Spain Property Blog

This year, investments in malls, hotels, offices, and warehouses are set to reach its highest amount since 2007, just before the bursting of a 10-year property bubble tipped the Spanish economy into its worst slump.

Now, banks are clearing a way for a real estate turnaround beating their fellow euro-zone peers with various foreclosed assets; thereby, luring foreign investors into purchasing discounted properties. Instead of slumping, Spain’s economy is now growing and outpacing the rest of Europe with 2018 set to be one of the strongest years for commercial real estate according to Savills Plc.

According to the chief executive officer and founder of Madrid-based Merlin Properties, 2018 is the year when everything is supposed to come together. Ismael Clemente heads this leader in European real estate investment and states that the Spanish economy is doing well and it is considered an investor friendly nation. The banks are healthy and Spain is showing a beneficial legal infrastructure with cheap property as compared to other cities in Europe.

The positive changes seen now are a far cry from the state Spain experienced one decade ago. In 2008, it was near impossible to gain investors in the Spanish real estate industry and existing investors were trying to sell their property as quickly as possible. Fortunately, recovery was experienced with a banking system bailout and the pace of the lender discount has continued clearing out any toxic real estate assets.

According to Mr. de Acuna Martinez, the director of real estate consultancy firm R.R. de Acuna and Associates, the financial crisis was seen several years ago and the phones did not stop ringing until 2012 with the Spanish bank bailout. de Acuna agrees that the amount of real estate investment in 2018 is a result of the bailout because it allowed money lenders to reduce real estate loans and assets to a reasonable price that investors were willing to pay.

After the bailout, Spain was able to establish Sareb – a bad bank managing approximately 50 billion euro in real estate from money lenders since 2012. It was announced on Thursday that Sareb had sold all the loans at a face value amount of 375 million euro to Deutsche Bank. This brings the overall sales figure up to 13.9 billion euro since the bank’s inception in 2012.

Banco Bilbao Vizcaya Argentaria SA, the second largest bank operating in Spain, agrees to sell its foreclosed real estate assets last month. The sale price of these assets was reported to have a gross value of 13 billion euro and the sale was made to Cerberus Capital Management. Cerberus Capital Management, however, valued the assets at 5 million euro. Blackstone Group LP paid approximately 5 billion euro for 51% of the banks real estate assets in August, all of which had a gross face value of approximately 30 billion euro.

The two deals mentioned above represent the lion’s share of all soured property debt sales made in 2018 reaching a current record of 48.2 billion euro. This statistic was discovered from the advisory firm, Evercore Partners International. Furthermore, this amount is more than all four preceding years combined.

According to David Finkel, the managing director of Madrid-based Talus Real Estate Agency, 2018 should be a year of significant transfers of real estate loans and assets from banks to investment trusts. Finkel expects this trend to further develop in the year and expects to see transaction volumes grow as buyers of properties sell to long-term holders.

At present, investment in Spain’s corporate property is said to reach approximately 8.9 billion euro by the end of the year. This is a prediction from Savills as the statistics show an increase from the 1.9 billion euro real estate profit after 2011 and an approach to the 10.8 billion euro from 2007.

Just over two thirds of the investment entering Spain this year will be presented from foreign real estate buyers with retail property being the most popular type of investment. Savills data indicates that while retail property is most popular, hotels and offices are closely behind in numbers. Shopping malls in Spain offer investments a 4.25% profit opportunity as compared to the 3.75% in Paris, Frankfurt, and Berlin as seen in statistics from Knight Frank LLP.

In addition to generating revenue, the real estate economy is also helping to drive deals in the country. Predictions indicate that there will be a growth from 3.1% to 2.5% in this year. This is better than any major European nations and indicates that even the turbulent political issue with Catalan will not affect the Spanish property upswing.

Brexit has been on everyone’s mind ever since the vote in the U.K. to remove itself from the European Union took place. But what does this mean for those who have property and other investments on the continent?

After some torrid years which saw Spanish property prices plummet the country seems to to be on the path to recovery. In the last year property prices seemed to have clawed back some of their losses and investors could begin to breath a sigh of relief. This newfound confidence seems to have translated itself into an appetite for Spanish property.

This is especially true for those who want to view their investment in Spanish property as long term – a buy to let opportunity.

However, there are still some questions that need answers.

Firstly – is this recovery just a flash in the pan?

Spain took a long time to recover from the global financial crisis. However with year on year property prices increasing by around 5% it outstrips its European neighbours. But even this modest increase offers opportunity. Those prices are still far below historical highs. This darling of the British property investment community – including retirees may still represent a great opportunity.

Is demand still high across all regions?

Leading agency Sequre says that Spain remains a diversified market. It makes up a large proportion of its overseas market portfolio which grew by 118% in 2016.This gives them confidence that Spain is surging to the front of favoured places for Europeans, including British nationals to invest.

According to the organisation there are evergreen regions such as the Costa del Sol and and Costa Blanca that remain tourist hotspots and the but to let market remains strong – an investment opportunity that should not be overlooked.

Is a boom on the Horizon?

After being down in the doldrums for many years Spanish construction of new accommodation seems to be picking up. Many Euros, in fact millions are being thrown at the Spanish economy in order to stimulate the economy – and much of this is trickling into the construction sector.

Visit the Costa del Sol, Costa Calida or Costa Blanca and one thing becomes apparent – construction is booming. The sheer number of cranes and construction equipment is simply staggering. It signals a resurgence of Spain as a property investment destination.

So is Spain the Best Overseas Investment?

Buy to let is always a matter of doing research and exercising due diligence before making a decision. In property that is especially important. But the old saying that location is key still remains true. looking further afield in Spain may deliver exceptional results in the medium to long term.

But for those who want to go with the tried and tested then those cities near to Blue Flag beaches are a great bet for exceptional return on investment. Places such as Marbella and Alicante have lways delivered due to their beach status and a great climate.

Are There Other Choices?

For those who are looking for something a bit different and who have an appetite for big returns while minimising risk there are areas such as Mijas located in the Costa del Sol. Fairly low buy in – but rental yields that continue to grow year on year. For the savvy investor this is an area that might be worth looking at.