Rental Prices Soar & Are Now Equivalent To The Minimum Wage

2 August 2017 – El Economista

Renting a holiday home for short periods of time has become fashionable. According to data from Exceltur, the association that represents 23 of the largest companies in the tourist sector, the stock of homes available for tourist use amounted to 1.7 million at the end of last year. In other words, there is currently one tourist home for every two regulated beds. This new business, which has always existed – but which is now experiencing a boom – is being criticised in the market at the moment, since holiday homes are being blamed for the rise in residential rental prices.

According to the real estate portal Idealista, “the rise in rental prices has nothing to do with the supply of accommodation for tourists given that that is static and there is a lot of rotation in the traditional rental market”. Moreover, Idealista adds another reason to distinguish the rise in traditional rental prices from the supply of holiday homes, since “the greatest increases in rents have been registered in those neighbourhoods that are least attractive to tourists”.

Therefore, for Fernando Encinar, the co-founder and Head of Research at Idealista, “the rise in rental prices is being driven, exclusively, by the improvement in employment”. Joseba Cortázar, PR Manager Iberia at HomeAway, shares this view: “There is really no evidence to suggest that tourist homes are driving up rental prices. Prices are rising in line with the evolution of the economy”.


On the other hand, Gerard Marcet, founding partner at Laborde Marcet, says that “it is inevitable that tourist housing will have an inflationary effect on the rental sector in Spain if it is not properly regulated. If we do not take effective measures, it is almost impossible to control what each individual does in his or her home and whether or not he or she pays tax on the accommodation services he or she offers outside of the regulatory framework.

For this reason, rental prices are rising at double-digit rates in Spain’s major cities. In Barcelona, Madrid and San Sebastián, it is no longer possible to rent a property for less than €650-€700, which is basically the minimum wage”.


Which solutions can be introduced to regulate this market? Joseba Cortázar says that “we need public-private collaboration between the platforms and associations in the sector to better understand the phenomenon and arrive at a consensus in terms of legal regulation, but we should not demonise the sector. We have to establish an ethical code of conduct for the various platforms to adopt”.

In this sense, Gerard Marcet thinks that “on the one hand, we need to approve unique, ambitious and effective regulation to put an end to this irregular practice and that the only thing that it does is to encourage a price war and the rise of the underground economy. On the other hand, we need to grow the stock of public housing to increase the supply of homes available for rent and, whereby, deflate prices in the market, allowing people access to homes at reasonable prices, given the salaries in Spain. Finally, in cities such as Barcelona, the government should unblock the situation that the hotel sector has been immersed in since the hotel moratorium was approved”.

Original story: El Economista (by Luzmelia Torres)

Translation: Carmel Drake

Funds Seek Out Dilapidated Buildings For Renovation

24 August 2015 – El Economista

The interest from international funds in Spanish real estate has no limits. These investors are not only looking for iconic buildings and premises right in the centre of Madrid, they are also willing to buy dilapidated residential properties for renovation.

Interest is growing in the acquisition of these kinds of assets in cities such as Madrid and Barcelona, explains Samuel Población, National Director of CBRE Residential. According to the director, these investors, which tend to be international funds of Anglo-Saxon, US and French origin, are willing to pay between €5 million and €25 million to buy properties that need to be fully refurbished. “They spend up to €50 million on a single asset, but there do not tend to be many buildings for that price on the market”, he adds.

The modi operandi of these funds are almost always the same. They form partnerships with Spanish property developers, which contribute a smaller proportion of the capital, but who know the local market and who can streamline the administrative procedures. If a fund has a good business plan, it may generate a return within two and a half year, explains Población.

These investors also purchase properties to demolish them and build new ones in their place; in fact, that is often a cheaper option than a complete refurbishment. In this sense, Población indicates that “the problem they face is that the listing levels (for the protection of buildings) are very high and do not allow developers to demolish buildings and construction new ones. They have to restrict themselves to full refurbishments, preserving elements such as stairways and façades, which drives up the construction costs significantly”.

That is exactly why Población believes that introducing more flexibility in terms of the listing levels of buildings would allow the stock of homes to be refurbished more quickly, since more investors would enter the market. The reality is that Spain needs this type of investment, since around two million homes in the country are in poor conditions and need renovating, according to the figures provided by the Institute for Energy Diversification and Saving (IDAE). These figures place Spain, which has 25 million homes in total, as one of the most obsolete real estate stocks in the European Union.

A real reflection of these numbers has been seen in Madrid this month, where two properties have been demolished due to their poor condition. To avoid these kinds of incidents, Norberto Beirak, a member of the Governing Board of the College of Architects in Madrid, considers that certain protocols need to be established, which must be fulfilled when Technical Inspections of Buildings are carried out (ITE).

“There are no rules governing the procedures for these inspections”, he explains. Moreover, it is typically the buildings’ owners that pay for this service and they tend to commission very basic inspections due to a lack of resources.

Original story: El Economista (by Alba Brualla)

Translation: Carmel Drake

US & Asians Investors Want To Construct More Homes In Spain

30 June 2015 – El Economista

There are 439,000 empty new homes in Spain. However, that figure is not deterring international investors, who are coming here to construct more homes. According to Roger Cooke, Senior Advisor in the Real Estate Transactions team at EY: “US and Asian investors are very interested in buying land in Spain for the development of homes”.

This is a significant development in the market. “In the 20 years that I have been working in the Spanish real estate sector, this is the first time that international investors have been interested in Spanish land for residential development”, explains Cooke, who remembers that before the crisis, foreign investors channelled funds into property development, but only in non-residential segments, whereas most of the investors in the residential sector were domestic.

Nowadays, many overseas investors are looking to build partnerships and work together with Spanish developers – under these arrangements, the investors inject the majority of the capital and the developers provide the local knowledge.

In fact, some of the large funds have already managed to reach such agreements in Spain, for example, the case of Lone Star, which will invest €1,000 million this year buying land through Neinor Homes. Together, they hope to launch ten developments and sell more than 2,000 homes.

Space in the market for everyone

With figures of this magnitude, it is easy to think that the country must be heading towards another real estate bubble. However, Cooke considers that there is sufficient demand for new housing developments in Spain. (…).  He says that there are currently two types of buyer, which reflect the two types of development: those where construction has not yet started; and those properties that were built before the crisis.

Moreover, on the one hand, there are buyers who look for the best price. They want to acquire properties constructed before the crisis, in peripheral and/or sparsely populated areas. On the other hand, there are more sophisticated, primarily international investors, which are more focused on new developments on the coast. These types of clients are willing to pay more money, but for homes that are built to their liking and have high standards of quality. (…).

For now, the residential market is recovering in cities such as Madrid and Barcelona, but Cooke warns that “we must look towards the coast, because that is where we see demand for holiday homes”.

In this segment, European buyers are the most active, although potential buyers from outside Europe are also arriving on the scene.

Asian investors have also seen the opportunity in this market and are starting to buy land to develop certain projects.

Original story: El Economista (by Alba Brualla)

Translation: Carmel Drake