Registrars: House Prices Rose By 5.7% In 2016

15 February 2017 – Expansión

House prices rose by 5.6% in 2016, according to data published yesterday by the College of Registrars. In QoQ terms, this means that homes became 1.9% more expensive during the last three months of the year, whereby recording their ninth cumulative quarter of increases. These findings come from the Index of House Prices for Repeated Sales (IPVVR), prepared using the Case-Shiller methodology, which analyses only those homes that have been sold at least twice during the period under analysis, i.e. since 1995. This methodology is considered to be one of the best ways of measuring the true evolution of house prices and is the benchmark that is used in the USA.

The other key finding from the Registrars’ statistics is that the volume of homes sold increased by 13.9% last year, to 403,742, up by 49,205 compared to 2015. In this way, house sales exceeded the psychological barrier of 400,000 transactions, something that has not happened since 2010. (…).

The data from the College of Registrars in terms of house sale volumes is almost identical to that published last week by Spain’s National Institute of Statistics (403,900 operations and an increase of 13.7%). As such, the really interesting findings from the Registrars’ statistics relate to prices.

For example, the index shows that since the peaks of 2007, average house prices have recorded a cumulative decrease of just over 25%. By contrast, with respect to their minimum levels (recorded in 2014), average house prices have registered a cumulative increase of 13.3%. House prices rose by 6.6% in 2015 and by 2.55% in 2014.

Prices return to 2004 levels

Although the Registrars do no specify the average cost of homes per m2 in absolute terms, they do report that house prices are now at similar levels to those recorded in the middle of 2012 and at the end of 2004 (…).

These figures “seem to indicate the future trend to the extent that it seems reasonable that house prices will continue to grow, normally by more than 1% per quarter, giving rise to YoY increases of around 5%”. In other words, house prices are expected to continue to grow at rates similar to last year. (…).

Increases across the board

The breakdown in house sales shows that price increases were recorded in every autonomous region in 2016 with respect to 2015. The greatest rises were observed in the Balearic Islands (+30%), Cataluña (+21.1%) and Asturias (+17%). Moreover, growth rates reached doubt digits in twelve autonomous regions. For example, the rate in the Community of Madrid was 13.85%, in line with the national average.

Forty-nine of Spain’s 52 provinces have now left price decreases behind. In fact, the sales volumes of second-hand homes increased in every province in 2016, led by Madrid (58,752 transactions), Barcelona (46,415), Alicante (29,688), Málaga (26,436), Valencia (21,963), Baleares (13,811), Sevilla (12,900), Murcia (11,972), Las Palmas (11,272) and Cádiz (10,288).

The fourth quarter of the year closed with the highest percentage of purchases by foreigners in 2016, representing 13.57% of the total, giving rise to the third highest figure ever. (…). During the year as a whole, overseas buyers accounted for 13.25% of the market, with almost 53,000 purchases.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Banks Delay Property Sales & Await Higher Returns

11 August 2015 – Cinco Días

Spain’s banks are delaying their property sales and are instead waiting for conditions in the market to improve significantly before they increase their rate of sales. That was the conclusion of a report published by the ratings agency Moody’s in May about the management of the property glut still sitting on entities’ balance sheets, which now amounts to €83,000 million. And the trend has been confirmed by the (most of the) banks themselves in their recent half-year results presentations. (…).

In particular, Santander, BBVA, CaixaBank, Sabadell, Popular and Bankia sold 32,397 properties in total during the first six months of 2015, which represents a decrease of 18% with respect to the 39,241 transactions recorded during H1 2014.

However, the transactions this year have been closed with average discounts of around 35% – a significant improvement on the  60% discounts that the entities were forced to accept just a few years ago, as they desperately tried to get rid of the assets they had accumulated on their balance sheets following the burst of the real estate bubble. Some entities are now even generating profits from the sale of properties.

That is the case of BBVA, which recorded profits of €36 million from the sale of real estate assets worth €456 million during the last quarter. This turnaround enabled the entity to reduce the losses from its real estate arm to €300 million during H1 2015, which represents a decrease of 35% on the negative figures it recorded a year earlier. And it achieved this result selling half as many properties, with 5,190 transactions closed in the 6 months to June 2015, compared with 11,402 in H1 2014.

