Tag: residential investment

The Province of Málaga is Surfing the Crest of the Residential Investment Wave

16 November 2018 – Eje Prime

Málaga is no longer all about the Costa del Sol when it comes to the housing market. The provincial capital has emerged as a benchmark in the province, becoming a new magnet for primary residences, in partnership with the Costa del Sol, where demand for holiday and beach homes has been reactivated. The Mediterranean Real Estate Fair (Simed), which is opening today in Málaga, is a good pulse meter for that growth. In total, more than 160 real estate companies are going to market more than 22,000 homes during the course of the weekend at Málaga’s Palace of Conferences and Fairs (‘Palacio de Ferias y Congresos de Málaga’ or Fycma).

The increase in the number of exhibitors in the room, which are going to occupy 9,000 m2 of surface area, is a reflection of the current climate in Málaga in this new real estate cycle. The 70% increase in space leased by real estate firms since the last edition goes hand in hand with the rise of more than 10% in house prices in the Malagan residential market.

Some data, such as that from the proptech firm Urban Data Analytics, indicate an increase of 19.4% in house prices in Málaga during the first quarter of the year, whilst the Ministry of Development reported that the rise amounted to 10.8%. The public ministry estimated that the price per square metre in the capital amounted to more than €1,500/m2, a value that has not depreciated in the subsequent months.

According to the real estate consultancy Savills Aguirre Newman, which has just opened a regional office on the iconic Calle Marqués de Larios, Málaga is growing from its epicentre. The provincial capital saw its supply of residential new build properties rise by 23.8% in 2017, with more than 4,000 homes planned, and that has repositioned it as the main city in the south of Spain for real estate, surpassing even Sevilla.

The new developments that are being constructed and the high demand in the city, which is undergoing a “metamorphosis”, are going to allow the province of Málaga to exceed the 19,464 homes sold in 2007, its best performance to date, according to the report by Savills Aguirre Newman. Nowadays, property developers and funds who want to acquire land are investing in the capital in light of the demand that exists. “That did not happen before, the residential motor was almost always focused 90% on the Costa del Sol”, says the director of the consultancy firm in Málaga, José Félix Pérez-Peña, in the same report.

The prime area of the capital is its central zone. There, the most expensive square metres are for multi-family homes, which amount to €3,000/m2, whilst in the East of Málaga, the reference area for local buyers, the price of single-family homes amounts to around €2,600/m2.

The large property developers are investing heavily in Málaga

None of the major property developers want to miss out on the opportunity that investing in Málaga represents. Neinor Homes, Aedas Homes and Metrovacesa, amongst others, have projects underway in the area and their intention is to establish themselves with more investments.

Aedas has landed in the capital with 87 homes in Teatinos, the fashionable neighbourhood in the Málagan residential sector, which has great potential for growth. Meanwhile, Metrovacesa has put four projects on the Costa del Sol up for sale and has announced an investment of €175 million in a 250-home development in Torre del Río.

Meanwhile, Neinor Homes is planning 1,500 homes in a dozen developments, comprising both primary residences and second homes in Málaga Capital as well as in several towns along the Costa del Sol, including Estepona, Marbella and Benahavís, amongst others.

Original story: Eje Prime (by J. Izquierdo)

Translation: Carmel Drake

Demand For Rental Properties Rises & Prices Soar

29 May 2017 – Expansión

Rental homes have become the most profitable and successful option in the residential investment sector. 80% of owners who put a home up for rent last year managed to let it without any problem, a percentage that is much higher than those who wanted to sell their property, 33%, according to Fotocasa.

Three out of every ten Spaniards had a direct relationship with the property market in 2016, with the demand for rental housing constituting the activity with the most weight, according to the findings of the “Survey of the housing market in Spain 2016-2017″, published by Fotocasa this week.

“At the moment, demand for rental housing exceeds demand for buying properties: whilst 14% of the population participated in the rental market in 2016, only 10% of Spaniards participated in the purchase market; and the percentages of people looking for rental homes (5%) and to buy homes (6%) are very similar”, said Beatriz Toribio, Head of Research at Fotocasa.

The strong growth in demand, coupled with the rigidity of the supply of rental homes, have led to blocks of unmet demand and important increases in prices over the last few months, according to the experts. In Spain, on average, rental prices have risen by 10% in the last year. That figure is higher in large cities such as Madrid and Barcelona, which account for approximately 50% of demand for domestic rental properties, according to Solvia.

