The CEO of Merlin Properties, Ismael Clemente, has lamented that “political interference” in European countries such as Spain or Germany “has shattered the traditional residential market“, by approving measures such as rental price limitations.
This was stated by the manager during his participation in a PwC conference to present his report ‘Real estate market trends 2023’during which he pointed out that the traditional real estate sector has also had another competitor such as investment funds, focused on new assets such as ‘coliving’ or student residences.
Regarding interest rates, which are having an impact on the real estate market, Clemente has also ensured that the European Central Bank (ECB) is causing a recession by raising interest rates of interest, which contract the demand, and which will soon force the body to lower them “so that the catastrophe is not very big”.
“The demand will explode due to the recession that the central banks are causing and, when that happens, they will loosen the rates again so that the catastrophe is not too big. We are going to see how this experiment of mixing sulfate with nitric works,” he has transferred.
In addition, it has anticipated that the valuations of real estate assets will tend to fall due to the effect of the rise in interest rates, although this external cause to the sector may be offset by the increase in rental income, the result of inflation.
In any case, the director of the Socimi listed on the Ibex 35 added that the current uncertainty in the sector will gradually ease, eventually dissolving into “an underlying healthy activity”, at least in the office sector.
Clemente explained that in Spain there is no problem of balance between supply and demand in this market because, after the financial crisis of 2008 to 2014, rents did not recover to previous levels and it was no longer attractive to build new assets due to low expectations of future income.
Investment in a state of ‘shock’
For his part, the CEO of Colonial, the other great Socimi of the Ibex 35, Pere Viñolas, has also spoken of the dichotomy between the “world of investment and that of operations”, defending that the former is in a ‘state of shock’ due to the rise in rates and the second in “perfect condition” due to the good valuations and the rent increases.
Viñolas has predicted that there will be a “stop” in the sector, due to the increase in profitability in fixed income, which diverts investment, although, once it has passed, real estate will continue to hold the interest of investors.