Fotocasa: 20% of Investors Rent Out Their Properties as Tourist Apartments

2 December 2017 – Expansión

In the last three years – which have seen the consolidation of the current upward trend in the housing market – an unusual situation has arisen: rental prices have risen by more than property (sales) prices; at the same time, demand for rental properties has soared and hundreds of thousands of homes have appeared on the market, which has resulted in an impasse of high yield and low risk. Given that the returns on traditional investments, such as debt and deposits, are at historical lows, property is shining once again. Without falling into the excesses of the bubble, housing is providing investors with shelter and revenues once more.

Not only that. The appearance of new real estate models has spurred on the financial potential of residential assets, in such a way that 20% of real estate investors are now using their properties as tourist apartments. In other words, one out of every five, according to a study by Fotocasa, to which Expansión has had access.

That high percentage – which is expected to continue growing – is due to the fact that new short-term leasing platforms, such as Airbnb, allow investors to obtain even higher returns than from traditional rental arrangements. In any case, 65% of investors still prefer the stability of having a long-term tenant. The remaining 15% buy homes but do not let them out, instead, they wait for them to appreciate in value before selling them for a profit.

“Now is a good time to buy to let, be it long-term or holiday rentals, given that both formulae are generating returns that, in the current context of low interest rates, cannot be found in any financial product or on the stock market”, explains Beatriz Toribio, Head of Research at Fotocasa (…).

11% of all house purchases are bought for investment purposes. In other words, around 50,000 homes this year. That means that around 10,000 dwellings (the aforementioned figure of 20%) will be used as tourist apartments (…).

More revenues

(…) According to data from Fotocasa, 74% of the owners that in the last year have put a tourist home up for rent through the online portals and platforms say that they obtain more revenues through their tourist rentals than from residential letting. 66% of those calculate that they obtain between 5% and 15% more; 16% say that they receive between 15% and 20% more; and 12% state that they can earn 20% more than from long-term rentals.

It is a buoyant time for savers and investors. Almost half of those who buy a home that is not going to be their primary residence, do so as an investment (45%), whilst 55% acquire, in theory, to have a second home. But, almost 40% of the latter group consider putting that home up for rent for short periods of time – for example, during the summer when they are not on holiday there – whilst 7% end up opting for long-term rentals (…).

Rental prices are currently increasing at a YoY rate of around 10% and second-hand house prices are rising by around 5% YoY, according to Fotocasa. Those figures increase to 10% and 20% in certain districts of Madrid and Barcelona, the two major investment centres (…).

The saturation of tourist apartments in Madrid and Barcelona is causing a great deal of political debate. The Town Hall of the Cataluñan capital, led by Ada Colau, first fined Airbnb for its 6,000-7,000 illegal tourist rental properties, and at the same time announced “more forceful legislation”. Then, in the summer, it reached an agreement to make a list of the apartments that were breaking the law. This week, the platform has withdrawn 2,500 advertisements in Barcelona, 1,200 thanks to that agreement with the Town Hall and 1,300 after a limit of one home per person was placed on the number of entire houses that a single owner may have in Ciutat Vella.

Controversy aside, which are the best homes for investing in a tourist apartment? The price and the number of rooms are the basic requirements that buyers look for, but “those who are looking to invest prioritise aspects relating to the area, such as transport links (44% vs 31% for the overall purchasing population), a nice neighbourhood (46% vs 38%) and the services in the area (37% vs 30%) (…).

Tourist rentals have one fundamental disadvantage: “They require more effort and time, due to the high turnover of tenants, especially if the owner manages that side of things him/herself, without the help of a professional”, says Toribio. “That is the main reason why two out of every 10 lessors abandon this type of rental arrangement after giving it a try”, she reveals.

