Residential Market Report

Transcription

1 Residential Market Report Madrid City and the Metropolitan Area of Madrid A g u i r r e N e w m a n June 2014

2 A G E N D A INTRODUCTION AND METHODOLOGY GEOGRAPHIC DISTRIBUTION CONCLUSIONS OF THE STUDY FORECASTS

3 01 INTRODUCTION AND METHODOLOGY

4 01 MADRID Residential Market 01 INTRODUCTION AND METHODOLOGY This report analyses the open-market new-build residential market in Madrid. The field research undertaken for this report was carried out over the months of April, May and June and was finalised on the 10th June The aim of the research was to analyse the open-market new-build housing market for apartments located in the city of Madrid and the main towns in its surrounding suburbs. The research was carried out on a total of 235 open-market apartment developments, of which 137 were located in Madrid city and the remaining 98 in the surrounding suburbs. Data was collected after carrying out extensive research on the purchase of homes in all of the 21 districts of the city of Madrid and the main towns in the surrounding suburbs. Whilst every care has been taken to provide accurate data, Aguirre Newman does not accept any responsibility for the information provided on the subject developments.

5 02 GEOGRAPHIC DISTRIBUTION

6 02 MADRID Residential Market 02 GEOGRAPHIC DISTRIBUTION Below we detail the towns that have been studied in this report. Fuencarral El Pardo San Blas Centre Latina Tetuán Ciudad Lineal Moratalaz Carabanchel Chamartín Salamanca Puente de Vallecas Villaverde Hortaleza Chamberí Arganzuela Vicálvaro Barajas Retiro Usera Villa de Vallecas Information relating to the surface area of properties, constructed sqm (sqm built) relates to: For apartments, constructed sqm refers to the constructed area including the proportionate amount of common areas. In developments which include a parking space and/or storage area in the final property price, we have deducted the corresponding amount off the apartment s retail price (the sales value of these elements if known or an average for the area the properties are located in) in order to ensure that the pricing of apartments is comparable. For single-family homes, the enclosed space of the property has been adopted as the constructed sqm figure. In other words, the square metres relating to the plot are not included. We have not studied single-family homes in Madrid due to a lack of comparables. In order to ensure that the results of this report are as close to reality as possible, we have divided Madrid up into different areas, based on the exclusivity of the city's different residential areas, as detailed in the following map.

7 02 MADRID Residential Market 02 GEOGRAPHIC DISTRIBUTION The various districts that make up the muncipality of Madrid are not treated just as one area in the study, but may be discussed as part of areas of higher or lower exclusivity. The division of areas and the housing developments within them has been based on Aguirre Newman s market knowledge and perceptions of location, building specifications and the surrounding areas. The towns included in the metropolitan area of Madrid comprise the 23 main urban areas within a radius of 30km of Madrid. Historical data has been revised for the different research areas (A-1, A-2, A-3, A-6 and the Southern Area) so that the area definitions are treated in the same way and the data from one period to the next is fully comparable. MAP OF THE RESIDENTIAL AREAS OF MADRID CITY MAP SHOWING THE TOWNS WITHIN THE METROPOLITAN AREA OF MADRID A-1 (Burgos) A-2 (Barcelona) A-3 (Valencia) SOUTHERN AREA (A-4 and A- 5) A-6 (La Coruña)

8 03 CONCLUSIONS OF THE STUDY

9 03 MADRID Residential Market 03 CONCLUSIONS OF THE STUDY Main conclusions: The following key points summarise the main results found from the research into Madrid s residential market over the given period. Prices per sqm continue to fall in Madrid city with an average drop of 14.23% y-o-y. This is now the seventh consecutive year of price falls since the maximum price per sqm at the top of the market in The accumulated fall in prices since then stands at 42%. An average apartment in Madrid city has an average area of 103 sqm, an average price of 2,696 per sqm and an average final price of 277,685. In order to make the purchase, and considering a mortgage with an interest rate of 3.0%, the average buyer must pay a deposit of 59,702 and then monthly mortgage costs of 1,151 for 25 years or 1,041 for 30 years. Hence, the mortgage cover ratio, i.e. the percentage of household income used to pay off the mortgage, stands at an average of 27%, which is an acceptable rate for a balanced market. However if we look at the rate ofaccessibility, which is calculated by dividing the average price of a property divided by the household income, this gives a multiple of 5.4 which is a long way off the figure for a healthy market. For a healthy market, the acceptable rate for sustainable residential property prices should be a maximum of 4.5 times the gross disposable household income. There has been a fall in the average sales marketing periods due to some developments with advanced levels of sales coming on to the market. On the other hand, certain developments that had been for sale for many years, finally completed the sale of their final units over 2013, which has also contributed to an improvement in the average sales period. The average sales period of a development in Madrid city (with an average of 66 apartments) is 33.2 months, compared to 63.7 months in As has been the trend across the rest of Spain the sales volumes of new apartments in the Community of Madrid fell again over The sale of new-build apartments fell by 56% in 2013 compared to the previous year, with 6,521 completed new-build sales, compared to 14,818 in In terms of Madrid city, sales volumes of new-build homes dropped slightly from 3,768 in 2012 to 3,519 in Both years were well below the historical maximum of 18,433 new-build homes sold in 2006.

