The Real Estate sector in the time of the COVID-19

The Real Estate sector in the time of the COVID-19

COVID-19 is having a strong impact on all human activity globally. And, in this scenario, it is inevitable to ask what repercussions this situation may have on the economy, on the real estate market, on companies and on the valuation of assets.

The current situation is unpredictable and unusual, and enormously volatile, and the dimensions of its impact will depend on how long this situation lasts.
During the 2008 crisis the real estate sector was the most affected. The bursting of the real estate bubble marked the beginning of that great crisis. The data showed this to be the case. The Spanish National Institute of Statistics announced a sharp drop in home sales (27% in the first quarter of 2008) and in mortgage contracts (25% in January 2008). Twelve years later another big crisis has started, but in this case the root has been health. How will the real estate sector come out of this new crisis?

In recent years we have seen strong growth in professional investment in the Spanish real estate sector, although its pace was beginning to slow down due to strong competition and the gradual rise in prices. The driving force behind the expansion was threefold: the high level of liquidity, the lack of attractive investment alternatives and our growth differential with respect to the rest of Europe.

The covid-19 has left the signing of many real estate operations in the air, has paralyzed the market for offices and retail and has relaxed the day to day of investment funds that were considering new purchases in the country

The impact of the coronavirus will depend on the length of the quarantine and the movement limitation of international buyers. However, the impact on the middle and upper segment of the real estate market is expected to be short to medium term. Due to the fall in financial markets and the unprecedented drop in interest rates, the real estate sector is expected to remain one of the most interesting assets for investors
Although the real estate activity has decreased by about 60%, it is not completely paralyzed, there are still many tools with which to work to continue offering solutions to customers.

Take advantage of the confinement to train and update portfolios, to strengthen relationships with customers, to recycle and to bet much more on technological innovation.
When the confinement is over, there will be less meetings outside the offices, less travel and the activity will be more focused on conference calls and video calls; this will allow more time for the real estate professional for the so demanded and necessary family conciliation.

Magnate Warren Buffet puts Mallorca on his target for luxury property sales

Magnate Warren Buffet puts Mallorca on his target for luxury property sales

In October 2019, magnate Warren Buffet and Berkshire Hathaway HomeServices, his network of real estate mediation offices, began operating in Spain, thanks to their alliance with Larvia, one of the main real estate agencies in the country. Both companies have started to operate under the name of Berkshire Hathaway HomeServices Larvia.

This merger has (at the moment) three offices in Madrid and one in Barcelona. Although the objective is to grow in the number of offices and in turnover and its immediate strategy would be not only to double its size in the two main cities of the country, but also to grow in those cities where there is a stable demand. And among them Mallorca. It is expected that 40 offices will be opened in the next ten years.

 

This agreement is a big step for Larvia, joining a network of agencies that has grown to more than 50,000 agents and 1,500 offices in the United States, Europe and Dubai in just six years of existence, generating, in 2018, 114,500 million dollars in sales volume. For its part, Berkshire Hathaway HomeServices has seen Spain as a point of attraction for all international clients (not just investors)

Berkshire Hathaway HomeServices Larvia will focus on the sale of luxury homes from 700,000 euros. In Madrid there are more than 200 references for sale, all of them second-hand, and around 70 in Barcelona city. However, the new group recognizes contacts with developers for the sale of new luxury construction.

With regard to turnover, Rabassa, CEO of Berkshire Hathaway HomeServices Larvia, admits that next year they plan to increase the figure by 2.5 points and thus reach five million euros with this new alliance. “For the next ten years we have to multiply the figure by 12”, he adds.

The open-mindedness of Berkshire Hathaway HomeServices also means that the new agency does not close itself off from managing other types of commercial or hotel assets.

 

 

 

 

Venezuelan fortunes land in Spain

Venezuelan fortunes land in Spain

They are millionaires who represent the great fortunes amassed in the golden years of Chavism, with high oil prices and gigantic public works turned into machines to earn money by means of overcharges and bribes. Some have been called “bolichicos”, young and ambitious businessmen who grew up in the shadow of power. Others are former high officials of the regime who used their position to collect million-dollar bites, all of whom have chosen Spain as a place to live in the last decade. They have also chosen Spain as a privileged destination for their investments.

