Summary of our market study

As of 2020, the Spanish real estate market has seen a mixed pattern of recovery post the economic downturn of the previous decade, with demand driven by second-hand housing transactions rather than new real estate development. Despite the market's growth, the Spanish real estate sector shares a concern over the possibility of a new bubble forming. Sales of housing witnessed a downturn in 2019 with a decline of -2.2% in the period January-August compared to 2018, breaking a five-year growth streak. However, this slowdown is counterbalanced by falling credit rates, which could stimulate the market due to more attractive financing conditions. The tourism boom has spurred demand for seasonal rentals and purchases, particularly by foreigners, who accounted for 12.6% of the national total with a 7.8% increase from the previous year, especially targeting regions like Valencia, Catalonia, and the Balearic Islands. Regional disparities in affordability affect access to homeownership, with indices in La Rioja, Murcia, and Aragón indicating higher affordability, compared to the Balearic Islands, Catalonia, and Madrid. Construction activity has modestly picked up from its crisis-era lull, but the supply-demand mismatch persists with a significant stock of unsold new homes. The property price recovery lost steam, with regional differences marking stark contrasts in real estate values. Key players like Metrovacesa, Neinor Homes, and AEDAS Homes have been active, focusing on delivering thousands of housing units in the coming years, with many property developers going public and attracting international investment funds eyeing robust profit margins. New legislative changes such as the Ley Hipotecaria of 2019 aim to protect consumers and alter the real estate landscape by imposing stricter solvency checks and shifting some cost burdens from clients to lending banks. The real estate development market continues to navigate through consolidation, the incursion of web giants like Amazon trialing property listings, and the adoption of alternative financing methods as traditional banking support wanes. Overall, while the Spanish real estate market is poised for growth, its stability hinges on striking a balance between supply and demand, adapting to regulatory changes, and leveraging innovative financing and online platforms..### Trends in Spanish Real Estate Market Demand: Resilience and Diversification Spain's real estate market has weathered storms, notably the early 21st-century crises, which included a debilitating real estate bubble. However, since 2015, we've witnessed rebirth and dynamism, characterized by surging sales and value. Interestingly, the second-hand property market is significantly outpacing new development, with sales figures showing that the number of transactions leaped from around 80,000 to approximately 135,000 within a span of four years. This points toward a demand that is robust, yet more inclined toward existing properties versus those that are newly developed. Despite this inclination, it's worth noting that the overall transactions in real estate have maintained a steady ascent except for a slight drop observed during 2019, hinting at a market reaching maturity after consistent growth since 2014. Mortgage rates play a pivotal role in shaping demand. Their decline has invigorated the interest of buyers with credit rates fueling the demand for lower borrowing costs. The financial environment remains conducive for real estate investment, spurring a positive impact on the market demand. The resiliency of the Spanish real estate market also gets reflected in its contribution to the country's GDP, having climbed to account for nearly 10% of the GDP with a substantial increase in gross value. Simultaneously, the uplift in real estate development activities signals a sector that's gaining momentum, with the number of companies registering a slight uptick between 15 and 20 million euros. On the flip side, while construction activity is experiencing revival signs post-crisis, there remains a persisting stock of unsold new homes that suggest a disconnect between the offer and the market demand. Still, the property prices, overall, have shown resilience, rallying to an index level of nearly 120, even though recent tremors indicate that the sustained rise in property prices may be waning. Amidst these dynamics, Spain remains an attractive destination for international buyers, with purchases by foreigners accounting for over 12% of the national total, nearly tripling since the late 2000s. This is propelled by the tourism sector and notably, the British, French, and Germans show contrasting preferences for different Spanish regions. Furthermore, the real estate accessibility index paints a diverse picture across different Autonomous Communities, suggesting that the ease of purchasing a home isn't uniform throughout the country. Regions like La Rioja, Murcia, and Aragón exhibit high accessibility indices, contrasting sharply.### The Principal Real Estate Developers Shaping Spain's Constructive Landscape The Spanish real estate market is a vibrant and dynamic environment marked by the presence of influential developers who play a pivotal role in the sector's resurgence following past economic recessions. These developers range from specialized homebuilders to subsidiaries of financial conglomerates, each contributing uniquely to the fabric of Spain's construction and property development landscape. **Neinor Homes** is recognized as one of the front-running specialists in real estate development. As a company that went public in early 2017, Neinor Homes distinguishes itself through its commitment to delivering high-quality housing to the Spanish market. Their robust portfolio and strategic vision have positioned them as a significant player with a notable pipeline of properties slated for completion over the coming years. **Metrovacesa** stands out as another key player, boasting an impressive track record and an expansive number of homes set for delivery within a similar timeframe. Their prominence in the market is bolstered by robust backing, with major Spanish banks like BBVA and Santander among their main shareholders. This financial powerhouse status affords them a considerable impact in shaping residential developments across the nation. **Aedas Homes**, owned by the American fund Castlelake, is not far behind in the ranks of dominant developers. With its strong foundation and strategic investment from an international fund, Aedas Homes exemplifies the international interest in the Spanish real estate sector, which promises high returns and a burgeoning market landscape. The banking and financial sector also has its representation in the property development playing field through entities like **Altamira**. With a substantial capital and a wide array of developments at their disposal, Altamira merges financial acumen with property expertise, creating a potent combination that leverages Spain’s real estate potential. **Solvia** is another development firm rooted in the financial world, which has solidified its presence with an array of property offerings that attract various market segments, from first-time homebuyers to seasoned investment veterans. Lastly, **Aliseda** is a heavyweight with an extensive portfolio that reflects the magnitude of its operations and its influence on the market trends and consumer choices within Spain's property sector. Beyond traditional developers, the market has also witnessed the unconventional entrance of digital giants like **Amazon**, which, although not a developer itself, has dabbled in the real estate sector by featuring properties on its platform. This innovative venture represents the potential of e-commerce crossover into property sales and showcases how traditional real estate activities are increasingly intertwining with digital marketplaces. As the
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Summary and extracts

