Spanish property market will see an upturn this year

Posted on April 19th, 2012 in Real Estate in Spain by author

Commenting on the real estate trends of 2012, CBRE’s president Mr Eduardo Fernandez-Cuesta expressed his organisation’s views that transactions for the property market this year will show an increase compared to 2011, but warned that home values would continue to undergo a downward price adjustment.

The CBRE president made his predictions during a presentation on trends in Spain’s real estate market and said that the most sales transactions currently being registered were those for properties with price tags of between €100,000 and €120,000, where 100% finance packages were offered as part of the deal.

Basing his comments on his company’s survey of 200 industry professionals, Mr Fernandez-Cuesta added that 90% of those questioned predicted sales prices for residential properties would decline further, however, the same experts stated that Madrid and Barcelona had pretty much reached their bottom level in the current price adjustment.

Discussing the individual segments of the residential sector, the survey showed that new housing developments would continue to suffer, while refurbished existing homes and the rent-to-buy sectors would fare much better this year.

CBRE’s president highlighted the need for a recovery of the property market to take place soon, as banks and other financial institutions needed to tidy their balance sheets and rid themselves of unsold assets.

He added that public spending cuts in the light of the Government’s austerity measures would have an impact on the management of civic property assets used for administrative purposes. Adolfo Ramirez-Escudero, CEO and consultant of the company, explained this point further. Of the 200 industry professionals questioned, 95 % stated that such municipal bodies are not making the most of their real estate assets.

The survey showed that 91.8% of property experts estimate financial institutions are also not making the most of the property assets in their possession, while 60% of experts believe that banks will add to their real estate portfolios this year rather than divest of housing stock.

Seen on a business by business sector basis, experts believe that the office market will attract more investment than the retail sector, closely matched by the residential and industrial real estate sectors.

Looking more closely at the subject of investment, the study suggests that 53% of experts questioned believe the opportunistic funds market will be looking to invest more on a higher returns basis, with the remainder coming from private investors (20%) and institutional investors (13%).

The survey also revealed that the predictions for real estate organisations outside of Spain included an upturn for hotels with the fastest growth predictions and the office market as the most likely to be of increased interest to overseas investors.

El Economista reported that the survey further revealed an upturn of the real estate market would go hand in glove with a reduction of unsold real estate currently on the market. Some 50% of experts questioned believe that this year far more properties will be sold than last year, predicting that this would affect all sectors with the exception of the logistics real estate market.


Overnight stays in Spanish hotels rose by 3.5% at the start of the year

Posted on April 19th, 2012 in Real Estate in Spain by author

January 2012 figures published by the National Statistics Institute show that 12.6 million visitors opted for overnight stays in Spanish hotels during the first month of the year, which represents a 3.5% rise in a year-on-year comparison.

While the overnight stays for residents fell slightly by 0.2%, the number of overnight stays for non-residents rose by a significant 6.1% with the average length of stay going up by 1% at the same time compared to the same month in 2011. The average length of stay recorded now stands at 3.1 nights per person.

Another study, the Hotel Price Index (HPI) showed an increase of 0.3% for January 2012. Turning to the overall profitability of the hotel sector and the average room rate achieved, the HPI study shows that while invoiced overnight stays per night were on average €68.30, the actual profit made per room was €28.90.

Occupancy rates of available rooms stood at 37.4% for January this year, which represents a 3.3% rise on the same period in 2011. At weekends the occupancy rate rose to 40%, which represents a 2.2% rise when compared to the same month a year ago.

Overseas Visitors’ Overnight Stays

A breakdown by country shows that in January 2012 a greater number of German guests stayed overnight than British visitors. The overnight stays for German guests were recorded at 27.3% and for British visitors overnight stays stood at just 21.1%, which means the German market segment rose by 3.7% on the same month a year ago, while the British holidaymakers only represented a 0.8% rise.

Overnight stays from guests coming from Italy (down 5.5%), France (up 10.2%) and Sweden (up 25.7%) were also an indicator of the respective economies in those countries, which influences tourists’ decisions on holiday budgets.