The political and economic situation that the South American country is going through in recent years has been reflected in the Spanish real estate market with purchases of luxury properties that are generally paid in cash and that have reached 30 million.

For the last three or four years there has been a marked increase in Venezuelan buyers and investors, especially in Madrid, the natural gateway to Europe for this type of buyer. Purchases have doubled in just four years, coinciding with the economic downturn in the country controlled by Nicolás Maduro.

In large cities such as Madrid, Venezuelans are already the foreign nationality that makes the largest number of purchases in the capital Madrid ahead of Chinese and Russians, with investments ranging from 2 million, in the case of individuals, to about 30 million, targeting the most exclusive neighborhoods such as Salamanca, Jerónimos, Chamberí and Justicia.

Generally, operations are paid in cash and if they decide to take out a mortgage it is not out of necessity, but because they are interested in fiscal or financial matters. Since many of them have Spanish nationality because of their Spanish ancestors or because they do not spend long periods of time in Spain, they do not need the “Golden Visa” to operate within our borders, although for a percentage of Venezuelan investors the “Golden Visa” is still a claim.

The arrival of Venezuelans in the real estate sector is not limited to the purchase of houses. Last year the increase in rents by Venezuelans in the capital grew by 35%, with more than 40 firms a month and an average income of 1,700 euros. His profile is a person with a medium-high purchasing power, with studies and employment, and with an average length of stay in Spain not exceeding 3 years.

This growth, together with the greater dynamism of the market and the evolution of the Spanish economy, has pushed up the prices of luxury housing in Madrid over the last three years.

The luxury real estate market of the Balearic Islands does not understand crisis

The luxury real estate market of the Balearic Islands does not understand crisis

The luxury real estate market does not understand the crisis in the Balearic Islands, growing exponentially even in the hardest years stabilizing in 2018, according to the annual report prepared by the College of Registrars of Property, under the title “Real Estate Yearbook 2018. According to this report, the Balearic Islands is the most popular destination for foreign investors, ahead of Andalusia and Catalonia, since although 979 homes were sold during the previous year, these already account for a fifth of the total. One out of every five homes sold on the islands was considered luxury.

The demand on the islands focuses on a limited group of high quality properties in privileged locations. Majorca: luxury properties and new construction projects guarantee high prices In Majorca, the largest island in Spain and the heart of the Balearic Islands, the average price of residential properties rose to 1.6 million euros in 2018, up 10% from 1.47 million euros in 2017. In prime locations in the southeast and in the coveted districts of the city of Palma, such as its old town, Portixol and Son Vida, the average price of apartments is 800,000 euros. Puerto de Andratx, in the southwest, is one of the most expensive places on the island, with an average cost for the villas of 4.5 million euros. Modern villas with sea views are the most in demand, along with restored palatial mansions and traditional haciendas with large tracts of land.

In ibiza, the third largest city in the Balearic Islands, property prices remain stable. In 2018, the average price of premium properties in the city of Ibiza and its surroundings was 4.1 million euros, although the apartments register an average price of 950,000 euros. By area, highlights the average cost of 3.6 million euros of villas and cottages in very good locations in the south of the island, while in the north is around 3.1 million euros. Properties range from historic houses to modern apartments and penthouses overlooking marinas, as well as exclusive villas in the centre of the island. The increase in private aviation services and the strong influx into marinas is evidence that Ibiza maintains its position as one of the world’s leading tourist destinations.

Prices in Menorca’s main locations have remained stable due to high demand from foreign buyers. The most sought after properties are holiday homes with sea views in the southeast and northeast. Last year, the most select estates in tourist resorts sold for up to 3 million euros, while houses in the capital, Mahon, and in the area around the port of Ciutadella registered an average price of 1.5 million euros. The properties of higher standing reached prices of up to 7 million euros. Thanks to the continuing positive trend in the property market, the island’s authorities are investing more in the modernisation of the motorway and in the construction of a new port in Mahon, which is specially designed to attract large yachts. This will attract even more international buyers in the future.

