroño (10%). All of them contributed to an average increase in house prices across the country of 3.8%.

Despite the great motor that Madrid, many tourist areas and certain non-coastal cities represent, where demographic pressure is starting to push prices up again, the positive trend of the market as a whole is being weakened by the diminishing strength of Cataluña following the independence referendum on 1 October 2017. Whilst house prices in the Cataluñan capital rose by 20.6% during the third quarter of last year, that growth had moderated to 14.8% by the end of 2017 and to 11% by the start of this year.

This weakness corresponds to lower investment activity, due in part to a slowdown in tourism, as well as uncertainty, which has caused a delay in certain purchase decisions, such as the time it takes to sell a home (…).

Moreover, it is worth noting that whilst before house prices in Cataluña as a whole rose by 12.5%, now prices in the other three capitals are stagnating or falling, and prices in the region as a whole have slowed to an increase of 7.3%.

This situation is the opposite of what is happening in the Community of Madrid, where the increase in prices in the capital is driving demand out to towns on the outskirts. In this way, prices for the region as a whole are rising with similar strength to those in the city of Madrid (…).

Heterogeneous situation

The increases in the large capitals are not isolated, given that the rises are taking place in the most touristy areas, as well as in those areas where unemployment has decreased significantly. In this way, prices are rising by between 5% and 8% in capitals along the Mediterranean (only Gerona has seen its prices decrease), as well as in Andalucía and the Canary Islands, and in several cities in the Northern third of the peninsula (such as Vitoria, San Sebastián and Burgos); in the case of Sevilla, prices rose by 8.8% in Q1.

Nevertheless, within the real estate market as a whole, there are still many provincial capitals where house prices are falling, such as the case of Ciudad Real (where prices fell by -11.9% in Q1), followed by Cáceres (-9.2%), Guadalajara (-6.3%) and Lérida (-6.2%). Several factors explain those decreases, which are concentrated in the least populated areas and, which, therefore, have little weight on the overall market. Firstly, many of those cities have high levels of unemployment and the majority are experiencing population loss, which relieves pressure on the real estate market (…).

Original story: Expansión (by Pablo Cerezal & Juanma Lamet)

Translation: Carmel Drake

Century 21 Analyses Inorganic Growth Opportunities

25 January 2018 – Expansión

Century 21, one of the largest networks of real estate brokers in Spain, wants to take advantage of the upward trend in the real estate cycle to grow in size, and so is analysing the purchase of regional operators and is even considering merging with one of the national chains.

“Spain is one of the countries in which the broker segment is most fragmented. We are starting to see a trend towards consolidation, which is both inevitable and necessary. We believe that an organised network, with defined working and behavioural criteria and self-regulation, are fundamental for the professionalization of the sector”, said Ricardo Sousa, CEO of Century 21 for Spain and Portugal, speaking to Expansión.

Sousa explains that, although his firm is not currently holding any advanced negotiations in this regard, the company is “mindful” of acquisition opportunities. “There are regional players that may enhance the synergies and allow for more rapid and consistent growth. That is something that appeals to us”, he said.

Alliances

Sousa also opens the door to alliances with players that compete on the national level: “We are continuing with our organic strategy of value creation with the opening of new branches and through our network of collaborators. In parallel, we are watching the market to find the ideal partner”.

The director gives the example of the “success” of the merger between Century 21 Portugal and Fitamétrica – two of the largest networks in the Portuguese market – five years ago.

Century 21 arrived in Spain in 2010, at the height of the crisis in the real estate market. Eight years later and, with the residential sector now booming, the company has 70 branches and 1,150 collaborators.

The director considers that “there is too much optimism in the market”, which is being translated into certain “irrational” investment and purchase decisions. And he adds: “People need to be more careful because the cycles are becoming increasingly faster and shorter”. For Sousa, there is a clear need in Spain for new-build and renovated properties and there is a segment of the population, the middle and low-middle class, that has been “forgotten”.

Last year, the company recorded turnover of €15.7 million, which represented an increase of 37%. In 2018, Century 21 plans to increase its revenues by 27%, to €20 million. Barcelona will account for 30% of total turnover, a similar percentage to that recorded in the Canary Islands, whilst Madrid is expected to represent 25% of total revenues. The company plans to focus its growth efforts on peripheral areas in those regions.

Last year, Century 21 brokered 5,414 transactions, which represents an increase of 22% with an average value of €199,598, down by 6.3%.

In terms of Cataluña –the chain’s main region, which currently accounts for 41% of turnover -, Sousa acknowledges that the political tension led to a deceleration during the months following the referendum. “Many buyers delayed their purchase decisions in October and November, and decided to close those operations in December and January instead, meaning that those months have reached record highs”, he said.

