Investment Opportunities in Spain: Retirement communities and holidays residences june 2013


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In Spain, because of the financial crisis and lack of finance, there are very good opportunities to invest in real estate: retirement communities, hotels and tourist resorts, among others. The Spanish economy is recovering and tourism industry is continuing growing (the second tourist country in the world), becoming the European Florida for European retirees.
If you are interested to go into detail about Spanish business opportunities in relation with Retirement communities and holiday residences, please do not hesitate to contact with me. We are a real estate advisor consulting firm with broad experience and high ethical standards.
Rafael Codoñer

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Investment Opportunities in Spain: Retirement communities and holidays residences june 2013

  1. 1. Real Estate Consulting & Project Management RETIREMENT COMMUNITIES AND HOLIDAY RESIDENCES IN SPAIN Valencia, June 2013
  3. 3. INTRODUCTION Demand for Spanish property from northern Europeans (mainly UK, Scandinavia, Germany, Benelux and new markets like the Russian Federation) has been extremely strong over the last 15-20 years. This has increased in intensity over the last 2 years, in particular given the low prices and extensive offer, in addition to the advent of “budget airlines” and improved accessibility to most Spanish coastal destinations. The most recent figures show an amazing potential for growth caused by several demographic and economic factors, besides the fact that Europeans want to improve their quality of life. When compared with the U.S., the northern European “baby boomer” has a limited range of suitable alternatives when buying or renting a retirement home, second home or future retirement home, in terms of a fully integrated Active Lifestyle, Wellness Style real estate offer in Spain. The position of Spain in the European environment and its strong infrastructure of communications and services, place it in an exceptional situation to become established as a tourist and residential destination for European citizens. This information leaflet shows the main macroeconomic variables and anticipates the investment opportunities and development of business projects related to tourism and residential retirement communities. The opportunity is immense and the figures compelling. The broad experience and market knowledge of LaNave places it as ideal adviser and partner to locate opportunities and to develop investment projects with greater guarantees of success. 3
  4. 4. SPAIN: ECONOMIC SITUATION, KEY FACTORS AND TRENDS Economy Severe economic crisis with a big increase of unemployment rate. A fiscal package to reduce the deficit of 11% of GDP is being implemented. Strict control of public expenses (State, Regions and Municipalities). Problems of cash flow in public administrations with impact on private companies (suppliers to public administration). Cuts in some social services. The new labour regulations and the adjustment measures taken in the economy are getting the first results: o o o o Spain is growing through external demand, as exports and tourism reach record levels. The flexibility in labour costs and the increase of productivity explain why this growth is structural, not short term driven. There is an orderly and constant reduction of the “Spanish Risk Premium”. The international investors are positioning themselves in different Spanish industries. Very good prospects for the Spanish stock market in 2013, according to analysts. 4
  5. 5. SPAIN: ECONOMIC SITUATION, KEY FACTORS AND TRENDS Financial system The Spanish financial system is successfully addressing its liquidity and solvency weaknesses. The restructuring of “Cajas” has been completed through mergers and injections of public funds. The reduction of capacity (branches and employees) is continuing. The financial sector is set to have provisioned close to €200 bn. by year-end 2012, as house prices are falling in line with those of other economies. Three Spanish banks (Santander, BBVA, and Caixa Bank) are among the world´s leading private banks. Bankia (result of merging of Caja Madrid, Bancaja and other saving banks) has completed its bailout and its restructuring plan, through recapitalization and structural and capacity adjustments. Real Estate Average prices have fallen 30% to 50% from their peak in 2006 (10% in 2012). There are big differences between markets and locations. Construction is back to 6% of GDP, below historic average. Average house prices could fall 5 to 10 % in 2013 and stabilize going forward. By 2013, house prices will reach historic averages vs. disposable income. 5
  6. 6. SPAIN: ECONOMIC SITUATION, KEY FACTORS AND TRENDS The Spanish “bad bank” (SAREB) 51% private company, with an advantageous tax scheme. 55.000 million euros in assets (67% loans and 33% foreclosed properties). Transfer of foreclosed properties with an average haircut of 63% (54% dwellings, 63% works in progress, 79% land). SAREB has to administer the assets, maintain/increase their value and put them into the market in the next 15 years of planned activity. The Company has estimated a return on equity (ROE) of 14% in a conservative scenario. Tourism Spain is the second country with the highest income from tourism, after USA. 58 million tourist visited Spain in 2012 (Spanish population 46 million), and the upward trend in tourists and income is continuing in 2013. Spain is the world´s 2nd largest tourist destination for residential tourism, where foreigners acquire a second residence. Spanish touristic growth is structural. 6
  7. 7. SPAIN: ECONOMIC SITUATION, KEY FACTORS AND TRENDS Health System Spain´s health care system is ranked 7th best in the world by World Health Organization (WHO). Spain is the 8th best life expectancy in the world. The statutory National Health Service provides universal coverage is funded from taxes and predominantly operates within the public sector. Private voluntary insurance schemes play a relatively minor role within the Spanish health system. Most European citizens are covered by the Spanish public health system (European Economic Space). 7
