Real estate servicers, the companies that manage properties left by banks and investment funds in the previous housing crisis, have launched aggressive price discount campaigns of up to 62% to try to speed up the sale of assets.
Servicers, such as Altamira, Aliseda, Hipoges, Servihabitat, Solvia and Haya Real Estate, aim to meet their annual sales targets, despite the fact that the real estate market is expected to close in 2023 with a 15% decline in sales of homes, and anticipate a predictable drop in prices next year.
"In our case, the discount campaigns are subject to an active portfolio management strategy", points out Eduard Mendiluce, CEO of Aliseda and Anticipa, the fund companies managed by Blackstone, who adds that, "occasionally, these companies also want to increase the rate of sales". Juan Ramón Prieto, operations director of Hipoges, a servicer controlled by the KKR fund, points out that similar campaigns were seen years before. "It is very common that in the last quarter of the year there are campaigns for discounts and reductions in real estate in order to close the financial year with the best figures possible".
Funds and banks concentrate assets on the Mediterranean coast, where the construction boom at the beginning of the century was greatest, and where prices, on average, are 29% below the levels reached in 2007. These homes , and especially the floors, have not found buyers for more than a decade because they do not adapt to the demands of the market. Therefore, they are usually in secondary locations, in a poor state of conservation or, in the case of new-build flats that were awarded from developers who entered bankruptcy proceedings, 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 flats in our portfolio is between 100,000 and 120,000 euros, so we are an excellent alternative for clients who want to access the market housing at more moderate prices”. According to the data from the Asset Management Company for Banking Restructuring (Sareb), which was awarded the same type of assets from the old bankrupt 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 most resistance in terms of prices to the increase in financing costs. In addition, the lack of supply compensates for the low number of transactions expected and prices remain with slight declines only in some regions and in the higher price segments”. In Hipoges they also see price stability, "although it will depend a lot on each area", points out Prieto.
So, he explains, prices are "suffering" in regions without large population centers (such as Zamora, Sória and Jaén), but they rise in coastal cities and remain stable in Madrid and Barcelona.
The funds maintain sales this year in large part due to the high number of buyers who purchase the properties in cash, which, in the case of Blackstone's funds, represents 55% of operations.
Real estate sources point out that homes are usually bought for a second residence, for the children or, although less often, as an investment. "The savings accumulated during the pandemic will end and there is concern about what may happen next year", they acknowledge.
According to data from the National Institute of Statistics (INE), in the first eight months of the year in Spain, 152,325 homes were bought without a mortgage, 36.85% of all sales made, but this percentage reaches 56.6% in the Valencian Community, 49.2% in La Rioja, 47.8% in Murcia, 45% in Cantabria and 44.5% in Castilla y León.
The funds, the same sources point out, can reduce the price more than the banks, because they bought the properties in large lots and with high discounts. Therefore, the drop in prices rarely generates losses for them, unlike what happens in banking, which is, therefore, much more reluctant to apply discounts.
For Eduard Mendiluce, "the funds are not more aggressive than the banks in terms of prices. They just have a different logic: while banks attend to book values, investment funds aim to maximize the value of the portfolio”.
According to Juan Ramón Prieto, "funds, due to their nature and cycles, tend to be more agile when it comes to adapting to market situations than banks, which have very strict regulation and control". Prieto remembers that Hipoges manages both fund assets, such as KKR, Sareb and banks. In his opinion, fund discounts are not homogenous, but "depend on the strategy of each one, on the moment in which the portfolio is located and always on the profitability obtained and expected", points out Prieto.
The servicers apply the biggest price discounts to floors, with reductions 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 the buyers are smaller", points out Prieto, so he predicts that the evolution of its value and the rate of sales "will depend a lot on how the new construction market".
According to the latest data from the INE, sales of new construction began to fall in September, by 19.7%, after months of holding up better than second-hand sales, largely because sales were closed often on plan more than a year in advance.
For Mendiluce, "the reality is that with a production of less than 100,000 homes per year, there is little new work and, therefore, the soil 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 - "sell more than 40 million euros per month of land without price discounts", although he recognizes that make "one-off offers and hook on some assets". In his opinion, land is now one of the best real estate assets and will be one of the group's growth levers.
However, land sales are slowed by the stoppage of developers. As explained by Gonzalo Bernardos, professor at the University of Barcelona and director of Forcadell's real estate study, the real estate crisis destroyed the local business fabric, and now, "the big developers are in the background, and many in Spain are already they don't go". And the small promoters 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. In addition, the increase in interest rates and materials has left promoters without margins.