10 03 MADRID Residential Market 03 CONCLUSIONS OF THE STUDY Main conclusions: Development activity has virtually come to a standstill, due to lenders requiring ever stricter terms from developers in order to provide them with financing. Lending institutions have been providing financing for the projects where they are also acting as developer. Terms available to any other developer require off-plan sales of over 75% of the total development, which makes it impossible to start new projects. New projects that are coming on to the market are being constructed under cooperative schemes. As mentioned in previous reports, in some parts of the city and certain specific towns in the metropolitan area of Madrid, over the past few years, there has been a reduction in the amount of available supply of new-build apartments, and if no new developments are started in the medium term, this may lead to very low levels of available supply in those markets. In these markets, potential purchasers may also consider the pre-owned market, of which there is generally a large supply in all areas of Madrid and the metropolitan area. The aforementioned trend has continued, by which financial institutions have gone in to direct competition with developers, when it comes to selling the schemes that come on to their books as foreclosures. They are also offering more advantageous mortgage conditions to buyers of their own developments compared to buyers of otherdeveloper s projects. Sareb has become a major player in the real estate market, although its activity has not had a major impact on sales prices. Developers remain open to the option of renting with or without a future option to buy as a way of finding an occupant for vacant stock. Research has revealed that 19.7% of those developments offering units for sale in Madrid city were also on the market to let with an option to buy, compared to 16.4% in the previous year.

11 04 FORECASTS

12 04 MADRID Residential Market 04 FORECASTS Below are some forecasts on the Madrid residential market for the upcoming year. Price stabilisation or slight downward adjustments (<5%) are expected after accumulated average prices decreased by over 40% for new-build homes in both Madrid city and its metropolitan area. From the buyers side there has been more confidence shown with respect to concerns mentioned in previous reports, in terms of economic and employment uncertainties in the economy at large. On the other hand it seems apparent that although sales volumes will recover, they will not reach those levels seen prior to the economic crisis. There has been a fall in the number of young people leaving their parent's home and historically this group was the main buyer of primary homes. Finally, a key element for a recovery in housing demand is the availability of mortgage financing on attractive terms. Increase in the sales volume of new-build open-market homes. Official data on transactions carried out over Q show a y-o-y increase in the sale of newbuild homes both in Madrid city and in the Community of Madrid as a whole. In Madrid city, sales completed in Q increased by 56% compared to the same period in 2013 (646 compared to 412), whilst in the Community of Madrid, the equivalent increase was 92% (1,644 compared to 854). Different sales marketing periods for new developments coming on to the market and those prior to As seen since 2013, development projects that came onto the market after 2011 are seeing improved sales periods, whilst those that came on to the market prior to continue to have long sales periods. New projects being started have come about after rigourous market and feasability studies, which have justified their development and consequently show high levels of off-plan sales. Low levels of development activity in previous years owing to weak demand and not wanting to add to the existing oversupply. However in some areas of Madrid city, particularly in central areas, there are very few new-build homes available. These are areas in which it has not been possible to build new projects due to the lack of development land. In every case any new projects have been renovations of whole blocks of apartments. It is worth commenting that in some areas, such as Valdebebas or Arroyo Fresno, there is some development activity from cooperative schemes, which is attracting buyers.

13 M a d r i d B a r c e l o n a M a l a g a L i s b o n B e r l i n L o n d o n M e x i c o C i t y