Savills: Spain Leads RE Inv’t in Southern Europe

12 December 2017 – Expansión

Real estate investment in Spain is on the verge of setting a new record and positioning the country as the leader of the sector’s boom amongst its counterparts in Southern Europe. Specifically, investment in the tertiary market (offices, retail, hotels and logistics assets) in Spain looks set to amount to €8.9 billion in 2017, which represents an increase of 5% compared to the previous year and the highest figure in a decade, according to a report from the consultancy firm Savills.

The report reveals the strong performance detected in the retail and hotel sectors and also highlights that the growth in e-commerce in Spain is expected to result in greater demand for logistics and storage space, a segment that has lagged behind the main markets in Europe until now.

Luis Espadas, Director of Capital Markets at Savills España, also points out that, to the extent that demand in the more traditional sectors grows, so investors are starting to focus on alternative products, such as student halls and nursing homes. “That market may be small still but it has the potential to develop more attractive returns and price differentials”.

Other countries

The recovery of the sector in Spain has been followed by an upturn in other countries such as Italy, Portugal and, more recently, Greece and Cyprus. In this way, after a few years of weak investor activity, the volume of investment in Southern Europe increased by 277% in 2017, compared to the minimum of €5.2 billion recorded in 2012.

Overall, total investment volumes increased by 8% YoY. The markets in Southern Europe now account for 10% of the total investment in the European Union, compared to the 5% that they represented in 2012. “Economic growth, the decrease in unemployment rates and renewed consumer confidence are attracting investors back to Southern Europe”, says Alice Marwick from the Europe Research department at Savills.

Original story: Expansión (by R. Arroyo)

Translation: Carmel Drake

BBVA: Residential Investment Will Accelerate In 2017

9 September 2016 – Expansión

Investment in construction, in particular in residential housing, will become one of the main drivers of the recovery next year. BBVA Research, the research arm of the financial institution, forecasts that real estate investment will experience annual growth of 2.8% in 2016 and of 3.3% in 2017. According to the entity, the real estate boom will continue for the next two years.

Nevertheless, the “Economic Observatory for Spain” report, which the research arm presented yesterday, warns that domestic uncertainty and new “fronts of scepticism” – such as those resulting from Brexit – “will also affect the real estate sector over the next two years”. Even so, BBVA forecasts that house sales will continue to grow over the medium term, supported by “favourable financing conditions”. “The gradual increase in demand in an environment of decreasing supply will encourage construction activity and the emergence of new residential projects”, predicts the bank.

The Chief Economist at the BBVA Group and Director of BBVA Research, Jorge Sicilia, explained that the recovery in the housing market is still in its “very early” days, and as such, he believes that we should be “on alert” to the effect of low interest rate policies in the event that they last for a long time. In this sense, he indicated that although these policies are driving savings and investment decisions, they may end up having a “negative impact”. Despite these risks, BBVA’s research service calculates that residential investment will increase by 2.8% this year and by 3.3% in 2017. It also forecasts that investment in construction – which includes public works and non-residential properties – will grow by 2.3% this year and by 3% next year.

Echoing the report published on Wednesday by Analistas Financieros Internacionales regarding the evolution of GDP, BBVA forecasts that the economy will grow by 3.2% this year, before slowing down to 2.3% in 2017, due to a deceleration in private consumption and exports. According to the report, the political uncertainty resulting from the lack of Government may reduce economic growth by up to seven tenths this year and next, although this negative effect on GDP is one tenth lower than the impact calculated in May.

The labour market will also feel the effects of the slow down in the economy. This year, half a million full time jobs are expected to be created, but next year that figure will decrease to 300,000. The unemployment rate is predicted to decrease to 18.2% by the end of next year.

Original story: Expansión (by C.R.)

Translation: Carmel Drake

RE Experts: Now Is A Good Time To Buy A Home

1 August 2016 – El Economista

The Professional Association of Real Estate Experts (APEI) thinks that now is a “good time” to buy a home because the prices of second-hand homes “are not going to fall any further”, but it warns of the risks ahead if the political uncertainty persists. Those were the views of the President of APEI, Óscar Martínez, who highlighted that “there has been movement” in the market over the last two years and that “price increases have been widespread”.

According to the latest data from Eurostat, house prices rose in Spain by 6.3% (in Q1 2016), the highest increase since 2007, and by 4% across Europe. “There are not many new builds, which will push prices up further still”, forecasts Martínez, who thinks that now is a “good time” to buy.

In this sense, he predicts that the prices of second-hand homes are not going to fall any further and that the trend is going to be towards “stabilisation or slight increases”, above all in places where there is a shortage of housing, given that there are “very few new builds”.