  8. 8. POSITIONING AND OPPURTUNITIES: ADVANTGES OF INVESTING NOW Expectations & Facts There are signs that 2013 has reached the bottom out of the Spanish economic crisis and is the beginning of (slow) recovery. So, it is time to be positioned in the market and have access to the information and opportunities for closing deals. The “bad bank” needs to show high turnover from the beginning of its activity. It expects to sell the best properties during the first 3 years. New legal and tax regulation for Spanish REITs (SOCIMIs). Proposed easier availability of “residence permits”, to attract investors and residents from non EU countries (Russia, China, etc.). The tourism industry continues increasing with record results. 8
  9. 9. POSITIONING AND OPPURTUNITIES: ADVANTGES OF INVESTING NOW Properties on the Spanish coast There is a consensus that the recovery of market and prices in the “costas” will be before than other locations, because: Spain is consolidated as an international purchase destination for holiday and retirement homes. The steady increase of international tourism is the base for new buyers. The recovery of the north and central European economy will be before the Spanish domestic market. New markets are knocking: Russian Federation, Scandinavian countries and others are new buyers; and there are opportunities in China and other countries. The internal domestic market is more affected by the crisis: unemployment, fewer immigrants, lack of funding, etc. 9
  10. 10. POSITIONING AND OPPURTUNITIES: ADVANTGES OF INVESTING NOW Residential tourism and the 50 plus sector International buyers and the active-life-style 50-plus living in Spain are a reality that is constantly growing. According to the study carried out in 2012 by HSBC, Spain has a very easy going life style, aided to a great extent by its excellent climate, a factor that is extremely important for people leaving their home land, particularly for those who have retired. More than half (55%) believe that Spain offers a better standard of living than other countries around the world. The Spanish diet is another of the highest scoring factors for expatriates living in Spain. The fact is that 77% of those surveyed admit that their diet has improved since coming to Spain. Products and prices There is an excess of supply in some areas: generally in non-consolidated areas, third ring of metropolitan areas, without services, good connections, etc. The fall in prices has been 30% to 50% from the peak in 2006. The prices of some new developments and urban land plots are below the replacement cost. House prices are expected to bottom out in 2013 after falling for 7 years. The pricing policy of SAREB and other Spanish banks is more “accounting” oriented than “market value” oriented. 10
  11. 11. POSITIONING AND OPPURTUNITIES: ADVANTGES OF INVESTING NOW Investment highlights: focus on distressed holiday dwellings, sheltered residential communities and touristic projects for the European market: There is a clear opportunity to get better distressed prices on holiday homes than on first-residence prime-located dwellings. It is easier for banks and Spanish brokers to sell to Spanish buyers than to foreigners. Average price correction at the coast has been bigger than in cities. European buyers are back. The figure of dwellings sold to foreign residents has increased 15% in the last year, while total dwellings sold have decreased 12%. General prices index in Spain is decreasing more than in other countries. This will make Spain more competitive in terms of tourism. Spain is the European country that receives most foreign tourists yearly. The rental apartment accommodation option is increasing quicker than other accommodation options. There will be a lack of good quality and well-located holiday dwellings in Spain during the coming years. As Europe’s Florida, more and more foreigners will spend holidays and retire in Spain. Therefore, a price increase can be expected in coming years. There is a niche market for fully integrated resorts of sheltered communities for 50-plus citizens. 11
  12. 12. POSITIONING AND OPPURTUNITIES: ADVANTGES OF INVESTING NOW With enhanced fundamentals and depressed valuations, we believe now is a fantastic moment to take positions and invest in Spain: All the changes introduced in the Spanish Economy make the present moment attractive to invest in Spain. Spain is at a low level in the economic cycle. Companies who take the lead in investing now will have the opportunity to benefit the most. 12
  13. 13. LA NAVE La Nave team of executive professionals has extensive experience in the real estate industry and is used to working in an international environment. In particular, LaNave has wide experience of planning, development and management of touristic and retirement projects along the Spanish coast. LaNave groups and brings together the broad knowledge of experienced professionals to provide specialized strategic and operational consulting and services for companies and real estate wealth and assets. LaNave has a multidisciplinary team with ability to carry out the management of assets, from advice on buying, analysis and portfolio selection, management of the value of properties to the final sale through the most appropriate marketing process for each type of asset. The main objective of the actions undertaken by LaNave is aimed at the enhancement of value of the real estate portfolio of our customers through personalized attention to their needs, considering the current real estate market situation and making innovative proposals for the development strategy of each client, portfolio or asset. Our organizational structure allows us to develop an integrated service, with responsibility, control and single coordinator, and coverage throughout Spain. Pascual y Genís nº 1 - 2º 46002 Valencia Spain Telef.: (+34) 96 351 62 59 Fax : (+34) 96 394 10 20 Email: Web: 13