1 Market overview

1.1 Definition and presentation

Real estate development includes companies whose activity is the construction or rehabilitation of real estate products with the aim of reselling them to buyers and investors who will use them directly or offer them for rent.

These real estate products can be of different types: housing, offices, commercial premises, service residences, hotels, leisure facilities....

Thus, in the face of this diversity of supply, the demand also includes a wide range of actors, which may be individuals, companies, public bodies or local authorities.

The real estate market, and therefore, among others, the real estate development market, are special markets in Spain because they were hit hard by the crisis at the beginning of the 21st century. The real estate bubble had indeed triggered a deep recession for the country. Nevertheless, since 2015, the sector has been experiencing renewed dynamism and growth, leading some analysts to fear the formation of a new bubble in the coming years.

1.2 The world market is highly concentrated

In ****, the global real estate market was worth $*.* trillion, up *.*% from ****. [***]

The real estate market is, according to MSCI This was mainly driven by the United States (***), Japan, the United Kingdom, Germany, China, France, Hong Kong, and Canada.

Source: ****

1.3 Spanish real estate market recovery is driven by second-hand goods

Marked by deep crises in ****-**** and ****, the real estate sector is doing well in Spain, with a strong recovery in sales since ****, which have risen from **.** billion euros to **.** billion euros (***). [***]

Source: ****

At the same time, there has been strong growth in the number of transactions on the market. Indeed, ...

2 Demand Analysis

2.1 Home sales are down

 If we first compare the figures for total housing sales in **** with those for the corresponding months in ****, we can see that June and especially August **** are down sharply compared to the previous year. Thus, home sales in August **** fell by -**.*% compared to August ****. [***]

Source: ****

Another criterion for assessing market ...

2.2 Falling credit rates fuel demand

Interest rates on real estate loans are a particularly important determinant of the demand for real estate. When interest rates are low, they encourage individuals and businesses to invest, since savings are less attractive. Conversely, with higher borrowing rates, the cost of debt can become prohibitive, which in turn curbs the ...

2.3 Tourism boom drives demand for seasonal rentals and purchases

In ****, purchases of housing by foreigners accounted for **,*** dwellings, or **.*% of the national total and up *.*% compared to ****, almost triple the figures at the end of the ****s. Among these **.*%, there are certainly individuals who wish to live in the country, but also an increasing number of property investors who choose ...