Similarly, he advises homeowners to hold onto their properties unless absolutely necessary, given that “it is true that if you sell cheaply, you buy cheaply, but if you are thinking about investment, now is not the time to sell. Now is the time to sell only if strictly necessary, to change home, for example”.

The recovery will continue at a slow pace

In general, homes in good condition are more expensive than they were in 2013, when prices had decreased by 45% compared with the peak of the real estate bubble, in 2007, according to APEI, which currently represents a network of around 1,300 real estate agencies all over Spain.

The average price of private housing per square metre now stands at around €1,600/sqm, compared with €2,085/sqm in 2007, which meanst that prices now are very similar to those recorded in 2004, according to data from INE.

“Properties below that price generally have very few options for sale”, explained the President of APEI, who stated that “they are typically properties in bad locations or of poor quality, which are sold or attempted to be sold very cheaply. In other countries, those kinds of properties would be demolished”.

Regarding investments by groups, the President of APEI said that they are underway in large capitals, such as Madrid and Barcelona, but they are not been seen in the smaller capitals yet.

Meanwhile, Martínez thinks that, after the summer, and if the unemployment rate continues to fall, the recovery will continue, although at a “slow” pace, but he warns that the threat now comes from political instability. “If this insecurity persists, it will cause delays in the recovery”, he predicts.

Original story: El Economista

Translation: Carmel Drake

Madrid: 26% More Office Space Was Leased In Q2 2016

7 July 2016 – Expansión

Despite the decrease in investment in the real estate sector and, specifically, in the office segment so far this year, leasing of office space in Madrid is continuing to rise; and it exceeded the threshold of 100,000 sqm in Q2 2016.

Specifically, leasing of office space in the capital rose by 26% during the second quarter of the year, to 110,000 sqm. In half year terms, that figure represents an increase of 14,000 sqm, to 219,500 sqm, according to a report from BNP Paribas Real Estate. For BNP Paribas Real Estate, this leasing trend reflects the “good health” of business activity in Madrid, which is driving further forecast increases in office space leases.

During the second quarter, approximately 110 operations were signed, which means that more than 100 operations have been signed per quarter for the last seven consecutive quarters, compared with the average of 88 contracts per quarter registered between 2009 and 2014.

In terms of average rents, the real estate consultancy firm notes an increase in four sub-areas of Madrid (the financial district, the centre, the decentralised area and the outskirts). Specifically, overall average rents have increased by around 13% in annual terms, to €15/sqm/month.

BNP Paribas Real Estate highlights the behaviour of the decentralised area of Madrid, which accounted for 42% of the new leases during the quarter and recorded the highest increase in rents, with rises of almost 30% YoY. “The trend seen during the crisis, when most lease contracts were signed in areas inside the M-30, is now being reversed”.

The consultancy firm highlights in its report that the amount of available surface area is still decreasing, in light of the shortage of new offices and the flurry of new leasing activity over the last two years. Specifically, at the end of June, the availability rate stood at less than 15%, with further decreases forecast.

In terms of predictions for the rest of the year, BNP Paribas Real Estate expects the leasing figures in the second half of the year to be in line with those seen during H1, and it forecasts that rental prices will increase “slightly”.

“These figures are backed up by a labour market that is continuing to recover, with the most recent employment figures showing positive results. The number of people registered as unemployed is at its lowest level since September 2009 and that figure is expected to fall further still”, say sources at the consultancy.

Original story: Expansión

Translation: Carmel Drake

Bank Of Spain: Unemployment May Drop To 20% By Q4 2016

18 August 2015 – El Economista

The Governor of the Bank of Spain, Luis María Linde, believes that the unemployment rate may decrease to around 20% by the end of 2016, if the trend observed over the last 18 months continues.

That was the prediction he made today (Tuesday) during his appearance before the Congressional Budget Committee, where he gave an update on the progress of the draft bill for the General State Budget (‘Presupuestos Generales del Estado’ or PGE) for 2016.

According to Linde “the greater flexibility that companies now have to adjust their workforces, to reflect changing macro-economic and competitive environments, has enabled the creation of new jobs”.

“If the trend observed over the last year and a half continues, then the increase in employment may bring the rate of unemployment down to 20% by the fourth quarter of 2016”, he added. According to the Government’s forecasts, the unemployment rate should fall to 19.7% by the end of next year.

Temporary contracts remain stable

Moreover, he rejected accusations from the opposition party that the labour reform passed in 2012 has lead to an increase in job insecurity, stating that the proportion of permanent and temporary contracts over the total is practically the same as it was four or five years ago. (…).

