The reason for this is that it already is one of the Spanish economy’s basic sectors. In particular, tourism is the GDP’s largest booster, and the fourth largest is commerce. On the other hand, these will also be the real estate segments to be most affected by the pandemic crisis, with a possible impact of 30% on the country’s GDP.
Nevertheless, Manuel Enrich revealed during the initiative Iberian Property Investment Talks that the real estate sector «is very healthy, not indebted and there is great appetite from investors». What is needed is to reach «public-private agreements to build projects together». As an example, a municipality can provide terrains to a private developer to build affordable housing for rent. Authorities can offer tax benefits and concessions and must be more flexible in all that is related to permits and licenses. «Authorities should be open-minded in order to understand proposals such as mixed uses», he stated.
One of the highlighted cases is megaproject Castellana Norte, which after 25 years on the back burner, was approved during the country’s state of emergency. This is an example of how the Madrid authorities were willing to streamline the licensing process.
Opportunities in rental housing
In these circumstances, real estate assets may be one of the best types of assets for an investor. The assets with the lowest yields within the Spanish real estate market, which are rental housing assets, have a 3% yield because they have low risk. The number is very attractive. Hence, the build to rent segment will be one of the best opportunities provided by this crisis, according to Enrich.
Another virtue provided by the rental housing segment is that it has a very low default rate. According to market data, this rate was around 10% in April, whereas for other types of assets, whose yields were set between 5% and 7%, it could reach 40%. Any of these assets will be more attractive than other options within the market.
Nevertheless, Manuel Enrich says he is prudent regarding the future and considers that the scenario of a 20% to 25% reduction in terms of real estate activity is optimistic. In his view, «we will only return to where we were in 2019 by the end of 2021 or the beginning of 2022».