Spain: 2019 year of challenges for real estate

Silvia Castro Betancourt

January 13, 2019

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This article was written and published in Spanish and has been translated into English via Google Translate. Click here to read the original article.

In 2019, despite a forecasted slowdown in the economy and tension between public and private players, the real estate sector is expected to finish consolidating the bull run that began two years earlier.

Rise in rates, deceleration of the economy and municipal election

The year 2019 does not appear, at first glance, as an easy exercise for the real estate sector. However, brick professionals enter the new year with the duties done and willing to continue to attract the attention of international investors.

Economic growth and 'Brexit'

Different national and international organizations have warned throughout 2018 about the slowdown of the global and Spanish economy. The European Central Bank (ECB) was one of the last to offer its forecasts for 2019, making it clear that, although global economic activity will experience a slowdown over the next twelve months, everything indicates that it will subsequently remain stable.

For the institution chaired by Mario Draghi, the maturation of the world economic cycle, the lower support of monetary policies in advanced economies and the impact of tariffs between the United States and China will be the main culprits of the brake on global economic activity.

For its part, in its October projections, the International Monetary Fund (IMF) revised its growth forecasts for the Gross Domestic Product (GDP) down to 3.7% for 2019, which meant a reduction of 0, 2 percentage points compared to the April forecast.

Brexit, and especially the fact that March 29 is just around the corner, will also add tension and uncertainty to the current economic scenario. A divorce between the United Kingdom and the European Union could affect both the economic interests of the Anglo-Saxon country and those of Spain, a territory that attracts a large number of investors and British brick buyers.

Interest rates on the rise

In a context of economic slowdown, monetary policy and the increase in interest rates will mark the agenda of real estate professionals in 2019. The expectation is that rates will continue to rise in the United States and the United Kingdom, but also in Europe, specifically from autumn and up to 0.75%.

According to the latest predictions from the Bank of Spain, real estate will be one of the sectors most affected by this rise in rates due to the increase in liabilities of companies and families. In any case, experts estimate that it will not be until one or two years later when the market starts to suffer.

The investment, without new records?

The consultants do not foresee a new investment record in world real estate in 2019. In the case of JLL, for example, it even predicts a reduction of 5%, which would mean placing the investment in brick at around 700,000 million dollars (616,000 million euros) across the globe.

Despite this, real estate investments will continue to be attractive, especially in countries such as Spain. According to the latest data from Cbre, during the next year it is likely that investment volumes of around 10,000 million euros will be seen only in Spanish territory.

The fashion of real estate has not come to an end thanks to the long-term commitment of international funds for Spain and the promotion of markets such as logistics, alternative assets or residential.

The promoters, at cruising speed

The 2018 has been one of the best years, together with 2017, for the housing market in Spain. The number of sales has not stopped increasing, but neither have the prices that, far from touching the ceiling, have risen to double digits in cities such as Madrid or Barcelona.

According to experts, in 2019 this trend will continue, albeit more moderately, with increases in residential costs that will move, on average, between 4% and 6%. On the other hand, according to sources such as Cbre or Tinsa, the number of operations will increase by 5%, reaching over 625,000 transactions.

In this sense, 2019 will be the year in which major players in the sector such as Neinor Homes or Metrovacesa will reach a cruise speed in the delivery of homes to their customers, after a period marked by the purchase of land and the construction of their promotions. all the Spanish geography. The real estate, therefore, is prepared to reach a point of maturity in which no great peaks of activity are expected and in which the client will occupy a leading role.

Brick and Public Administration, a stormy relationship

In 2019, everything indicates that the lack of land will once again be one of the main headaches of the sector, especially in key areas such as Madrid, Barcelona, ​​Andalusia or the Basque Country. With the municipal elections just around the corner, the promoters also await changes in the direction of certain public administrations, which can influence different procedures such as the granting of urban planning licenses, but also in the confidence of investors.

Another of the matters that take away the dream of the promoters and owners is the decree law on rent approved in early December by the Executive of Sanchez. For now, the measures promoted by the Government include the increase in the terms of the rents and the limit of two monthly installments of the deposit that may be required from tenants.

However, since Podemos have already announced that they will not be willing to accept that Sánchez resign to regulate rental prices when the decree arrives in Congress at the end of January. Among the response actions posed by the party led by Pablo Iglesias is a rent strike in housing blocks that, after being acquired by speculative funds, have multiplied the prices of rent to tenants.

Ada Colau also supports the proposal of Podemos, a position that was already defended in the budget agreement. In this sense, the mayor of Barcelona claims that "municipalities can regulate the abusive prices of rents, just as the president had committed in his day".

The 'real estate' will become technological

 In 2018, it has become clear that the real estate no longer fears the proptech. Currently, most professionals in the sector take advantage of new technologies to improve their products and services. Tools such as big data, artificial intelligence, process automation or collaboration are start ups are here to stay and will be key for companies in 2019.

To date, only 30% of companies invest or have plans to invest in emerging technologies. However, according to one of the latest reports prepared by KPMG, this is expected to be the year in which the best companies will discover how to observe, test, evaluate and invest in proptech ", challenging those who remain anchored in the past.

This article was written and published in Spanish and has been translated into English via Google Translate. Click here to read the original article.

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Silvia Castro Betancourt

January 13, 2019

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Acerca de Lucas Vargas:

  • Empezó en Grupo ZAP como el VP de Sales y en 2016 cuando la empresa tenía 60 empleados. Fue nombrado COO de VivaReal tomando el mando de Brian Requarth el Co-Fundador. VivaReal lanzó en Colombia y se trasladó a Brasil. En 2017 se hizo CEO del Grupo ZAP.
  • Ha trabajado en Mexico en PWC y en el Banco Santander
  • Tiene un Master de Business Administration de Harvard
  • En noviembre este año después de la fusión de OLX Brasil y Grupo ZAP fue nombrado el CEO del OLX Business Unit. Lidera la empresa junto con Andries Oudshoorn y Marcos Leite
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Simon Baker is the Founder and Executive Chairman of Online Marketplaces and Property Portal Watch. Involved with property portals for 15 years, he’s a well-recognized expert and industry consultant.
As former CEO/MD of the REA Group for 8 years, Simon led the group to its current market-leading position. When he joined REA Group in 2001, it had $4m in revenues, $6m in losses and an $8m market cap.
By 2008, the company presided over $155m in revenues, $35m in EBITDA and enjoyed a peak market cap of $1b. Simon is currently Chairman of the Mitula Group and Real Estate Investar and a serial portal founder and, investor.