Real estate servicers, the companies that manage the properties that banks and investment funds took over in the previous real estate crisis, have launched aggressive price discount campaigns, of up to 62%, to try to accelerate the sale of assets.
Servicers, such as Altamira, Aliseda, Hipoges, Servihabitat, Solvia or Haya Real Estate, are trying to meet their annual sales objectives, despite the fact that the real estate market is expected to close in 2023 with a 15% decrease in home sales , and anticipate a foreseeable price drop next year.
“In our case, the discount campaigns are subject to an active portfolio management strategy,” says Eduard Mendiluce, CEO of Aliseda and Anticipa, the fund companies managed by Blackstone, who adds that “from time to time, these also "They seek to increase the pace of sales." Juan Ramón Prieto, director of operations at Hipoges, a servicer controlled by the KKR fund, points out that similar campaigns have already been seen in previous years. “It is very common that in the last quarter of the year there are discount campaigns and sales on properties in order to close the year with the best possible figures.”
Funds and banks concentrate their assets on the Mediterranean coast, where the construction boom at the beginning of the century was greatest, and where prices are still on average 29% below the levels they reached in 2007. Their homes, and above all Their lands have not found buyers for more than a decade because they do not adapt to the demands of the market. Thus, they are usually in secondary locations, in poor condition or, in the case of new construction apartments that were awarded to developers who went into bankruptcy, they are unfinished works or have small homes with no outdoor spaces.
In the case of Aliseda and Anticipa, explains Mendiluce, “the average value of the apartments we have in our portfolio is between 100,000 and 120,000 euros, so we are an excellent alternative for clients looking to access the housing market. housing at more moderate prices.” According to data from Sareb, the Asset Management Company from Bank Restructuring, which was awarded the same type of assets from the former bankrupt savings banks, the average price of the homes sold through servicers is 97,000 euros. .
Housing, explains Mendiluce, “is the part of the real estate market that has the greatest capacity for resistance in terms of prices in the face of the increase in financing costs. Furthermore, the lack of supply compensates for the lower number of planned transactions, and prices remain with slight decreases only in some regions and in the highest price segments.”
Hipoges also sees price stability, “although it will depend a lot on each area,” says Prieto. Thus, he explains, prices are “suffering” in regions without large population centers (such as Zamora, Soria or Jaén), but they are rising in coastal cities and remain stable in Madrid and Barcelona.
The funds are maintaining sales this year largely due to the high number of buyers who purchase the properties in cash, which in the case of Blackstone funds represents 55% of the operations. Real estate sources indicate that they are usually purchases of homes for a second residence, for children or to a lesser extent as an investment. “The savings accumulated during the pandemic are going to run out, and there is concern about what may happen next year,” they acknowledge.
According to INE data, in the first eight months of the year, 152,325 homes have been purchased in Spain without a mortgage, 36.85% of all sales made, but this percentage reaches 56.6% in the Valencian Community, the 49.2% in La Rioja, 47.8% in Murcia, 45% in Cantabria or 44.5% in Castilla y León.
The funds, the same sources point out, can lower the price more than the banks, because they bought the properties in large lots and with high discounts. Thus, lower prices rarely generate losses, unlike what happens to banks, which are therefore much more reluctant to apply discounts.
For Eduard Mendiluce, “funds are not more aggressive than banks in terms of prices. They just have a different logic: while banks focus on book values, investment funds seek to maximize the value of the portfolio.”
According to Juan Ramón Prieto, “funds, due to their nature and cycles, tend to have greater agility when adapting to market situations than banks, whose regulation and control are very strict.” Prieto recalls that Hipoges manages both fund assets, such as KKR, Sareb and banks. In his opinion, the discounts of the funds are not homogeneous, but "they depend on the strategy of each one, the moment in which their portfolio is and always on the profitability obtained and expected."
Servicers are applying the greatest price discounts to land, with discounts of 40% in the case of Servihabitat or up to 50% in Aliseda. “Land is a much more complex product than housing and in which buyers are smaller,” says Prieto, which is why he predicts that the evolution of its value and the pace of sales “will depend a lot on how the market behaves.” of new construction.”
According to the latest data from the INE, sales of new construction began to decline in September, by 19.7%, after months holding up better than second-hand construction, largely because sales were often closed off plan, more than a year before.
For Mendiluce, “the reality is that with a production of less than 100,000 homes per year, new construction is scarce and, therefore, the land maintains a significant level of strength.” The Blackstone companies – “the first land manager in the country with more than 3,000 million euros under management”, he assures – are “selling more than 40 million euros of land per month without price discounts”, although they acknowledge that they “ punctual offers and hook on some assets.” In his opinion, the land is now one of the best real estate assets and will be one of the group's growth levers.
Land sales, however, are being slowed by the halt of developers. According to Gonzalo Bernardos, professor at the UB and director of the Forcadell real estate study, the real estate crisis destroyed the local business fabric and now “the big developers are from funds, and many in Spain are already leaving.” And the small developers who survived the previous crisis have slowed down the start of new works, because the purchase demand is lower and they can access lower prices. Furthermore, the increase in interest rates and materials has left promoters without margins.