Favourite Holiday Spots

As in previous years the most popular holiday destination for tourists from other countries are Andalusia and the Canary Islands. Overnight stays by foreign guests holidaying in the Canary Islands went up by 7.7% compared to the same month a year ago. In second place is Cataluña with a 1.1% increase and Andalusia is in first place with a 14.7% rise.

With regard to Spanish residents holidaying in their own country, they favoured Andalusia, Cataluña and the Communidad de Madrid for overnight stays. Here the year-on-year comparison shows a downturn for Andalusia (5.4%), but an upturn for Madrid (0.3%) and Cataluña (3.7%).

The Canary Islands, seen on a year-on-year comparison for highest occupancy rates by room, were the winner with 71.3%, with the Communidad de Madrid in second place (41.0%) and Communidad Valenciana in third with 35.3% occupancy rates per room.

Occupancy and overnight stay rates were best for the island locations as well as coastal regions and the resorts located in the Pyrenees. In this category Gran Canaria was the clear winner with an occupancy rate by room recorded at 78.0% and a weekend occupancy rate by room at 78.7%.

Holiday Island Tenerife had a record 2 million overnight stays just for January 2012, while Madrid, San Bartolomé de Tirajana and Adeje recorded the greatest number of overnight stays. Popular tourist destination Arona achieved the highest occupancy rate by room with 83.3%, while Puerto de la Cruz boasted a weekend occupancy rate of 83.8% per room.

Considering a year-on-year comparison of January’s results, the HPI reached 0.3% this January, a 1.6 point increase from December 2011 and a 1.2 point rise from those recorded for the same month in 2010.


Office market in Spain will remain stagnant until 2013

Posted on March 31st, 2012 in Real Estate in Spain by author

Commercial real estate experts Savills believe the office market in Madrid won’t show an improvement until 2013, although the beginning of 2012 has been encouraging.

Savills believe that investment in Spain’s commercial real estate sector will be hampered by a lack of demand for office space and a distinct shortage of trust in Spain’s economy picking up any time soon.

Gema de la Fuente of Savills’ Research noted that growth in Spain was likely to remain “muted until 2013”, adding that, as overseas investors were concentrating on  retail, the domestic market would be more likely to control the office market in 2012.

Among the few highlights in Spain’s commercial property market was the sale of Torre Picasso in Madrid. With 43 storeys Torre Picasso ranks as one of Madrid’s tallest skyscrapers, using most of the space as offices. The office development changed hands for €400 million / £338 million at the beginning of this year and Savills confirmed that this particular deal accounted for 10% of the total volume of transactions brought to completion by the end of 2011.

The buyers are Pontegadea Inmobiliaria SL, an investment company founded by Zara’s Amancio Ortega. The intention to sell was announced at the very end of last year, when construction company Fomento de Construcciones y Contratas made the deal public.


Overnight occupancy rates rose by 3.2% this October

Posted on March 2nd, 2012 in Real Estate in Spain by author

Spanish hotel industry counted some 24.7 million overnight stays this October, a healthy 3.2% increase compared year-on-year. While the overnight occupancy rate by residents fell by 9.3%, the rate of overnight stays from non-residents rose by 11.1%, indicating that efforts to improve Spanish tourism industry are beginning to work.

Latest figures published by the National Statistics Institute show that the average stay also went up by 3.5% compared with October last year, when on average guests stayed for about 3 nights in hotels.

According to the figures, 52% of all available hotel beds were occupied in October 2011, representing an increase of 2.2% from the previous year. Indeed, during the first 10 months of 2011, the rate of overnight stays went up by 6.9% compared year-on-year.

The weekend occupancy rate went up by 3.5%, bringing it to an overall 56.3% result.

The changing fortunes of European economies are reflected in the number of visitors that come to Spain. While the German economy is flourishing once more, the number of German guests staying in Spanish hotels went up by 14%; meanwhile, the British market increased by a mere 5.3%. In combination the two countries were responsible for 9 million guests occupying Spanish hotels this October.

