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2017 / iberian.propery // 25
ISSUE: TOP IBERIAN Investors //dossier
I suppose the main challenges for real estate investors
interested in Iberia are not much different from the ones
faced by investors interested in other European countries,
particularly those investing in countries that are not part
of the core nucleus of European investment markets (UK,
Germany, France). Interest in these peripheral European
markets has been growing steadily since Q3 2013, and the
abundance of money ready to be deployed by investors
(both equity and debt) has not been matched by the quantity
and quality of available assets. Therefore, we face today a
seller’s market, with prices peaking around (and sometimes
surpassing) maximum historical highs.
All of this has to be analysed in the context of historically
low interest rates, which has been used as an argument for
those defending that these prices are comparatively not as
high as the ones registered in 2006-07. The market seems
to agree with this view, as there are no apparent signs of
reduced appetite; on the contrary, the amount of money
allocated to Iberian markets seems to be growing.
In this framework, competition for assets is very strong
and some investors have acquired assets accepting lower
returns than they would normally seek or going higher up
the risk curve than they would normally go. Others may
have underwritten those assets based on unrealistic rental
growth prospects, a vision encouraged by some local
agents and that investors less familiar with the territory
may take for granted.
Having a good knowledge of the occupier markets and
reliable advice on the ground may help you avoid these
pitfalls and correctly forecast the behaviour of the asset in
the next years. But this is only part of the equation, as you still
need to make assumptions about how pricing will evolve in
the capital markets in a scenario where inflation is growing
again and there is talk of interest rate hikes and a possible
change of stance in quantitative easing.
Developing a pan-Iberian strategy is not only possible but
desirable, as there are some synergies between the two
markets of Portugal and Spain – namely in the operators
and investors that are more active in both. But there are
fundamental differences in terms of scale and speed of
movement between the two markets, and any pan-Iberi-
an strategy needs to take this into account. Availability of
resources and speed of execution will be paramount, as is
often the case in very competitive markets.
I believe the case for investing in Iberia is strong, but should
always be founded on an intimate knowledge of the two
markets and on a cool head – always keeping in mind the
relationship between risk and return, andwhere you wish to
position yourself as an investor on both parameters.
Paulo Sarmento
Meyer Bergman
Principal
«Developing a pan-Iberian strategy is not
only possible but desirable, as there are
some synergies between the two markets of
Portugal and Spain – namely in the operators
and investors that are more active in both.»