Ty byrd discusses the worldwide implications of the spanish housing bubble.

1. Ty Byrd, Spanish Housing Bubble!
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The housing bubble has burst in Spain and Global Investors are flocking to the country for
bargains on real-estate. This burst comes
after real-estate prices dropped 50% from
their peak. Investors from the United
States, Asia, and Britain have been flying to
Madrid in order to acquire real-estate for
different companies. For example, Baupost,
a hedge fund, is buying shopping centers,
and The Blackstone Group in addition to
Goldman Sachs are purchasing apartments
in Madrid. “It’s surreal” states, Dilip Khullar,
a Spanish real-estate investor, “One day it
is the worst place in the world to buy real-
estate and the next it’s the best.”!
!
One of the main reasons for the decrease
in price of property in Spain is due to the
low interest rates set by the European
Central Bank. The interest rates were set to
help leverage the German Market and in turn
this helped increase the Spanish real-estate boom. When the Spanish real-estate market burst
in 2008, “Nobody wanted to invest a penny in real-estate” explains Mr. Pascual-Sanchiz de la
Serna. “Spain was overbuilt and it was going to take 10 years to work through.” In reality, it
hasn’t taken Spain that long to bounce back.!
!
In 2013, the real-estate market started to revive itself and this led to Government reforms which
included relaxed labor laws and stricter rules for banks in order to account for bad real-estate
decisions. This meant that banks could no longer ignore the assets on their bank sheets.
Because of this, the banks had to hold more capital and as a result, the banks started to think it
was better to sell. However, Spain is just beginning to see improvement in their market. There
had been an increase in the amount of real-estate transactions last year but it was still small
compared to the overall transactions in commercial real-estate that occurred in all of Europe last
year. In addition, Spain’s economy continues to struggle. The unemployment rate is 26% and it
doesn’t seem as if it will decrease very much in the next year.!
!
On the other hand, investors foresee the Spanish market bouncing back and are quickly buying
up real-estate as fast as they can.!
!
Sareb Bank, one of the main banks in Spain, reported selling 1.5 billion euros of the 51 billion
assets in 2013. Belen Romana, chairwoman of Sareb, stated that the first investors (about 50 of
them) for the auctions of real-estate were aggressive and pushed her to make fast deals.
However, she refused to be pushed by them and auction processes were put in place.!
!
Moving forward for the future, 2014 seems like it will be a better year for more transactions.
There has been a push to move globally and the companies discussed have jumped on this
opportunity in the Spanish market. The next question to consider is, Are the prices of these
spaces too high?