Spain’s property market booms
According to a Spanish proverb, it is a bad idea to start building a house from the roof. But that is just what a Spanish firm is doing — and business is booming.
Faced with a lack of available land in big cities such as Madrid and Barcelona, construction firm La Casa por el Tejado is building new apartments on rooftops — a sign that Spanish property is bouncing back eight years after a brutal crash.
“In Spain, we have identified more than 4,000 buildings which have available roof tops to build on,” said La Casa’s founder, Joan Artes, whose firm hoists prefabricated apartments by crane onto building roofs.
“At a time when we lack space to build, we’re talking of more than two million square meters.”
The revival has helped Spain to become one of Europe’s few economic success stories, with estimated growth of 3 percent next year. Construction accounts for 10 percent of gross domestic product.
But there are concerns that the market could slow if interest rates rise. Enrique Losantos, who heads the Spanish operations of real estate firm Jones Lang LaSalle, says the main risk would come from a change in monetary policy.
A new eldorado with yields of up to 11 percent is now taking the centre stage: hotels and tourist resorts.
Leading the pack is Hispania, partly owned by billionaires George Soros and John Paulson, which has bought 16 hotels in Spain, mostly in the Canary Islands and in the Balearic Islands.
In a recent presentation to investors, the firm said its 1.1 billion euros investment in 10,532 hotel rooms was landing an average annual return of 10.1 percent, compared to 6.5 percent and 4.4 percent for its office and residential assets.
Mergers and acquisitions are also heating up, with at least two dozen players, both property firms and investors, expected to disappear in a wave of consolidation driven by rising real estate prices rather than a desire to cut costs.
Premium real estate firm Colonial, one of the few big names that made it though the crisis, is rumoured to be considering a takeover of boutique investor Axiare.
Asset manager Pimco has raised its stake in mid-sized property investor Lar, while sources say that Neinor, a Madrid-based property developer partly owned by U.S. private equity fund Lonestar, is considering an initial public share offer.
“It is fundamental to gain size. So there will be mergers and acquisitions and at the end of the day, just a dozen big groups will remain,” said Colonial Chairman Juan Jose Brugera. He declined to comment on Axiare.
Neinor Chairman Juan Velayos also declined to comment on specific plans for his company, including a potential listing, but said the rebound had just started, with new promotions expected to reach 200,000 a year, from 50,000 currently.