“The two regions are where rental prices have grown by the most in the last year, specifically, by 17% in Cataluña and by 12% in Madrid”, said Toribio. The price per square metre of a rental property in Cataluña is €11.85/m2/month, whilst in Madrid, the price is €11.22/m2/month.

Rental prices have been growing continuously in these two areas of Spain for the last 34 months; meanwhile, they have been rising in Andalucía and Valencia for the last 27 months. The evolution of these cities is explained because they account for a higher supply of employment, which attracts young people, who are the main consumers of rental homes. The changes in the new generations have modified the real estate sector in Spain: 33% of people who are looking for a home choose a rental property, according to the Housing Observatory. In some areas such as Valencia, that percentage can exceed 50%. The profile of the people who prefer to rent are the so-called Millennials, a segment of the population that is going to continue to grow: they are expected to move out of home, generating a need for 520,000 rental homes over the next 3-5 years.

Original story: Expansión (by D. Esperanza and R. Ruiz)

Translation: Carmel Drake

Bank Of Spain: The Housing Market Is Not Overheating

4 April 2017 – El Mundo

The Bank of Spain (BdE) does not perceive “any signs of overheating” in the housing market, nor does it expect the real estate sector to overheat anytime soon, given that the recovery in the market is happening at the same time as the process to deleverage the economy.

During the presentation of the supervisory body’s macroeconomic forecasts for the Spanish economy (2017-2020), the Director General of Economics and Statistics at the Bank of Spain, Pablo Hernández de Cos, denied that the housing market is showing any signs of overheating.

Hernández de Cos highlighted that the housing market has been enjoying a recovery for several quarters, which is being seen in the number of transactions, the number of new builds started and the trend in prices, although the Bank of Spain does not expect “the market to overheat”.

Despite the fact that the growth rates “may be significant”, the Director of the Bank of Spain said that after a “very significant” adjustment process in the sector in terms of transactions and the correction of prices, the recovery in the market is taking place in parallel to the continuation of the process to deleverage the Spanish economy. “We are not seeing any signs of overheating”, he added.

“Uneven” reactivation

In its forecasts, the supervisory body notes that high-frequency information relating to both the number of new builds started and the number of transactions involving residential properties, indicates a “continuation of the path of gradual improvement in residential investment, whose prolongation during the forecast horizon will be based on the favourable evolution of employment, the expected continuation of propitious financing conditions and the expectation that assets are going to appreciate in value”.

Nevertheless, it forecasts that the recovery will progress in an “uneven” way by region, with the main cities and autonomous regions most focused on tourism experiencing the most intense growth. In any case, it warns that the latter areas may experience a certain moderation in demand as a result of the process for the United Kingdom’s exit from the European Union (EU).

Original story: El Mundo 

Translation: Carmel Drake

Spain’s Rental Market Is Thriving, Boosted By Buy-To-Let

9 January 2016 – Expansión

Thanks to strong investor appetite / The high profitability of residential investments has increased expectations in the rental market, given that it is the option now chosen by 21% of Spaniards. Experts forecast rental price rises of more than 5%.

The rental market closed 2016 with price rises of 6.7%, but in many large cities, the increases were in the double digits. The difficulties facing young people when it comes to affording a home, the emergence onto the market of hundreds of thousands of homes that were empty and the high returns of real estate investments have increased expectations for this residential option, once forgotten in Spain and which is now the alternative chosen by 21% of Spaniards.

This year, “given that interest rates are not expected to rise in Europe over the medium term, housing will remain attractive as an investment asset”, said Jorge Ripoll, Director of Research at Tinsa. “Speculative demand will push more and more savers towards the sector”, predicts Miguel Cardoso, Chief Economist for Spain at BBVA Research.

In this context, the consensus of the panel of real estate experts consulted by Expansión is that the rental boom will not only continue during 2017, but that the rises may even be larger, especially in the large cities. Julián Cabanillas, CEO at Servihabitat, highlighted that his forecasts indicate an average YoY growth in rental prices “of more than 10%”.

The increase in prices will be “particularly noteworthy in the large cities, whose weight over the national average is also more significant”, added Cabanillas, who warned that: “If prices continue to rise in the double digits, many households will be priced out of the market, particularly those formed by young people”.

The President of Tecnitasa

José María Basañez points out that “during the last few months of 2016, the rental market in Spain was more robust than the market for house sales”, a trend that will continue into 2017, in his opinion. “Therefore, we may well see price rises of more than 5%, on average”. (…).

