The financial investor George Soros, the giant Chinese corporate Dalian Wanda and the new fund manager Tiaa Henderson all have something in common: they have all invested in the Spanish real estate sector in recent months. This activity has not gone unnoticed by other investors, since not only has real estate investment in Spain returned to figures not seen since the boom years (2007), but also the phenomenon is also expected to continue in 2015.
According to the ‘Trends in the European Real Estate Market 2015′ report, prepared by PwC, Madrid is the third favourite destination for investors at the European level, behind Berlin and Dublin. “There is a mixture of 28 cities in this ranking: classic investment destinations such as Berlin and Munich, capitals that are in recovery, such as Athens – the survey was conducted in November before the Greek elections – and Dublin”, explains Rafael Pérez Guerra, the partner responsible for the real estate sector at PwC.
Of the 28 cities studied, only those in Russia have limited prospects for investment growth, even though 61% of respondents believe that the good assets (known as “the core” in the sector) are overvalued in virtually all of the European markets.
This boom has led many investors to seek out new markets. “Another important area of interest are the secondary cities, such as Birmingham, which is ranked in sixth place, above London and Munich. Investors have started to take on more risk because profitability in the large markets is scarce; as a result they are exploring secondary sites”, he adds.
The change in the Spanish real estate sector is reflected in the rise (up the ranking) of its main markets as investment destinations: Madrid has risen from 19th place to third and Barcelona from 22nd to 13th, according to PwC’s report.
“There is a very high level of interest and activity in Spain. It is not that the market is not over-heating, but rather that the dynamics of the sector are changing, with an imbalance between a scarcity of good deals in prime areas and significant demand from opportunists who remain in the market and more stable investors who are arriving”, says Enrique Used, the partner responsible for transactions in the real estate sector at PwC.
This commitment to the Spanish market will continue in 2015, according to the survey respondents, and will not be limited to the large markets. “International capital has moved towards Spain, en masse. Prices have risen considerably in Madrid, which suggests that the investors that are looking for the highest returns, should set their sights on the secondary markets in Spain during 2015 to obtain higher returns.
Although the 500 people surveyed by PwC see a clear recovery in investment in Spain, they still believe that the market for the construction of new homes should improve; Madrid and Barcelona are ranked only 14th and 23rd, respectively, although that represents an improvement with respect to 2013 when they were ranked 21st and 25th.