Approval of the Government’s forecasts

Linde thinks that the forecasts made by the Government in its draft bill for the PGE for 2016 are “feasible”, even though they differ from those published by the supervisory body itself.

The Government has indicated that the macroeconomic projections in the accounts for next year reflect a “prolongation of the current phase of expansion”, which is “feasible, in the current context”.

Specifically, Mariano Rajoy’s Government believes that the economy will grow by 3.3% this year and by 3% next year, with a recovery in inflation of around 1.1%, which will take the nominal GDP rate to 4%.

The Greek rescue “will bring stability”

The Governor of the Bank of Spain said that the third Greek rescue plan is the most “complex and demanding” of those agreed hitherto between Greece, the European authorities and the IMF, but he believes that its implementation will only serve to strengthen the euro zone and stability in the region. (…).

Original story: El Economista

Translation: Carmel Drake

Bankinter Expects House Prices To Rise In 2015 & 2016

29 July 2015 – Expansión

Bankinter expects average house prices to rise gradually in the short term, with increases of close to 2% this year and 4% in 2016, in select locations.

Price rises are a contributing factor to the recovery of the sector, which is also marked by an increase in the volume of house sales, according to the report.

The entity believes that the improvement in employment, lower financing costs and the increased attractiveness of housing as an investment compared with other types of property, will all act as catalysts for demand, which will grow at a moderate rate in the short term to exceed 400,000 homes in 2016.

Furthermore, although the current recovery cycle is not expected to generate a new “boom” in housing demand, it is creating the conditions for sales to increase during the course of this year to 380,000 homes and next year to 420,000 homes.

Bankinter considers that 50,000 new homes will be sold in 2015 and that this figure will increase to 70,000-80,000 new homes in 2016.

In this sense, the entity points out that the outlook for the sector is continuing to improve and that 2015 will be the second consecutive year to register an increase in house sales of almost 4%.

In this context, Bankinter considers that the era of price adjustments is now over and that 2015 will be the year of stabilisation, prior to future price increases. However, it does not expect that house construction will ever return to the peak levels seen in the years before the crisis.

The possible increase in demand in the residential real estate market next year will depend on the acceleration of economic growth, the conditions for accessing financing and high liquidity and the attractiveness of housing as a good investment.

On a positive note, the entity highlights the increasing volumes of investment in large asset portfolios for their subsequent rental and management, as well as the rise in average rental prices for offices and shopping centres – their future evolution depends not only on changes in town planning regulations, but also on political uncertainty, which is leading to the postponement of certain investment decisions.

In short, the real estate sector is offering attractive investment opportunities, says Bankinter, which considers that the best investment options involve the purchase of real estate assets in prime locations in large cities and tourist resorts, with a target net return of around 3% and a minimum investment period of 3 to 5 years.

Nevertheless, the behaviour of the sector will also depend on the decline in the population and the unemployment rate, which it forecasts will continue to exceed 19%.

Original story: Expansión

Translation: Carmel Drake

INE: Q1 2015 – House Sales Up By 9.4%, Prices Up By 1.5%

9 June 2015 – Bloomberg Business

Spanish house prices are failing to keep up with the surge in transactions, as a lingering glut of empty homes takes it toll on the market.

Values rose by 1.5%  during the first quarter from a year earlier, however purchases increased by 9.4%, according to data published today by the National Statistics Institute (INE). Prices fell by 0.6% during the period compared with the last quarter of 2014.

“Challenging supply-demand fundamentals in the sector are likely to weigh down on the pace of recovery in house prices for the remainder of 2015 and 2016,” said Raj Badiani, an economist at IHS Global Insight in London. “The slower rate of increase in house prices during the first quarter of 2015 was disappointing.”

Spanish house prices fell about 40% from peak to trough following the property industry’s implosion in 2007. Though the economy is set grow by 3.1% this year and 2.5% in 2016, an excess of empty homes and lack of first-time buyers will continue to weigh down price growth going forward, Badiani said.

Spain’s housing market faces long-term challenges as the number of people between 25 and 35 years old, a typical source of first-time home buyers, will decline by 35% over the next decade, according to the Statistics Institute. The country has an estimated one million empty homes and also has the second-highest unemployment rate in the euro area at 23%.

“Demand for housing continues to battle against some harsh fundamentals, characterised by households still wary of poor labour market conditions, implying the glut of unsold new properties will continue to linger,” Badiani said.

Original story: Bloomberg Business (by Sharon Smyth)

Edited by: Carmel Drake