Overnight guests from France, Italy and the Netherlands accounted for year-on-year increases of 15.4%, 10.9% and 21.7% respectively.

The Most Popular Destinations in Spain

Like in previous years the Balearic Islands are still firm favourites among non-resident guests. Here overnight stays from overseas visitors increased by 13.2% in October. The Canary Islands are in second place with an increase of 14.0% and Cataluña is in third place with a rise of 5.9%.

Guests who are normally resident in Spain favour Andalusia, Cataluña and the Valencia region, but occupancy rates have gone down compared to the same period last year, namely by -14.5%, -8.9% and by -10.4% respectively, while the Canary Islands had the highest occupancy rates measured in bed places, namely 70.7% of beds were filled with overnight guests in October 2011. In second place Madrid counted an occupancy rate of 58.7% and the Balearics recorded 57.1% occupancy in October 2011.

The islands and costas are still firm favourites with tourists and this was reflected in the occupancy rates and overnight stays. Barcelona recorded the highest occupancy rate by bed places with 72.9% generally and the highest weekend occupancy rate by bed places with 78.7%. Mallorca had 3.8 million overnight bookings in October 2011.

Madrid and Benidorm also recorded high overnight occupancy rates. Arona on Tenerife had the highest occupancy rate by bed places with a staggering 81.5% being filled and Benidorm ranked as the highest weekend occupancy rate holder with 86.8% of bed places being filled.


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Spanish retail property sector falls further

Posted on March 2nd, 2012 in Real Estate in Spain by author

For a third time in as many quarters this year the Spanish retail property sector experienced a decline.

According to figures released by BNP Paribas Real Estate, Madrid’s retail sector has been forecast to have the lowest activity for 2011 as well as 2012 among all its European counterparts.

With the Spanish economy being in such a slump, occupiers struggle far too much to move to new rental premises or purchase new ones. As a consequence, rents across Spain are falling.

In Madrid’s Calle Serano – Calle Ortega y Gasset district rental income fell by 4% in the second quarter of 2011 in a year-on-year comparison, BNP’s study revealed. Overall, investment volumes declined by 2% in Spanish retail property sector during the period from July to September 2011, compared to the same period in 2010.

Like some of its European neighbours, Spanish hotel investment sector, covered by another BNP survey, also declined during the first 6 months of this year.

BNP Paribas Real Estate closed their findings with a ray of hope for the second half of 2011, stating that the potential sale by Hotasa of a cluster of their hotels was destined to enhance sales levels.


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Spain’s commercial real estate sector worst for a decade

Posted on March 2nd, 2012 in Real Estate in Spain by author

Data compiled by Savills PLC revealed that in the first 9 months of 2011, 52% less investment has been made in Spain’s commercial real estate sector, with a total of €1.25 billion worth of transactions on retail space in shopping malls, office space, warehouses and hotels taking place.

This means that the commercial real estate sector is currently seeing the lowest level of investment recorded in the last 10 years. It is feared a recovery will be slow in coming, given the financial state of the various Eurozone economies and the lack of credit being available as a result.

In the first ten years of a European single currency, the 10-year Spanish yield lies at 321 basis points above German bunds of a similar maturity, which is a decrease from a single currency peak of 418 basis points recorded on August 5th.

Investors who had been interested in Spain were put off by Spanish banks making it more difficult to get financing and offering borrowing at a higher cost after a flood of bad debt was incurred on property loans. Spain has Europe’s highest rate of unemployment, 21% of Spanish workforce is out of a job. As a result, the country is having difficulties meeting its deficit target of 6% gross of domestic product in 2011, particularly since growth is sluggish and Europe’s sovereign debt is spiralling out of control.

Gema de la Fuente, head of research at Savills’ London-based Spanish business, said that only a huge deal could now prevent 2011 from becoming the worst year with regard to investment levels since 2001.

