Real estate sector, caught between stabilisation and recovery

The real estate sector is emerging from the crisis, but the experts don’t fully agree on whether the sector is in a phase of stabilisation or in a recovery phase. That was the subject brought to light at “Economic outlook 2016 and tendencies within the real estate sector”. A meeting organised by VS (Valuation Society) and Asprima Foundation, Madrid developer’s management.

Juan Fernández-Aceytuno reiterated that the Spanish real estate sector is still “closer to stabilisation than to recovery”

Mr. Juan Fernández-Aceytuno, Valuation Society’s CEO, has reiterated, once more, that Spanish real estate sector is still “closer to stabilisation than to recovery” and has foreseen that when the time is right “some sectors will go faster than others”. He pointed out that before the crisis, the number of mortgages was higher than home for sale, because many of them were really consumer loans. These variables collided in 2011 and currently mortgage loans are slightly less than home sales. “The evidence that the sector is growing will come when mortgages and transactions are equal”, commented Mr. Fernández-Aceytuno, and also added that we can only talk about “stability” so far.

Additionally, Valuation Society’s CEO pointed out that existing housing transactions have been showing variation in saw-tooth pattern for 10 trimesters, with increases and decreases while new housing transactions have shown this for two trimesters.

On the other hand, he has pointed out that regularisation of real estate investment trust (REIT) has been “the most important legislation during the crisis”, because thanks to this legislation, foreign investment is increasing, generating a secondary market.

However, he was emphatic when it comes to housing rehabilitation “first thing that needs to be restored is legislation since building is almost science fiction”, given regional and state legislations are not in agreement.

Mr. Fernández-Aceytuno also stressed the importance of energy efficiency and sustainable construction in addition to an “unstoppable tendency” towards an increasingly protected costumer, another future critical element that implies an increased boost both in transparency and services for companies.

Valuation Society’s CEO attracted attention on the need to minimise risks for investors. “A Chief Risk Officer is not paid for being right, but rather for not being wrong”, that is why it is essential “to make investors feel comfortable” when they invest in our country.

“The Real Estate Sector is in a phase of expansion”

In the same meeting, Mr. Oriol Aspachs, Director of Macroeconomics at Caixabank Research, has a more optimistic point of view than Fernández-Aceytuno and claimed that” the adjustment of the Real Estate sector is done” and it has already started expanding, but there are slight differences in the “ expansion phase”, depending on the region.

Moreover, he pointed out that “banking sector is not only ready to fund the next cycle of expansion in the property market, but it is already doing it” and also added that “in three years’ time, the sector should experience a balanced situation”.

Mr. Aspachs has indicated that there are regions where “properties for sale” are already in a balanced situation to keep the current trade tendencies, “next year there’ll be a lack of supply”. He also commented that “in the trimesters to come, either there will be a significant increase in investment in those areas or a price increase”.

Additionally, the Director of Macroeconomics has stressed that the property market is diverse and it doesn’t progress the same way everywhere, and is dependant on the region. For instance, he commented that “areas with less availability is where home sales are the least”

A “surprising employment recovery” is behind this course change in the Spanish real estate sector, which has created half a million new jobs this year and will create between 400,000 and 500,000 more in 2016; in addition to “gaining the Spanish economy a competitive edge” by reducing labour costs.

Moreover, the economist has pointed out that in the case this favourable situation changes, the economic recovery would still be present in 2016, but there would still be fewer consequences. However, he has specified keeping the same Euribor level as the current one, the recovery of the banking sector and its competitive gains are going to “make up for” these fewer consequences. That is the reason why he stressed that “the sector’s adjustment is done and that there will be very positive consequences in the semesters to come”.

Gómez-Pintado has commented “verdades absoluta’s” existence (absolutes truth) for the Real Estate Sector.

Likewise, Juan Antonio Gómez-Pintado, Asprima’s president, has pointed out in his speech that “absolutes truths” in the real estate sector, such as the “existence of the cycles” and the study of Macroeconomics, are useful to understand the economic cycles and to adapt them to the sector’s Microeconomics; as well as the importance of funding, its monitoring and finding new formulas to apply to real estate sector . Furthermore, Mr. Gómez-Pintado also alluded to stock analysis and demands to put real estate business on track and stresses the need of legal security to operate on the sector and make companies more competitive.

Mr. Gómez-Pintado described different scenarios of net housing creation based on data from the Bank of Spain and its direct relation to housing need. The first one was an optimistic scenario, estimating around 230,000 new housing; while the second one was more pessimistic, estimating barely 63,000. Between the two scenarios, there is a “neutral” scenario where Asprima’s president has estimated the creation of 140,000 new properties, which will mean that more than 150,000 properties would still be needed.

When it comes to housing availability, Mr. Gómez-Pintado pointed out that a large percentage was eliminated during the crisis, so it is not homogeneous, since more than half of the stock are in the Valencia, Castilla-La Mancha, Andalusia and Murcia.

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