Why Now’s The Time To Invest In Spanish Real Estate

Why Now’s The Time To Invest In Spanish Real Estate

Why Now’s The Time To Invest In Spanish Real Estate

Spain’s real estate sector is emerging from the doldrums as foreign investors snap up attractively-priced apartment blocks, offices and hotels.

Not surprising, given that commercial property yields in Madrid and Barcelona have been as much as 50 per cent higher than those of Paris or London in the past couple of years.

 

 

According to the 2014 KPMG Real Estate Invest Survey, Spain is second only to Germany in terms of the quality of investment opportunities.

Greater economic stability and improved access to credit are two factors which have contributed to rekindling investor confidence, KPMG says.

But other factors have acted as a catalyst for the transformation of the real estate sector, once considered the source of Spain’s economic woes after a decade-long property bubble burst in 2008. These include asset disposals by Sareb, Spain’s “bad bank” set up in 2012 to take over distressed property-related assets from struggling lenders.

Knock-down prices and special low-tax investment structures have encouraged several top overseas investment funds like US-based H.I.G. Capital to sample Sareb’s wares!

 

BANKS PROPERTY UNITS LURE INVESTORS

As Spain’s banks clean up their balance sheets to boost their capital base, many have been seeking buyers for their property management businesses.

Catalunya Banc sold its real estate division to two US investors last year. Like other government-rescued lenders, it had to transfer its property assets to Sareb, but retained the management contract.

This has added to the attraction of these property units for investors, as selling off Sareb properties earns them commissions. And they also acquire a business they can use to service other troubled debt portfolios. A win-win situation!

 

SPANISH PROPERTY PRICES: THE ONLY WAY IS UP

Spanish property prices have sunk around 40 per cent since 2008. But the market is now considered to be bottoming out, after the country finally exited a two-year recession in the third quarter of last year.

In 2013, renewed interest and demand fuelled an 88 per cent year-on-year rise in transaction volumes in Spain, according to a recent sector report. So is there still upside for investors entering the market now?

An important factor influencing prices is the current low level of new housing starts – less than 20 per cent of the long term average – compared with the high level of demand.

Furthermore, the glut of unsold homes in Spain is being reduced thanks in part to the government’s move to offer foreign buyers residency permits.

Purchases from foreigners are growing at solid double figure rates and with estimated demand beating current supply, the outlook for the property sector is rosy.

For information on Spanish real estate investment, contact corporate law firm Argali Abogados.

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