Investment Builds Confidence in Spanish Property Sector

Published on 21/04/2008 in Investing in Spanish Property

The sub-prime credit crunch in the US has entered a new cycle and the recent announcement of the closure of nearly half of the estate agents based in Spain continues to dampen enthusiasm for overseas investment.  This has not deterred Spanish developer and construction company ‘Noriega’s’ decision to invest €90 million into the Realia Group in a bid to instil confidence, in what is perceived by buyers as a flagging market. 

The investment represents a 5% buy into the Realia Group. The venture, under the guidance of Noriega’s parent company, the Sanchez Ramade Group, demonstrates not only faith in the market but also its belief in the long-term future in the building sector in Spain. 

The Realia Group was formed in 2000 as a result of the merger of the developer division of FCC and Caja Madrid, and is one of the leading development groups in Spain specialising in promoting, and managing a wide range of properties in Spain, France, Portugal and Poland. 

The deal brokered through International investment Bank, Goldman Sachs, and International lawyers, Freshfields Bruckhaus Deringer, follows a €425 million investment by the Sanchez-Ramade Group in Spanish energy giant Iberdrola.

Eugenio Sanchez-Ramade Garcia-Conde, Managing Director of Noriega UK, commented on the investment.  “Noriega and Realia share market sector but complement each other with different sections of the market. The Spanish property market offers many opportunities for investment for the buyer looking to purchase a second home.  Improved infrastructure and transportation added to fantastic air links along with the weather make Spain an ideal choice for property investment.  Spain is now a mature market, so I am certain the recent turbulence in the property sector will stabilise and confidence will return.”

There is no denying a slow down in the Spanish property sector, which when you consider the astounding growth over the past decade and a half is not surprising, but the fact is that properties in Spain still recorded growth in 2007.  Property prices continue to rise above the standard headline rate of inflation in Spain, which is admittedly higher than other parts of Europe and the UK. 

What is missing from the current climate and some may say from the media in general, (though things are starting to improve with the media) is a more combative approach from developers, and a sustained and level-headed response to the situation.  Everyone knows bad news sells and it does not take many bad news stories to start undermining confidence in anything, let alone a property sector that is exposed to a variety of factors that can affect the market. 

Noriega’s UK director, Eugenio Sanchez-Ramade Garcia-Conde sees its investment in Realia as just one component to begin challenging the perception of hard times ahead for the Spanish property sector.  “It is difficult for developers and constructors to work in isolation.  There have been calls for a more unified approach from with our industry to start addressing issues concerning planning and the property market in general.  We cannot ignore the fact that 2008 will be a challenging year for the property market in Spain and the holiday and second home market in particular, but there are many positive factors that we should concentrate on.  Spain continues to be the number one destination for UK buyers when looking at a home in Spain and it will be for a considerable time.  The close proximity, the favourable climate, improved infrastructure and transport, and the friendly Spanish people make Spain an ideal choice.  I cannot see these factors changing.”

If the road ahead is a little uncertain one thing for sure is that Spain will not be in isolation to any perceived (or otherwise) market forces, all countries selling holiday homes or second homes will be affected. 

Written by: Darren Laws

About the author:Darren Laws is a freelance writer and has contributed articles on Spain to many publications.

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