According to the portal "TheObjective", the growth of interest rates on lending negatively affects investments in the hotel sector of the real estate market in Spain. According to market experts, the increase in the cost of credit financing led to the fact that many operations that were planned for the coming months were either postponed or canceled. The change in the policy of banks aimed at tightening lending conditions, coupled with rising interest rates, is felt in the real estate market among both individuals and companies.
Juan Fernandez Aseituno, managing director of the real estate appraisal agency Sociedad de Tasación, points out that the sharp decline in those wishing to purchase real estate is clearly visible on the market, since for most buyers a mortgage is the main financial instrument. With the loss of access to cheap loans, consumers have also lost the opportunity to be present in the market. For the residential sector, this led to a reduction in the customer base, and for hotels — to a reduction in the number of motivated investors.
In the end, the price adjustment in different segments of the Spanish market becomes inevitable, but not all sellers will be able to survive it, explain "TheObjective". In a few months, we can expect a significant slowdown in the market and even paralysis in some of its sectors. However, it is still difficult to judge what fate awaits the hotel sector specifically. We can definitely expect that most of the real estate transactions, as well as investments, will shift in the second half of the year. Closer to its end, and only if there are no additional shocks to the economy.
Many experts expected a decline in the market at the beginning of 2023, but it did not happen. And although for many it was a reason to celebrate, in reality it only means that the market is delaying the necessary "detente", aggravating the potential consequences of it. So far, the market is held mainly by large investors and buyers with large amounts of liquidity, who buy primarily premium properties.
Many local markets are already holding on mainly due to foreign demand. However, how long will it remain at the current levels? It is difficult to say, but it is harmful for any market to rely on growth at the expense of one category of investors/buyers. Despite the fact that most of this demand is rather a temporary fashion determined by the conditions of the current moment, and not a real need dictated by real market indicators.
At the moment, positive sentiment still dominates among experts. This is due, among other things, to the fact that pessimistic forecasts for the beginning of the year did not take place. These sentiments imply an expected slowdown in the hotel sector and the real estate market, but the preservation of pronounced positive dynamics. At least in the first half of 2023, most analysts do not expect a real recession and negative growth indicators.
In 2022, a total of 3.27 billion euros were invested in the Spanish hotel real estate market. At the same time, foreign investors accounted for a share of more than 2.3 billion euros, that is, 72% of the total amount. This figure was higher only in 2017-18, when Hispania and Blackstone entered the local market. This is also a reason to expect a decline, since in every case of record growth, at least some kind of correction should always be expected.
Among the main foreign investors in the hotel sector are the following:
- Singapore Sovereign Wealth Fund (GIC);
- Sancus Capital Investment Company ("Villamagna" and "Bless" in Madrid);
- Leonardo Hotel chain (approx. Fattal Hotels, based in Israel);
- Brookfield Investment Management Company;
- German real estate agency Engel & Völkers (specializes in luxury real estate);
- Eurazeo & PSP Investments Investment Company.