In this regard, Sousa says that whilst the domestic market has been reactivated, international firms are leaving their investment operations on standby, for the time being.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

JLL: Real Estate Investment Rose by 45% in 2017 to €14bn

11 January 2018 – El País

The volume of real estate investment in Spain broke records once again in 2017, closing the year at €13.989 billion, up by 45% compared to 2016, according to data from the international real estate consultancy JLL. And investors were not averse to any of the market segments, although two really stood out in 2017. On the one hand, the retail sector (stores and shopping centres), which saw investment of €3.909 billion, up by 31% compared to 2016 – that represents a historical figure thanks to the 35 operations that were closed during the year. And on the other hand, investment in hotels, which increased by 75% with respect to 2016.

Not even the political crisis in Cataluña deterred hotel investment from beating its own record by the end of 2017, with investment of €3.907 billion, representing an increase of 79% with respect to 2016 and comfortably exceeding the historical record set in 2015, when investment amounted to €2.614 billion, according to the study of this market conducted by the consultancy firm Irea. And that despite the slowdown in Cataluña, where no transactions have been closed since the referendum was held on 1 October. Nevertheless, “the impact of the uncertainty in Cataluña will make it hard for the investment data seen in 2017 to be repeated”, says Miguel Vázquez, Partner in the firm’s Hotels division.

For the time being, the incessant arrival of tourists in Spain (the country welcomed more than 82 million foreign visitors in 2017, almost 10% more than in 2016) is continuing to spark investor interest. In fact, in 2017, investment in holiday hotels comfortably exceeded financing in the urban segment (69% vs 31%), rebalancing the trend seen in 2014 and 2015.

Moreover, destinations that had remained quiet following the crisis were revived. Málaga rejoined the list of investors’ preferred destinations, accounting for 15% of total investment with 18 transactions amounting to €516 million. The Canary Islands retained its position as the favourite investment destination, accounting for €939 million of investment, representing 27% of the total volume. Madrid was the main destination for urban investment once again, with €637 million (including existing hotels and the acquisition of properties to convert them into hotels), ahead of Barcelona, which recorded €422 million.

Last year in Spain, 182 hotels were sold, containing 28,813 rooms, compared with 147 hotels and 21,646 rooms in 2016. That represented an increase not only in terms of the number of assets but also in the average price paid per room, which amounted to around €119,000, approximately 30% higher than the average price paid in 2016. In 2017, conversion projects and transactions involving land for the construction of hotels recorded a combined investment volume of €478 million, representing an increase of 139.8% compared to 2016, according to Vázquez.

Offices and residential assets

Offices were the third favourite assets for investors, accounting for investment worth €2.210 billion. Nevertheless, it was the only segment that recorded a decrease in absolute terms with respect to the prior year, with investment in this asset class falling by 20%. That reduction was driven by data in Madrid, given that investment in the Spanish capital fell by 38% with respect to the previous year – €1.374 billion – whilst in Barcelona, the investment volume amounted to €835 million, equivalent to an increase of 60%. Nevertheless, according to Borja Ortega, Director of Capital Markets at JLL, “that decrease was not due to a decline in investor interest, but rather a lack of product on the market and the fact that the previous two years saw record-breaking figures”.

Investment in land also stands out, since it amounted to a record volume of €109 million in Barcelona and €193 million in Madrid; moreover, that trend is expected to continue in 2018.

But it was investment in the residential sector – the purchase of entire buildings and land – that really soared in 2017. It amounted to €2.082 billion, which represented an increase of 160% with respect to the €802 million recorded in 2016. In Cataluña, residential investment amounted to 145% to reach €444 million.

Original story: El País (by S. L. L.)

Translation: Carmel Drake

Renta’s Socimi Invests €18M Buying More Homes in Madrid

4 December 2017 – Expansión

The Socimi owned by Renta Corporación and the Dutch fund APG is continuing to focus on the residential market in Madrid. The vehicle launched in April has just closed the purchase of three more residential buildings in Alcorcón and Campo Real, comprising 166 homes in total and involving the disbursement of €18 million.

As planned, Renta recently changed the name of its Socimi, which was created with the temporary name Rembrandt; it has now been changed to Vivenio.

Since its launch, eight months ago, the vehicle has invested €93 million in the purchase of 1,152 homes, all in Madrid and its surrounding municipalities. Although the objective was to buy homes in both Madrid and Barcelona, the opportunities and larger size of the Madrilenian market have meant that until now all the purchases have been performed in the Spanish capital. As such, the Socimi has not yet made its debut in Barcelona, even though Renta Corporación still has its headquarters there.

In October, a few days after the referendum, the real estate company chaired by Luis Hernández de Cabanyes announced that it was considering moving its headquarters outside of Cataluña and that it would be “preparing to take the necessary decisions in an efficient manner”.

Original story: Expansión (by Marisa Anglés)

Translation: Carmel Drake

INE: House Sale Growth Slows Down In Cataluña

14 November 2017 – Expansión

The negative consequences of the crisis caused by the “independentistas” extends to every sector of the economy. And one of the most affected is the real estate sector, as the data published on Monday by Spain’s National Institute of Statistics (INE) shows. Cataluña was the third autonomous region where house sales grew by the least during the month of September, with a YoY increase of 2.1%, equivalent to 6,146 operations.

