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Arcano: Iberian real estate will maintain attractiveness in 2020
21 February 2020 | Ana Tavares

Real estate products in Portugal and Spain, especially the housing segments, will continue to be attractive to investors and more competitive than other investment products. But it is necessary to find new forms of financing.

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This was one of the ideas presented by Ignacio de la Torre, Chief Economist from Spanish financial advisor Arcano, during the session “Why Portuguese and Spanish real estate markets will keep rising”, organised by APPII this week in Lisbon.

Both countries’ real estate remains more profitable than classic financial products, at a time when there is a heavy drop in interest rates, which are already at negative values, and it will continue to attract international investors. All this within a context of weak growth for the global economy, stabilisation for the American economy, some vulnerability for the Chinese economy and improvement for the European economy. Under this scenario, the Portuguese and Spanish economies will keep «growing above the level of the other European economies», and that is another advantage for the Iberian markets, according to de la Torre.

Ignacio de la Torre believes the ECB’s monetary policies will continue to be beneficial for the Iberian real estate and that the political risks on both countries are limited.

On the other hand, prices are still «reasonable», and the main destinations register a continuous domestic and foreign demand. The potential demand is far higher than the real demand. And despite the existence of more pressure on some specific destinations, «there isn’t even the risk of a housing bubble on either country».

However, in a world which is still governed by debt, the question is when will the next crisis hit. Currently, «the world has more debt than before the debt crisis of 2008. But this increase affected the markets and the companies and not the families and that is positive». In the case of Iberia, the debt is still growing below the two countries’ GDP. That means that this positive context for investment should remain for a while.

Focus on «risk and not growth»

Ignacio de la Torre believes the real estate market should focus «less on the growth of the economy and more on the contextual risks, establishing a balance between the two».

Amongst the main «dangers», are the populist political movements, which are considerably more moderate in Iberia: «these parties are in favour of the Euro, the EU and the stability pack and this is good for investment».

The dependence on the German debt is a risk, and it exists since the 60’s. A system which «works while the financing remains open. We should diminish that dependence».

New financing: «we need different ideas»

«When the banks stop financing real estate, we need to find different ideas, hybrid solutions, which include the capital markets», considered Ignacio de la Torre.

These models already exist in Spain, and «Portugal will also have similar solutions».

Spanish Quabit Inmobiliaria is an example of that. It is through the capital market that this listed developer finances itself, besides using other types of debt. According to Ruben Bernat Enguidanos, it is particularly difficult to buy terrains, since «in Spain banks are not financing those purchases». So, «we actively seek all type of financing to buy terrains, new forms of financing which are more flexible».

The company focuses on the mid to mid/low strata of the housing segment, a segment «where there isn’t much offer yet», and which will keep registering an increase in demand in Spain and also in Portugal. «It is good news in the sense that it will continue, we need to find alternative financing sources to keep up with the market».

Concerning the possible entry in the Portuguese market, Ruben Bernat Enguidanos does not put it aside and assumes it as a «clear option for the company’s growth», but he says that during the next two years the company will «keep stabilising its business plan».