Original story: Expansión (by Juanma Lamet)

Translation: Carmel Drake

Civislend: A Pioneering Crowdlending Platform For RE Sector Is Born

14 November 2017 – El Mundo

Civislend is commencing operations in Spain. The Participative Financing Platform (PFP) is a pioneer in real estate crowdlending in Spain. Authorised by the National Securities and Exchange Commission (CNMV) and the Bank of Spain, its aim is to mediate between property developers and investors, streamlining the bureaucratic processes and simplifying all of the administrative procedures to raise funds quickly and safely in exchange for the payment of interest. The company aspires to become the leading portal for the financing of real estate projects.

Manuel Gandarias (pictured above), CEO of Civislend, defines the platform as “an effective meeting point between real estate developers looking for a source of financing that complements traditional bank lending and investors interested in obtaining an attractive return on their savings”. Gandarias insists that “Civislend does not substitute banking institutions, but rather provides sufficient resources to finance the land on which real estate projects are developed, whereby serving as a trampoline for the granting of property developer loans”.

The comprehensive risk analysis that Civislend carries out before publishing a project on the Marketplace is one of the best guarantees of success compared with other alternatives based on crowdfunding that already exist in Spain. “The strict control filters that we apply in Civislend reduce the risk of non-payment to the minimum, in order to ensure that investors are protected as much as possible”, says Gandarias.

First projects already underway

Civislend has just launched the fund raising phase for its first two projects, which can be viewed in the Marketplace. They are two 20-home residential complexes, located in Brunete (Madrid) and Tomares (Sevilla). Both have received a type A scoring, which means that investors may obtain an APR of 7.88% and 7.90%, respectively, over 20 months, with a minimum risk and the payment of interest every four months.

The whole process begins when a property developer requests financing. A preliminary study is carried out, which serves to check the firm’s solvency, as well as the suitability of the real estate project. Next, a feasibility study is conducted, which involves the performance of a due diligence, after which the project is granted a rating on the basis of its risk profile: minimum (A and A+), medium (B and B+) and moderate (C and C+). These guarantees are complemented by other actions such as the pledging of shares in the companies responsible for developing the project and the registration of charges (liens) over the assets, where appropriate.

Any savers looking to obtain returns from their funds, with a controlled risk, can invest in Civislend. After registering, investors may choose the project that interests them the most in the Marketplace and decide how much they want to contribute. Non-accredited investors may invest between €250 and €3,000 per project or up to €10,000 per year in all PFPs in Spain, whilst there are no limits on how much accredited investors can invest. The property developers who approach Civislend in search of financing may request up to €5 million. For projects amounting to less than €2 million, both non-accredited and accredited investors may invest; whilst for projects worth more than €2 million, only accredited investors may invest.

Gandarias points out that “depending on the scoring of the project, investors will receive an annual interest return of between 6% and 12%. (…).

Original story: El Mundo

Translation: Carmel Drake

Bank Of Spain: Average Housing Yield Amounts To 8.8%

30 April 2017 – Expansión

Housing is still one of the most profitable investments. The net return from buying a home to put it on the market to rent, now amounts to 8.8% on average. That is according to data from the Bank of Spain, which takes into account not only income from the rental of properties, but also the annual appreciation in their values. In other words, if the rental of a home generates an income of 4.4% and the price rises by 5% in twelve months, then its total return would be 9.4%. And that represents an attractive yield, well above the rates being offered on debt and deposits. Moreover, in some places, the real estate market is offering even higher returns.

To this end, Expansión has identified the districts in Spain’s five largest cities where investors can earn more than 10% from buying a home. And the conclusions are clear: 9 out of the 10 districts in Barcelona and 12 of the 21 districts in Madrid already exceed that percentage. In Valencia, 10 of its 19 districts generate returns of more than 10%; in Sevilla, only 1 out of 11; and in Zaragoza, 4 out of 12.