With that percentage, Cataluña fell well below the average YoY growth rate for Spain as a whole, which amounted to 11% in September. That increase – below the rate recorded in August, of 16% – was driven by Castilla-La Mancha (47%), Murcia (27%) and Extremadura (24.2%), which experienced the highest rises. Unlike Cataluña, the other economically powerful regions, such as Madrid (11.4%), Valencia (13.2%) and País Vasco (13.3%), were above the national average.

This data partially reflects the impact of the events that took place in September, with the approval by the Parlament of the so-called disconnection laws. But given that most operations are negotiated several weeks in advance, Manuel Gandarias, CEO of Civislend, indicates that the deceleration was due primarily to “expectations” – many people postponed their purchases as a precaution, in case the situation deteriorated, which is what ended up happening.

This explains why Cataluña has gone from being one of the drivers of house sales in Spain to bringing up the rear of the ranking. In this way, in May, the region came in above the national average, with an increase of more than 30%. In June and July, the first signs of the deterioration could be seen, when the rate stood at around 17%, broadly in line with the rest of the country. But in August, it decreased below the national average (7.4% vs. 16%), and that decrease was further strengthened by the data published yesterday. In absolute terms, it means 6,720 operations were recorded in August, 7,020 in July and 7,039 in June; in contrast with 6,146 in September (…).

The growth recorded in Cataluña during the month of September was distributed unequally by province (…). The worst hit was Girona, which saw house sales decrease by -2.9% in September. Barcelona and Tarragona saw very limited rates of growth, with 1.9% and 4%, respectively, whilst the best figures were seen in Lleida, with a rise in house sales of 16.3% (…).

The negative trend indicated by this data will probably be made worse when the indicators relating to the next few months are revealed, as they will reflect the impact of the events that took place after the illegal referendum on 1 October. According to José Antonio Pérez, Professor of the Real Estate Department at IPE, the greatest effect is being felt “in investments from overseas”, which have reacted in the face of the legal uncertainty. Gandarias said that the situation will also have its impact on operations involving families, given that those who have decided to buy a home “will probably wait now until after the (regional) elections”.

The “independentista” crisis is also affecting property prices. According to a report published last week by Fotocasa, the price of housing in Cataluña slowed down its rate of growth from 10.6% in September to 6.1% in October.

Original story: Expansión (by Ignacio Bolea)

Translation: Carmel Drake

Värde Invests €50M In Barcelona Despite Tension Over Independence

24 October 2017 – El Confidencial

One of the largest real estate investment funds in the Värde Partner group has purchased 52,000 m2 of space for offices in Barcelona. It has closed the operation this week, less than a month after the referendum that was held on 1 October. The real estate sector has been surprised that buyers have not scaled back their efforts during such a controversial week from a political point of view. Värde is spending more than €50 million on this purchase, according to sources in the real estate sector.

It is one of the largest commitments to Barcelona in the real estate market in recent times, not least because it is associated with a development project that will require a further investment of €70 million. Moreover, the new space will then have to be leased to tenants. If Barcelona has a future, Värde believes in it, beyond the political problems.

The operation has involved an auction for the assets, carried out by CB Richard Ellis, which has gone on for months. The key name for these assets was “Project Helix”. And bidders have been competing to buy land, with a surface area of almost 13,000 m2 in the Poblenou neighbourhood, in the business district known as 22@.

Värde is already developing other projects in Barcelona, given that it purchased Vía Célere and since that property developer already had housing projects in several parts of the Catalan capital, such as La Magoria –Gran Vía– and on Calle Aragón.

Värde Partners is a US fund that has acquired some significant positions in Spain in recent years. Its speciality is not only real estate and it moves assets under management amounting to more than $10,000 million.

In Spain, the firm’s activity is not limited to Cataluña, by any means; it has a strong presence right across Spain. In 2018, it plans to list Vía Célere on the stock market, once it has merged it with the real estate company DosPuntos.

Sources in the sector did not expect Operation Helix to be signed, after the events of 1 October and the political uncertainty surrounding the sovereign tension. Much smaller transactions have failed to cross the final hurdle for much less significant reasons. But to everyone’s surprise, failure was not an option this time and the Catalan families that owned the land took home their juicy cheques.

Very diversified in Spain

In addition to its assets in Barcelona, Värde Partners controls the Socimi La Finca Global Assets, which comprises the non-residential assets from the García Cereceda family worth €260 million. It also owns a complex on Calle Marcelo Spínola in Madrid, as well as Torre Suecia in Méndez Álvaro and several buildings in the centre of the capital.

In Barcelona, assets are much more scarce and so many real estate companies are entering the property development market, which has driven up the price of land, due to the scarcity caused by the lack of urban planning by the mayor Ada Colau. In this context, having land ready to build on its very valuable in the Catalan capital.

Project Helix may be even more valuable if an urban planning amendment that has been submitted is approved. That would allow Värde to allocate some of the buildable roof surface area (m2) to homes, in light of the current shortage of new homes in Barcelona.

Original story: El Confidencial (by Marcos Lamelas)

Translation: Carmel Drake