Housing and Real Estate

The public sees the reality of residential real estate market every day. The profile of the buyer is one that has a lower risk of unemployment and meets minimum requirements in its repayment capacity. This adjustment, which is occurring in the residential, is not as clear in the tertiary market.

The tertiary product has not been set either speed or depth as it has done residential. In addition, for the tertiary sector (hotels, offices, shopping centers), the funding is gone, is only possible subrogation.

There is a wide gap between the expected return of international investors and the patrimonial Spanish are willing to engage with their real estate assets. Now, a new variable, income expectations, binds to the equation when evaluating the properties.

The spread between risk-free assets and the rates demanded by investors has been increasing in recent months, so the fall in rates has not meant a reduction of fees. Currently, there are levels of 200-250 basis points above the yield of 10-year bond.

This differential is justified by the risk of real estate compared to other sectors, but also by the risk premium that Spain suffers compared to other of Europe. The perception that children have negative expectations of the Spanish economy abroad results in that international investors are discounting the worst possible scenarios.

But do not forget that in a global economy, the money goes where it has greater expected returns with lower risk, not that we are not fashionable, but there are better places to invest than Spain because there is already setting has occurred.

Fall into autarky real estate would be a disaster for the sector. We touched on being a first-class market in Europe and now close the doors to foreign investment would be a blow from which it would take many years to recover. Again, those who need to liquidate its assets must be realistic in their assessment and take the little money available. Currently, only the best assets in the best areas are likely to be analyzed.

Today, homeowners more aware of reality are closing its operations at 2003 rates and this is clearly a leading indicator for investors who see an opportunity long term.