The most profitable districts are concentrated in the Catalan capital, above all due to the very high appreciation in property values there. Ciutat Vella leads the ranking with 27.7%, followed by Eixample (22%) and Horta-Guinardó (20.5%). That same percentage is also being generated in the Madrilenian district of Hortaleza (20.5%), which is not one of the most selective neighbourhoods, but, prices are rising quickly there nevertheless. It is followed by the Centro district of the Spanish capital (19.8%). Following those five, the ranking continues with Rascanya (Valencia) and Tetuán (Madrid), both with a gross annual return of 18.9%.

In the most exclusive neighbourhood of Madrid (the district of Salamanca) the figure is 13.9%. In Sarrià-Sant Gervasi (Barcelona), the average return is 9.8%. Other prime locations such as Chamartín (14.6%) and Gràcia (17.9%) are also very attractive. (…).

“The increase in returns in the city centres is happening due to a cocktail of senior boomers (the generation born in the 1960s) returning to the city centre and the huge boom in tourist rental properties”, said José Antonio Pérez, Director at the Real Estate Practice of the ‘Instituto de Práctica Empresarial’. That means that “now is a good time to buy a small flat or a small building to turn it into apartments for tourists”, said Pérez. (…).

But, investors should not limit themselves only to the large cities to find attractive investments. “Savers should also buy tourist homes in areas along the coast where there is already a lot of demand, or in peripheral areas of large cities that are well connected or in university areas”, advised Pérez.

The recovery in the residential sector is spreading out across the whole country. Slowly and unevenly, but it is happening. (…).

According to Jorge Ripoll, Director of Research at Tinsa, “The best prospects for investment in housing are located in established areas with active markets that are clearly recovering, such as those in Barcelona, Madrid, Málaga, Valencia, San Sebastián and Bilbao, for example”. They are areas “where asset prices are rising and where there is solvent demand for primary residences from those who cannot afford to buy a home due to their inability to have been able to save in the past”, he said.

Original story: Expansión (by Juanma Lamet)

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

Housing: Rental Yields Now Exceed 5%

3 February 2015 – El País

Property has become a safe haven again for savers and retirees.

Rental properties offer returns of between 5% and 7%. After almost seven years of falling prices, credit constraints and low yields on bank deposits, property “has become a safe haven again for savers and retirees” said Jesús Duque, Vice-President of Alfa Inmobiliaria.

Buy-to-lets have become a good investment option once more, as they provide much higher returns than those offered by financial institutions. Furthermore, prices continue to fall, although that trend is now slowing. The price of second-hand homes in Spain decreased by 0.1% during the month of January to reach €1,592 per square metre, according to the latest real estate price index published by Idealista. The year-on-year decrease was 5.1%. Nevertheless, the outlook is set to change as prices in five autonomous regions (Murcia, Valencia, Cataluña, Madrid and the Balearic Islands) increased.

To generate income, one cannot buy just any house. When looking to invest, one should focus on homes that have permanent demand, i.e. those with a central location. The most stable investments are properties located in middle class neighbourhoods, since they have risk-reward relationships that offer more stability over the long-term.

“It is much more worthwhile to invest in a neighbourhood in any city, rather than in a house on the beach, where the possibility of renting is usually limited to the summer months”, explains Duque. The greater the rate of rotation, the lower the profit. Several months may pass between tenants during which time the owner receives no income and also has to upgrade and repair the property. “Whenever possible, if you are looking for a stable investment, you should try to rent out your property for long periods”, said the expert.

Family homes amd those with space for at least two adults are better than one-person studios, for one-income households. And, almost more importantly, you must ensure that the rent will be collected and that it will cover the investment. This can be done through an objective analysis of the tenant’s ability to pay, but can also be supplemented by non-payment protection insurance, which although decreases the profitability of the operation, does provide security.

One should keep in mind that from the expected yield of 5% to 7%, an owner should deduct 1% to cover the payment of IBI, community costs, garbage collection, insurance and the repair and maintenance of the property.

Original story: El País (by Sandra López Letón)

Translation: Carmel Drake