As bank lending for developer financing is increased,
and international funds look to team up with local developers,
unmet demand for homes will be addressed.
Real estate lawyers at leading firms in Spain are seeing an
increase in instructions due to a substantial rise in the amount of
finance being made available for residential property developers.
Among the opportunities housebuilders have spotted is a major
shortage of high-end luxury apartments in Madrid and Barcelona.
CaixaBank recently announced that, in 2016, it is to double the
amount it will lend for developer financing to €1.4 billion.
Meanwhile, lawyers also report that international funds are showing
a growing appetite for financing residential developments in
The move by CaixaBank to advance more loans and cut borrowing
costs is seen as signifying a new era for Spain in developer
financing, with a rapid increase in demand for housing having led
to a lack of supply. This, combined with falling unemployment and
higher disposable incomes, has prompted new-build house prices to
continually rise, thereby making real estate an appealing financial
prospect once again.
"With the exception of a very small number carried out by
banks, there were fewer housing developments in Spain during the
lengthy crisis period,' says José Luis
García-Manso, partner at Pérez-Llorca in Madrid.
"We're now definitely seeing a significant increase in
instructions for both primary residences and seaside holiday
Ines Chamarro, legal director of real Estate at DLA Piper, says
there has been a "significant improvement in the sense that
finally, after several years, we're seeing some activity".
But she adds that it is unlikely that housing development will
reach the same level as before the property bubble.
"The increase will be probably on a smaller scale and more
cautiously than before the crisis – not all banks seem to be
fully on board with the idea yet." García-Manso
believes housing development will be limited by practical factors.
"The price of land may now be more affordable and development
is picking up again, but the one difference compared with the
housing bubble is that not all locations are feasible for new
However, Fernando Soto, partner at Freshfields Bruckhaus
Deringer, says the increase in housing development is not purely
driven by the need to ensure supply meets demand, but also by a
shortage of luxury accommodation. "There is a real lack of
high-end, luxury apartments in Madrid and Barcelona that are in
line with modern, up-to-date standards," he adds.
Higher profit margin
What is more important still, say lawyers, is that these changes
in the real estate market are increasing investor appetite too.
"Financing, which is so crucial for new developments, has
returned to Spain," explains García-Manso. "A
number of international funds are acting as new players, teaming up
with experienced local developers and providing financing for these
activities." Lawyers say that with investors seeking higher
returns, housing development offers a higher profit margin than
simple asset management for rental income. And it is luxury
properties in Spain's major cities that are attracting
investors. Soto says: "We're mainly seeing high-end
developments bought by SOCIMIs and international funds with local
Spanish lawyers are predicting growth in other parts of the real
estate market too, specifically logistics and hotels, with a
significant number of new developments and refurbishments expected
with regard to the latter. Soto says that last year was
particularly active, not only the hotel sector but also in the
retail sector, specifically shopping centres. Chamarro says that in
addition to the growing hospitality sector, there are also
"important transactions in more traditional products such as
shopping centres and logistics warehouses".
Amount CaixaBank says it will lend for developer financing in 2016
– double the amount it lent in 2015.
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