Other analysts, such as Julio Gil, Chairman of the Foundation of Real Estate Studies, and José García Montalvo, Professor of Economics at the Pompeu Fabra University, think that the rental price rises will be more moderate. Nevertheless, like in the case of house prices, “there will be areas where rental prices will grow more quickly (such as in Madrid, Barcelona, the Canary Islands and the Balearic Islands)”, said Montalvo.

“The rental market is here to stay in Spain. We are seeing a change in mentality, with more and more people convinced that it is the way forward”, says Beatriz Toribio, Director of Research at Fotocasa.

House prices are also rising

Finally, it is worth noting that two new phenomena are being seen in the rental market. On the one hand, rental prices are rising and the volume of house sales are increasing, as Jaime Cabrero, President of the Real Estate Agents’ Association in Madrid, explains. On the other hand, the rise in rentals is making house purchases more expensive, according to Juan Fernández Aceytuno, Director General at Sociedad de Tasación: “The rental market is causing house prices to rise because there are increasingly more investors who are buying properties to rent”. “The high returns offered on buy to let properties are behind the tensions in terms of prices that we have been seeing and will continue to see in 2017”, adds Toribio.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Knight Frank: Residential Inv’t Continues To Rise

14 October 2016 – Expansión

Residential investment is continuing its upwards trend in Spain despite the political uncertainty that continues to plague the country. In 2016, investment in the housing sector is expected to exceed last year’s levels thanks, above all, to the boost from property developers and private capital, and to the increasingly important role being played by investment funds. According to a report prepared by the real estate consultancy Knight Frank, the volume of residential investment in Madrid will reach €1,000 million by the end of 2016, whereby slightly exceeding the €950 million recorded last year and the €800 million recorded in 2014.

Currently, residential assets account for 19% of all real estate investment, compared to tertiary sector assets (offices, retail, industrial and logistics assets), which account for 81%.

By type of investor, the main players are private equity firms, which account for 36% of all operations and property developers (31%), followed by investment funds (20%), cooperatives (8%) and Socimis (5%).

In its report, Knight Frank highlights that alliances between local property developers, who bring knowledge and management expertise to the table, and international funds, who contribute capital, still represent a “formula for success” in the residential real estate market.

Moreover, this segment hardly sees any opportunistic operations. “Operations of a value added nature, which require investors to assume some of the risk involved in repositioning assets, are the most prevalent, on the basis that most investments have involved buildings that need renovating”, explained the consultancy. In this sense, the Socimis are the big stars of core operations – safer transactions that offer investors lower returns -.

Fewer defaults

In terms of financing, the report from the consultancy highlights the change that the sector has experienced compared to the years of economic crisis, when the credit tap was firmly shut.

Knight Frank highlights that one of the most significant differences in the new cycle is that financial institutions are not only giving importance to appraisal values, they are also analysing projects before they grant financing.

For the consultancy firm, the major adjustment in the banks’ weighting criteria, following the transformation of the financial system and the new classification of clients and loan to value policies, have caused the default rate to decrease to around 6.5% over the last two years, bringing it to levels more in line with the European average. Nevertheless, Knight Frank points out that Spain has a fair way to go to reach the levels seen in countries such as Germany (4%) and France (4%).

Financing

In terms of the alternative to the classic property developer loan financing, the consultancy firm highlights the rise of the Socimis as specialist vehicles and fixed income financing, for example, through bonds.

Original story: Expansión (by R. Arroyo)

Translation: Carmel Drake

BBVA Revises Down Its Forecasts For Housing Investment

17 May 2016 – Expansión

BBVA Research, the research service arm of the financial institution, has revised down its growth forecasts for housing investment in Spain to 2.8% in 2016 and 4.4% in 2017, from its previous estimate of 4.2% and 8.2%, respectively, due to political uncertainty, according to reports by Servimedia.

According to the bank’s latest ‘Situation in Spain’ report, “the recovery of the real estate sector is continuing, but at a slower rate than expected”. In addition, the report highlights that the fundamentals of residential demand (the recovery of the labour market and low interest rates) remain “solid”, which means that we can expect to see increases in sales over the coming months.

According to the study, construction activity, which has showed “significant” momentum in the last year, is going to continue to respond to the increase in sales. With this, added BBVA “we expect that residential investment will continue to grow over the next few years”.

Nevertheless, the bank warns that the “persistence of uncertainty surrounding economic policy, and the negative surprises recorded throughout 2015, have driven down its forecast for growth in residential investment over the next few quarters”. In terms of investment in construction, BBVA Research forecasts that it will grow by 3.1% in 2016 and by 4.1% in 2017, down from its previous estimates of 3.8% and 5.9%, respectively. (…).

Original story: Expansión

Translation: Carmel Drake