Tag: trends

Knight Frank: 150,000 New Homes Will Be Built Per Year By 2019

14 December 2016 – El País

The construction of new homes is going to continue to increase over the next three years to reach 150,000 units per annum. The activity will centre on Madrid, Málaga, Barcelona, País Vasco and the Balearic Islands, the provinces with the highest residential forecasts going into 2017, according to the annual Trends in the Residential Market in Spain report, compiled by the real estate consultancy firm Knight Frank. Over the next three years, new builds will gain ground to account for 30% of all sales, compared with second-hand homes, which will account for 70%. Currently, just 10% of sales involve new builds and there are only 11 units available for every 1,000 inhabitants. Moreover, the supply of new homes coming onto the market is getting completely absorbed, which means that no new home stock is being generated.

There will also be changes in terms of the type of new homes. Whilst in recent years, homes with three or more bedrooms have been the most demanded, the consultancy firm forecasts that homes with two or fewer bedrooms will start to lead the ranking once again. According to Ernesto Tarazona, Managing Partner for Residential and Land at Knight Frank, “the macro data supports this change in trend. We have fewer inhabitants and yet the number of households is growing. In other words, we have more households with fewer members; in Spain, 25% of households comprise one person and 30% comprise two people”.

Whilst the number of transactions involving second-hand homes is increasing in every autonomous community, the number of operations involving new builds is only growing in those regions with the greatest economic pull: over the last year, new build sales have grown by 40% in Madrid, by 18% in the Balearic Islands, by 5% in Barcelona and by 20% in País Vasco.

Price rises

In terms of prices, Spain registered a change in trend in 2014 and since then prices have increased by 3% on average. The lack of new developments has meant that new build homes have retained their value and have an average price of €1,750/m2, whilst second-hand homes cost around €1,500/m2. The provinces with the highest average prices (both for new build and second-hand properties) are Guipúzcoa, Vizcaya and Madrid.

The housing stock has been absorbed over the last three years, at an average rate of 20,000 new homes per year. Knight Frank calculates that just 2% of the total housing stock in Spain corresponds to new builds. Nevertheless, approximately 30% will be hard to sell due to location and conditions. (…).

The consultancy points out that the change in trend in the residential sector in Spain is already happening. “All of the segments (supply, demand, land and investment) bottomed out at the end of 2013 and started the road to recovery in 2014. This recovery was very slight in 2014 and 2015, but during 2016, the main indicators have experienced stable growth, and they have potential for improvement. As such, we are facing a new cycle of expansion in the residential sector”.

Original story: El País (by S.L.L.)

Translation: Carmel Drake

PwC: High-Quality Asset Shortage Boosts RE Development

29 January 2016 – Cinco Días

The abundance of capital and shortage of high-quality assets will drive real estate development in 2016, as well as boost investment in alternative sectors. Those are the findings of a report, Trends in the European Real Estate Market in 2016, prepared by PwC on the basis of 550 interviews with key players in the sector.

Capital will continue to force its way into the market, thanks to the sustained environment of low interest rates in Europe – and the consequent greater appeal of real estate investments versus the low returns on fixed income products and the volatility of the markets – the majority of the cash flows from outside Europe will come from Asia and America.

Nevertheless, there will continue to be a scarcity of high-quality assets, and those that are available will be overvalued, in almost every European market. In this context, property development is the best option for acquiring high-quality assets with good prospects in terms of returns.

The property development drive will be accompanied by an increase in activity in other segments – beyond the traditional commercial and office properties – such as health centres, hotels, student accommodation, data centres and logistics assets.

The document reflects the optimism of the funds, institutional investors, real estate companies and banks, although to a lesser extent than last year. Expectations are especially high in countries in Southern Europe, including Spain. Financing has completely disappeared from the list of (these players’) concerns about the sector.

Just like every year, the report analyses the main European cities and classifies them on the basis of their investment and development prospects. Madrid and Barcelona fair well. The Spanish capital maintains its position as the fourth most attractive city in Europe, behind Berlin, Hamburg and Dublin. Between October 2014 and September 2015, Madrid was the fifth most active market in Europe, during which time €5,000 million was invested in the city. Barcelona rises one place in the ranking – from thirteenth to twelfth.

Original story: Cinco Días (by Carlos Santana)

Translation: Carmel Drake