Alienating Investors

Ismael Clemente, managing director responsible for Spain and Portugal at RREEF, Deutsche Bank AG’s commercial real estate investment division, believes that the pressure on Spanish sovereign debt is putting off investors and profitable property deals that were supposed to take place in 2011 failed, because finance could not be found.

He added that sales of sizeable portfolios of commercial real estate would not increase either until Spanish economy had recovered and banks had sorted out their balance sheets.

Earlier this month CBRE Group Inc. conducted a poll among some 600 property investors, of whom 71% believed that Spanish real estate sector would start showing an improvement in the next 18 months.

Patricio Palomar, head of research at CBRE Spain, commented that the poll’s results were bad news, since investors clearly felt there was not going to be an improvement in the short term.

Ramiro Rodriguez, an analyst with BNP Paribas Real Estate Spain, believes that investment volumes in Spanish real estate sector won’t improve until the country’s economy picks up, which is not expected to happen until 2013 or even 2014. The road to recovery is paved with a number of obstacles that must first be overcome, like the many structural reforms needed, a forecast change in government and the small matter of Spanish banks carrying hundreds of thousands of repossessed properties as assets on their balance sheets.

At present a number of large deals are simply hanging in the air. Property portfolios held by the regional governments of Andalusia and Catalonia with a total value of $1.3 billion as well as real estate assets held by Banco Santander SA fall into the “pending” category. Santander carries at present properties worth a total of €8.3 billion on its balance sheets.

Rental Decline

Data collected by BNP Paribas Real Estate on the rental situation don’t make for any more cheerful reading either. In the second quarter of 2011 Madrid’s vacancy rate for office space stood at 13.4%, while the average rent was down by 3.2% per annum and down by 4.7% compared to the first quarter of 2011.

A square meter of office space in Madrid now stands at €15.30. The prime office market hasn’t fared well either with rents going down by 3.5% for the year, meaning just €27.50 rent per sqm. This represents a fall of 33% from the peak of €41.00 rent per sqm being charged during the second quarter of 2008.

In Spanish second largest city Barcelona, vacancy rates dropped sharply and now stand at 14.4%, while average rents decreased by 3.8% compared year-on-year, meaning that a square meter of Barcelona office space only brings in a rental income of €13.50 in 2011.

Gema de la Fuenta wondered when there was going to be light at the end of the recession tunnel. “Though economic indicators for this year and next are positive, we have already seen them downwardly adjusted as the year progresses,” she said.


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Are property prices rebounding from the summer slump?

Posted on March 2nd, 2012 in Real Estate in Spain by author

Real estate portal reported that the average price for a second-hand home in Spain fell by 4.28% during the summer quarter, the largest recorded drop in the last 4 years. September, however, saw a slight increase of 0.21% compared to the previous month. This was the first increase seen in this sector since November 2010.

The dual inducement of a reduction in Value Added Tax (VAT) on new builds and holidays being affordable once more has caused investors to act and as a result, the fall in house price has come to an end – for the time being. “This rise does not mean that prices will begin to rebound, considering the depressed economic situation of banks and individuals,” warned a spokesperson for

Taking into account the price drop this summer, property prices accumulated a 7.43% fall in a year-on-year comparison. At the end of September the average price for a 70 sqm second-hand home was around €133,490, which represents an average of €1,907 per square meter.

The region with the cheapest second-hand homes was named as Extremadura, where a 70 sqm apartment costs on average just €74,620. The Basque Country was named as Spanish most expensive area. Here a second-hand home still costs around €230,580.

The situation is not unified across Spain and some areas fare worse than others. According to Cinco Dias, property prices continued to fall in Andalusia (a 0.92% drop), in Aragon (a 0.05% drop), in Castilla y Leon (a 0.54% drop) and in Madrid (a 0.74% drop).

Current winners in the property game are La Rioja, where the average price of a second-hand home went up by 2.79%, beating even the favourites, namely the Balearics, where prices rose by just 2.76% during September compared to the previous month. In Galacia a small increase of 1.74% was recorded, Castilla-La Mancha saw an increase of 1.92% and a 1.96% increase was recorded for Navarra.


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