The main factors to be taken into account in view of the evolution of the luxury real estate segment in Spain until 2020 will be the economic and political stability, the political measures adopted in the field of housing, the international geopolitical situation, the economic policies of the ECB, the adjustment of prices and the evolution of currencies such as the pound sterling, the dollar and the Mexican peso.

Mallorcan Patios, a journey to the splendour of Palma de Mallorca

Mallorcan Patios, a journey to the splendour of Palma de Mallorca

An oasis of light, peace and tranquillity within the historic stately homes and palaces of the Mallorcan nobility and powerful merchants who inhabited the island hide among the narrow streets of the old town of Palma de Mallorca.

Of Roman origin, Palma’s courtyards reached their popularity with the arrival on the island of the Gothic style and the Catalan medieval house after the conquest of Mallorca in 1229 by James I. With the economic prosperity of the 17th and 18th centuries, the courtyards became more luxurious and refined. At this time the main houses of the city are rebuilt and, in some cases, reformed, in accordance with the Renaissance and Baroque style, being a symbol of power and social status.

All of them have managed to combine their historical past with modernity. The Mallorcan courtyards are a sign of identity in the stately homes of the city. Some spaces halfway between the street and the house. The place where the private and the public were mixed, some are still places of passage. Today, many of Palma’s patios have lost their public character and cannot be visited. Some have not even been seen, hidden behind their metal gates.

More than twenty patios are hidden in the streets Estudi General, Sant Bernat, Zanglada, Almudaina, Morey, Portella, Can Serra, Dusai, Vent, Sol, San Francesc, Terra Santa, Samaritana and Can Savellà. Pieces of Mallorcan history full of history and light. Silent corners with monumental staircases, palm trees, wells… even carriages.

The stately homes of Palma, whether they belong to a first or second row family, maintain a similar structure: an access portal; a covered entrance between the portal and the narrow cobbled courtyard; the courtyard itself, an open space with arches, columns and capitals; staircases and at the end of these the galleries, in the form of a preamble before entering the intimacy of the house.

The Route of the Patios of Palma is configured as a basic itinerary through the lower part of the city. Its main objective is to make the historic centre known, offering the tourist, visitor or resident, an overall view of the city’s trajectory, as well as the main tourist resources that characterise it.

The “Boom” of Hotel Investments in the Balearic Islands

The “Boom” of Hotel Investments in the Balearic Islands

The positive trend started in 2013 by the hotel market in the Balearic Islands has continued “in crescendo”, receiving in 2018 20% of total capital invested in Spain.

During the past year there have been up to 47 transactions of hotel assets, reaching a total volume of more than 967 million euros, almost double that in 2017. In this context, Mallorca continues to be the center of attention for investors in the archipelago, where 32 of the transactions are located thanks to the lower seasonality and aerial dependence of the island. It is followed by Ibiza, with 11 transactions and Menorca, with only 4.

These funds, which previously focused on the real estate sector (office buildings, industrial warehouses, etc.), varied their strategy towards other productive sectors, with the hotel industry being the one which, due to its high profit margins, became a priority objective.

The Balearic Islands, both as the preferred holiday destination for Germans, British and other European emitting markets and for its high potential became the priority area for acquiring tourist properties.

The main funds that are investing in the Balearic Islands are: Blackstone, Atom Hoteles, Portobello Capital, Covivio, CBRE Global Investors, Corum AM, Elaia Investment, Apple Leisure Group, KKR and Hispania. The Blackstone Group is the most active.

The strategy of these funds is aimed at investments in hotels leased and well-positioned in tourist areas of Mallorca and the rest of the islands for rehabilitation and repositioning with a projection of at least between 10 and 20 years, with an average investment per hotel of between 20 and 25 million euros.

Likewise, the plummeting income per room (RevPar) in hotel establishments located in Cancun and the Riviera Maya, as a result of the plague of algae (sargazo), and the flight of American and Canadian tourists to other destinations in the Caribbean, is negatively affecting small and medium hotel chains in the Balearic Islands, in the Mexican state of Quintana Roo.

Not being able to recover the income from exploitation a semester ago has caused these chains have been forced to sell their hotels in Mallorca to meet bank payments in order to repay the loans granted.

This accumulation of circumstances is what has motivated the affected chains to vary their strategy and opt for the sale of real estate in Mallorca.

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