1 SEMESTER ST
Document prepared by::
GuifrĂŠ Homedes Amat @guifre77
During this first half of 2017 we could say that rental market has generated more news of the whole real estate market. Most of that news are little documented and very general, which has generated little truthful information about the real operation of the market. The most remarkable fact, from our point of view, has been the publication of the Rental Reference Index, a tool developed by the Catalonian Goberment with the help of some real estate agents that provides transparency to the market and where all parties, owners and tenants, can be referenced to make the right decisions.
RENTAL MARKET - Forecast and analysis Amat Immobiliaris Data
RENTAL MARKET - Offer Amat Immobiliaris Data
Our forecast for this 2017 was not very good due to the lack of offer in Barcelona rental market and its surroundings. It was not good in the sense that we expected to make the same or fewer contracts than in 2016.
In several reports we have pointed out that the lack of products is affecting the rental market. In the following chart we show the average rental offer we have had in recent years in this term of the year and how it relates directly to the rental agreements made.
The analysis of this first half term tells us that we have exceeded our expectations in all our offices and we have made 26% more contracts than in the same period of 2016. However, we are below the contracts that made 4 or 5 years ago in the same term.
The other data, also related to the lack of products, are the contracts renewals, which, as shown here, have also risen for years. Basically they are tenants who prefer to stay where they are already than leaving and get into the rental or sale market again.
RENTAL MARKET - Rotation Amat Immobiliaris Data
New contracts, renewals and offers Renovations
The Rotation has been similar to the same term of the previous year. On average we rent our products in a month and a half. There is a certain amount of products that does not even enter in the market so it is not reflected in this data of rotation because before the tenant leaves we have the next one ready to move in.
In contrast to the small number of contracts that are made, there is the speed in which the properties are rented and the increase in rental income that has been and continues to be in the last months.
2014 2 months 2015 2016-2017 1,5 months 4 months
Apart from the mobility factor of the tenants just mentioned, and other factors that affect negatively the rental market offer and which we have commented on in other reports, it is worth remembering: Âˇ Important stock used as a long-term rental thot now has been destined for tourist or short-term rental. Âˇ Wrong policies of the Administration towards the owners of rental properties. Âˇ Lack of legal certainty. The clearest example of this is the permissiveness of the employment phenomenon.
MARKET REPORT - 1st Semester 2017 - Amat.
RENTAL MARKET - Incomes Amat Immobiliaris Data
As always, these data should be taken with caution and do not be extrapolated to the fact that the whole market behaves the same in all areas and all quarters. We always say that the housing stock at every moment determines the price. For example, in our case in Barcelona in the last three quarters we have rented a lot of new properties which had an influence of the price increase. This is not a reflection of the whole market, but it is in our data. We ourselves have done the exercise of seeing how the price rose in properties that we have managed for years, and where the contract has recently been finalized and a new one has been made; in these cases the average increase has been 8.8%.
As for the increase in incomes, as can be seen in all the graphs of analysis quarter by quarter from 2013 to the 2nd Quarter 2017, the tend is growing in all areas we are working on. In Barcelona city the most pronounced growth began in the 2nd Quarter of 2015 and continues to rise to the present day. In other areas such as Sant Cugat or Sant Just Desvern and its surroundings, the most pronounced growth begins a little later in the first quarter of 2016. This analysis of four and a half years projected an average annual growth of 20% in Barcelona city, 9% in Sant Cugat del Vallès and 4% in Sant Just Desvern and its surroundings.
When we make an annual balance of what happens in 2017, we will do a detailed analysis of the tenants’ profile.
Evolution Average of Half revenues BCN
And how do we see the future?
It is risky to say, but it is clear that the problem of products will not be solved from day-to day. In our sector supplying the market requires time and strategic vision of the evolution of housing in forecasting the future. In the short term we believe that the upward trend of rents will continue, but we expect it to be at a more moderate rhythm. In the medium term it could be that with the recovery of sales of brand new housing, especially in the first crown of Barcelona, the offer would normalize in two senses: on the one hand, people who were renting in the city and bought to the outskirts will free rental flats and, on the other hand, investors will put their rental apartments in these areas. We have something clear: the offer and any housing policy that is made must be understood from the metropolitan point of view and only from there will we be able to solve the problem that we have today with the rental market.
12 10 8 6 4 2 0 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T 2013 2014 2015 2016 2017
To put into context these sustained growths we must analyze where we come from and which level we were in 2008, which is when in our historical data we touch rental maximums. On average today we are 7% below we had been in 2008. Average AMAT Repercussion Rental 14 13 12 11 10 9 8 7 6
Also, absolute rental prices are very important there are also clear limits on how far the tenants can reach. As has been happening in several semesters, the most frequency of new contracts we make are between the range of € 800 to € 1,500. Specifically, the average stands at € 1,100. With the economic selection of ratios we use it means a significant and available family income.
MARKET REPORT - 1st Semester 2017 - Amat.
SELLING MARKET - Offer Amat Immobiliaris data
SECOND HAND MARKET - Prices Amat Immobiliaris data
As we have already done in the last two reports, we will analyze the sales market from two points of view. On the one hand, the Second Hand and, on the other hand, the Brand new housing. In general, the sales market is still very active, especially in new constructions, but we have to be cautious, especially with prices and valuations, since the price limits are very clear and it is advisable to move away from possible scenarios based only in expectations of price growth and not in the real economy.
