Inflation, rising interest rates, tightening bank lending and rising construction costs are the major challenges for real estate investments in 2023. In times of uncertainty about the future of the global economy, according to forecasts, home sales will fall by about 15%, and prices will be adjusted. Despite this, experts believe that there are safe and profitable market niches.
Sergio Espadero, Director of Consulting and Evaluation of the Tecnitasa group, speaking at the "Real Estate Investment Strategies in the Current Situation" event in Barcelona, said that residential real estate markets would remain the focus of investors in any case, although there would be "nuances". It is time to take the general decline in housing prices and transaction volumes for granted in the current realities. It is better to pay attention to niches with high demand potential, which sellers cannot satisfy.
One example of such niches is buying land with the transfer of rights to build affordable housing for rent. Spain’s market is favourable for profit. The country’s housing market is experiencing a supply-demand imbalance owing to the government's long delays in transferring new land plots for construction to developers. The market offers high-priced properties, and many people cannot purchase modern housing. Consequently, the Spanish government is embarking on various programmes to build affordable housing and is gradually increasing the transfer of land.
Pablo Mendes, Investment Director of Culmia, recalls that this segment has a greater advantage than the rest of the housing market. For example, administrative workers can license and authorize the sale, exchange and use of land for affordable housing and rental housing. This property is much more accessible to the buyer, has a shorter return on investment and generates income.
Are the other market segments equally profitable? Yes, they are, although the situation is more complicated. The government is much less interested in supporting the common market, as there are housing problems, a shortage of new buildings and huge demand, especially from foreign buyers. The situation is most difficult in large cities popular with foreigners, such as Madrid or Barcelona. Of course, the situation leads to an extremely active price increase, which is good for speculation, but this market is becoming increasingly narrow and closed to the average buyer. In addition, the situation with lending and interest rates are not expected to weaken in the near future.
Nevertheless, there are good options in the common market, for example, housing built under ESG standards, which set high criteria for social and environmental safety. The commercial segment also has ESG-properties. Julio Egusquiza, Director of Operations at Anticipa, recalls that the Spanish market is dominated by the secondary market. Over 70% of the housing stock is outdated and does not meet modern environmental standards, safety and energy efficiency. Modern ESG offers are in great demand.