Spain’s new-found political stability is attracting more foreign investors at a time when the rest of Europe is in flux, delegates heard at PropertyEU’s Outlook 2017 briefing for Southern Europe which was held in Madrid this week.
‘I believe Spain has the strongest growth prospects in Europe,’ said David Brush, chief investment officer at Spain’s largest listed real estate company Merlin Properties. ‘Increased capital flows, a good macro-economic backdrop and political stability are all very supportive of real estate. I am optimistic that Spain will be a positive surprise.’
Long without a government, Spain nonetheless witnessed deal activity despite market unease about prospects. Now, ‘as far as political stability in Europe is concerned, Spain is the adult in the room,’ Brush said.
This year may have proved that the market is extremely resilient to external shocks and political upheavals, but it is best served by long-term stability. ‘Sentiment towards Spain is very good now, so there are no worries to keep me awake at night,’ said Alfonso Fernández-Puebla, partner at Gómez-Acebo & Pombo. ‘I know that 2017 will be a good year.’
It is not just a stable government and a strong economy that are attracting significant capital flows into Spanish real estate, but also the market’s attractive value relative to any other market in Europe. ‘Prices are still below their peak and demand is growing, so prices are set to increase,’ pointed out Jorge Sena, managing director at Corestate Capital Advisors Iberia. ‘There are clear opportunities for the next few years.’
Lack of product
Another magnet is lack of high-quality product as development stalled after the crisis and there are many buyers who cannot find what they want. ‘In the last 10 years there has been no development and no repositioning of assets,’ said Fatima Sáez del Cano, director of Spain at Grosvenor. ‘Even in the residential sector, not a single house in 10 years, so clearly there is an opportunity there. There are so many assets that need repositioning.’
Development needs finance, and Spanish banks are now showing signs of being more active. ‘The property finance scene in Spain has changed very rapidly in the last few years and it is reassuring that loan to values have remained at healthy levels, healthier than before the crisis,’ said Manuel Gil, head of real estate finance at pbb Deutsche Pfandbriefbank in Spain.
The finance scene in Spain looks more promising from the other side as well. ‘From my perspective as a user of capital, I have seen the market deepen and broaden, and more liquidity is a positive for everybody,’ said Brush. In the last six months the availability of finance has strengthened, so if this trend continues ‘in 2017 we will see a further broadening and maturing of the market’, he noted.
Germany’s Allianz Real Estate is one example of a company that is very active on the lending side. ‘We like lending in Spain because we believe in the potential of rents and of values to grow,’ said its head of Iberia Miguel Torres. ‘Because of that growth potential, Spain offers one of the most attractive investment opportunities in Europe at the moment.’