This analysis is often difficult to do in detail since the characteristics of the properties sold vary greatly from one period to another and its price is very conditioned to these characteristics, especially to its state and location. This time we have analyzed the evolution of second-quarter sales from quarter to quarter since 2013.. Evolution Average of Repercussio of 2nd Hand BCN
From the supply point of view there are two different behaviors. If we talk about New Work we can say that this is normalizing throughout the metropolitan area. You can already find many projects both in the city and in the first crown of Barcelona. If we speak from the point of view of the Second Hand, there is little supply and is fragmented in many real estate and in many cases overvalued, especially in the city of Barcelona.
8000 7000 6000 5000 4000 3000 2000
SELLING MARKET - Global Results Amat Immobiliaris data
1000 0 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T 3T 4T 1T 2T 2013 2014 2015 2016 2017
Number of Sales
· Barcelona As can be seen, the trend is upwards with an average annual growth of 2% in the last four and a half years.
The high peak of the 2nd Quarter of 2014 corresponds to several sales made in the area of Diagonal Mar in that term, where we had already sold the branf new housing that we marketed by Solvia. There was high demand and the Second Hand sales were sold at very high prices..
· Sant Cugat del Vallès
Sant Cugat is a unique case since the crisis began when there were exceptional housing conditions in the market, this made the price drop very deep and very prolonged over time. As we have repeated in several reports, we have recorded a 70% fall in price, even below the target price that a city should have with the kind of Sant Cugat services. Today we can consider that the approximate value has already been recovered before the fall, since in four and a half years we have recovered 67% in price, approximately 15% per year.
Overall, we had an increase in sales of 47% compared to the same term of 2016, which has meant a 65% increase in volume. If we analyze what has been Second Hand and New housing, the sales increase of the same term compared to the same term of the previous year of Second Hand has been 16% and 61% in the New Housing.
· Sant Just Desvern Sant Just Desvern and its surroundings is a very mature market and at the same time smaller than other areas where we work in. Therefore, fluctuations tend to be more moderate. The annual increase of the last four and a half years has been 2%.
SECOND HAND MARKET - Rotation and financing Amat Immobiliaris data
Peaks of the 3rd and 4th Quarter of 2014 correspond to several operations that were carried out in the area of Sant Just Desvern and Esplugues de Llobregat with average absolute prices, around 500,000 €, but with very high repercussions.
In all work areas, second-hand sales turnover has been around 5 months on average, the same value as in the same term of the previous year.
The average absolute price of the first half of 2017 has also risen compared to the same period in 2016, and today it focuses on € 385,000.
If you look at the operations where customers request financing, during this first half of 2017 60% of customers have financed Second Hand purchases, that’s five points more than during the same period of 2016..
MARKET REPORT - 1st Semester 2017 - Amat.
NEW HOUSING SALE Amat Immobiliaris data
As we have already pointed out in other reports, the official data shows a generalized increase in Second Hand sales, and not thant much in Brand News Housing. This seems somehow contradictory with our report data, but it must be said that the vast majority of Brand New sales that we make will not be officially accounted by the registry data until the delivery of the properties (from late 2017 onward).
As we mentioned a year ago, we see a high recovery in the brand new sales market, this market is still very active. We have already mentioned that we have had a 61% increase in the number of brand new sales compared to the same term of 2016. The main characteristics of this market are: · Large projects outside the city and smaller projects in the city of Barcelona.
Looking to the future, the key is to understand how far the economic capacity of potential buyers reaches, since if the market is not really linked to the real economy, in a short time it can be broken or stopped again. And for this to be accomplished there is a determining fact, which is the price of the land. A key factor to contain the price of land is that there is a correct urban planning and, from this planning and the new generation of land, there will be some containment of its price and, consequently, the final price of real estate.
· New areas compared to a year ago, not only in the first crown of Barcelona, but also in more distant cities such as Mataró, Sabadell, etc.: · I certain areas of the first crown there is a lot of competition from different promoters at the same time. · A national buyer still predominates, but in some projects foreign buyers are already betting. · Very high sales pace, between 8 and 10 properties per month. · The average age of buyers is 43 years .. · A significant part of buyers come from the city of Barcelona, especially in brand new housing of Sant Just Desvern. · High rate of sales during the commercialization of between 10% and 30% upwards depending on each project. · 74% of buyers intend to finance the purchase.
BUYER PROFILE NEW construction
Operations They foretell FINANCING
FINANCement LIBERAL PROFESSIONALS, executives, bussinessmen employees
> 60 years
< 40 years
ECONOMIC SEGMENT 6
Between the end of 2017 and 2018, significant projects are expected to be marketed in Barcelona and in the surrounding area. In the city of Barcelona will begin the commercialization of some reference projects that we hope will mean a step forward in the residential conception of the city. We believe Hospitalet de Llobregat will be one of the most active locations in the coming months as many interesting projects will be on the market. And Badalona, Sant Cugat del Vallès and Sant Just Desvern will continue to maintain a high activity with new projects that will be incorporated as other commercializations are finalized..
AMAT LUXURY Amat Immobiliaris data The high-end market is also clearly improving. Here we do not make any comparison of prices, since each property sold is hardly comparable to the rest. We have done the same number of operations as the previous year, but the difference is that this year we have made several sales above two million euros, when in 2016 we did not do any. In this report we do not analyze buyers in detail, but the Luxury market is completely dominated by foreign buyers.
In rent there is also a clear improvement in this sense and have been made 30% more contracts considered Luxury.
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We analyze the situation of the real estate market in 2017