The funds anticipate that the paralysis in real estate investment will continue throughout 2023

2023-05-25 20:57:18

Since mid-2022, the real estate market for large asset transactions has been experiencing an atypical moment. After the European Central Bank (ECB) began raising interest rates – currently set at 3.75% – the owners of estate they halted their divestmentswhile potential buyers preferred to wait to see if they could invest at a cheaper price, a phenomenon known in the industry as “wait & see”.

At the moment, the difference between what sellers are asking for and what buyers are willing to pay is 20%according to Antonio de la Fuente, managing director of the Corporate Finance department of the consultancy Colliers, during the Madrid Real Estate Exhibition (SIMA).

Federico Bros, head of the M&G fund in Spain, believes that this situation will be delayed in the coming months. “As long as the rate rise does not end, the returns that investors will demand will not stabilize. All the forecasts pointed to a weak first semester but it will last throughout the year. During the first quarter the volume of operations fell by 35%.

The communities exhibit their differences on the Housing Law and advocate for a national pact

Despite the uncertainty, Antonio de la Fuente believes that it is a good time for those who have not been able to invest in recent years, due to high prices, to do so now, such as family office (family vehicles) and private investors. “It is a good time to make long-term investment decisions where there is no risk of lack of demandas it happens in rented housing”, he commented.

Investors call for government changes

Investors have taken advantage of the Madrid Real Estate Show to demand measures from the central government that allow them to increase their activity. Mariam Martín Ferreiro, general director of the management company Víveme, complained that 25% of the sales price of a newly built home are taxes, something that has an impact on the final sale price. “You can go to a much lower tax rate,” she said.

Also from a tax point of view, Jorge Pereda, residential director of Grupo Lar, said that investors do not have incentives to build rental housing. “The rents, which go by the Urban Leasing Law, are exempt from VAT. This means that the VAT that you bear during construction cannot be passed on and parties at a disadvantage”, he pointed out.

Another of the issues under discussion in the SIMA has been that of the maximum sale prices of subsidized housing. As the maximum amounts are set by each autonomous community, in some, such as Madrid, they have not been updated for a decade. Luis Roca de Togores, president of the Valdecarros Compensation Board, asked the Executive to update the prices of the basic module: “If the cost of the land and the work is higher than the sale price, subsidized housing will not be built. No one is going to do a project where they lose money,” she said.

Another of the claims that have been made is to eliminate bureaucratic obstacles and that the deadlines have a start date and an end date. “Our business is to move capital as soon as possible. Currently it is impossible to do it in less than 24 or 30 months. It is useless for us to bet on industrialized construction to save ourselves three months if we lose 10 or 12 in obtaining a building permit“, explained David Botín, director of real estate services of the promoter Aedas Homes.