Banco Santander also reported similar success…the entity sold 5,200 properties during H1 2015, compared with 6,000 during H1 2014…it closed Q2 2015 with the “smallest quarterly loss” ever since the creation of the bank’s RE arm.

Meanwhile, Banco Sabadell reduced its sales volume by a third from 7,541 during H1 2014 to 5,190 in H1 2015, and with lower discounts – specifically, with an average reduction to gross value of 46.4%, versus 52.4% last year and 60% in 2013.

CaixaBank sold 5,907 properties in H1 2015 compared with 7,392 in H1 2014…and has also offered lower discounts this year.

However, two banks stand out as the exceptions to the rule – Bankia and Popular – which actually both increased their sales volumes during H1 2015. The former sold 3,345 properties in H1 2014 and 4,135 in H1 2015, with discounts this year of 35%…(…). Meanwhile, the latter really bucked the trend, with the sale of 1,172 properties in H1 2014, increasing to 4,135 in H1 2015, whereby doubling its revenues from asset sales…(…).

Original story: Cinco Días (by Juande Portillo)

Translation: Carmel Drake

Socimis Are The Star Players In The RE Sector In 2015

22 April 2015 – Expansión

The value of companies in the sector has increased by 30% on average in 2015 / The Socimis Merlin, Lar España and Hispania are the analysts’ favourites to benefit from the recovery in the property sector.

The real estate sector is gathering strength on the stock exchange. So far in 2015, (the share values of) companies linked to the property sector have increased by 30% on average on the stock market.

Experts think that now is a good time to invest in these securities, given the strong economic outlook for Spain and the signs of recovery in their businesses. Investment in the real estate sector amounted to €2,463 million during the first quarter (of 2015), i.e. three times as much as during the same period last year. Analysts do not rule out that investment this year may exceed the record high of €11,470 million reached in 2007.

Factors in its favour

“Several factors point to an improvement of the sector: the rise in mortgage lending, the increase in (the volume of) sales, the reduction in the housing stock, and the increase in house prices”, says Victoria Torre, at Self Bank.

Nevertheless, the experts are not convinced: not all companies represent (good) investment opportunities. For Bankinter, it is still too early to back the traditional real estate companies and property developers, whose securities are small in size and have scarce liquidity. For that entity, the best opportunities in the sector are the Socimis (listed real estate investment companies). One of the major attractions of these companies is their returns: they pay out at least 80% of their profits to their shareholders and their returns per dividend can reach 4%.

The favourites in the sector

Merlin Properties is Bankinter’s favourite listed Socimi because it considers that it has an established investment portfolio, visibility over earnings and acceptable levels of liquidity and capitalisation. Juan Moreno, at Ahorro, also backs that company, whose (share price) has increased by 29.88% during the year. “Although (its shares) are trading slightly above our valuation (they closed trading yesterday at €11.76), we consider that the current environment of excess liquidity and low interest rates justify its current prices. The Socimi’s differentiating factor is its size, which allows it to access transactions for which there is less competition”, he explains.

Moreover, the returns on its dividends amount to 3.8%, i.e. the highest in the real estate sector. The six companies that track its value are advising (investors) to buy its shares. UBS gives it an upside potential of 6%, up to €12.41.

Another one of the options preferred by investors is Lar España. The company is a good way of betting on the recovery in the market for shopping centres. “It has just acquired the As Termas shopping centre for €67 million, which will help it to grow and boost its results”, says Remo Bosch, from the firm RBL Asesores. Lar’s share price has increased by 16% in 2015 and it has an upside potential of 10%, according to the consensus of analysts consulted by Bloomberg.

Moreno also thinks that Hispania is attractive. “It is proposing transactions that generate value, such as its agreement with Barceló, which in our opinion will generate €1.90 per share for every shareholder”, he says. He gives its shares a target price of €13.10, i.e. 4.5% above yesterday’s closing price.

Original story: Expansión (by D. Esperanza)

Translation: Carmel Drake