2.4 Uneven demand across regions

Access to the purchase of housing but is not to the same extent according to the Autonomous Communities. Data from the Sociedad de Tasación thus provide an overview of the accessibility index for housing purchase: this index estimates the relationship between the real purchasing power of an average citizen and ...

3 Market structure

3.1 The real estate sector occupies an important place in the Spanish GDP

The real estate sector occupied an increasing share of Spanish GDP until ****: the sector's share of GDP rose from *.*% in **** to **% in ****. Nevertheless, it then decreased to finally represent *.*% in ****.

Source: ****

At the same time, the sector has created more and more value in the economy, with levels of gross value ...

3.2 The boom in real estate development activity

 Real estate development activity has been very successful in recent years, which is reflected in an increase in the number of companies registered under the activity code corresponding to INE (***). Thus, the number of companies increased by *.*% between **** and ****. [***]

Source: ****

Market structure by company size

The Spanish Ministerio de Fomento provides ...

3.3 Value chain and structure of the property developer business

The real estate development activity requires the intervention of many actors upstream of the project, during the project, and downstream. Here are the main players in the real estate development value chain

The master builder. This is the project sponsor, the one who defines the specifications. In construction, the project owners ...

3.4 The main Spanish property developers

 One of the measures that can be used to gauge the activity of real estate developers is the number of housing units delivered over the next three years (***). [***]

Source: ****

The listing of many real estate developers on the stock exchange

One of the main trends in the structure of the real ...

4 Analysis of the offer

4.1 Products and services

A real estate developer is mainly aimed at individuals, investors, and companies with a real estate project. Generally, they offer real estate development services, but also many other services surrounding their core business

In terms of real estate development they offer contracts:

For Sale in Future State of Completion (***): in this ...

4.2 The resumption of construction

The pace of construction, which had slowed sharply during the crisis in Spain, has seen a timid recovery since **** compared with pre-crisis levels. Thus, in ****, the sector's production index reached ***, ** points below the **** level (***). Nevertheless, this index is up *.*% compared to ****.

Source: ****

Source: ****

The mismatch between supply and demand

Despite this ...

4.3 The rise in property prices is starting to run out of steam

After a fall in prices from **** to ****, the house price index has been on the rise again for * consecutive years, and in **** reached a level of ***.* (***). This price recovery thus reflects a good recovery of the sector after the crisis. [***]

Source: ****

The construction cost index has also been on the rise ...

4.4 The new development paths of real estate developers

According to a report published by Altus Group There are many changes taking place in the real estate development market today. In the face of these changes, some of the players are ready thanks to a set of measures that have already been designed, while others seem on the contrary to ...

4.5 The arrival of the web giants in real estate

Amazon is gradually entering the Spanish real estate market.

During ****, the Spanish version of Amazon's website has put around *** properties located in Madrid, Barcelona and on the Mediterranean coast on its site. Although the properties are not for direct sale on the site, Amazon puts the customer in touch with Altamira, ...

5 Regulation

5.1 The Ley Hipotecaria of 2019

In June ****, a new Mortgage Law came into force in Spain, which entails profound changes in the functioning of the Spanish real estate system and could therefore have a strong impact on real estate development activity.

This Act applies to mortgage loans where the borrower or guarantor is a natural person ...

5.2 Taxation of real estate in Spain

When a private individual wishes to buy a property in Spain, the different tax elements applicable are as follows:

All taxes and fees generally amount to between **% and **% of the purchase price VAT is **% on the purchase of a new property. On the other hand, if the investment does not exceed ...

6 Positioning of the players

6.1 Segmentation

  • Altamira (Santander)
  • Solvia (Banco Sabadell)
  • ServiHabitat (La Caixa)
  • Aliseda (Banco Popular/Santander)
  • Neinor Homes
  • Metrovacesa
  • Testa Residencial
  • AEDAS Homes
  • MERLIN Properties
  • Avintia
  • Idealista
  • FotoCasa

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Companies quoted in this study

This study contains a complete overview of the companies in the market, with the latest figures and news for each company. :

Altamira (Santander)
Solvia (Banco Sabadell)
ServiHabitat (La Caixa)
Aliseda (Banco Popular/Santander)
Neinor Homes
Metrovacesa
Testa Residencial
AEDAS Homes
MERLIN Properties
Avintia
Idealista
FotoCasa

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