Investment funds and Socimis have made a commitment to rental housing in Spain, which has not been slowed down during the year of the pandemic. Specifically, the real estate sector invested 2,000 million euros in the residential market, which represents 24% of everything invested in Spain during the last year. With this, its weight has doubled compared to the total invested by the sector since in 2019, before the health crisis, it was 12%. Only investment in commercial premises remains above rental housing in terms of the evolution of the sector in 2020.
The collapse in the price of urban land anticipates a “small drop” in housing in 2021
This data comes from a report by the real estate agency JLL and BME, the company that manages the Spanish stock market, which, although focused on the Socimi market, analyzes the trends of the real estate sector as a whole after the year of the pandemic. The authors of the report analyze that the “good performance” of this business is due to a “stable income” and high occupancy. This has led to a 22% increase in investment in residential housing, both among companies that were already in the market and new competitors. The study indicates that the weight over the total of the sector is expected to continue increasing.
JLL believes that Spain has become a “market with potential” for investors in operations known as BTR, which consists of building to dedicate directly to rent. Thus, it stands out that the real estate developers themselves are creating subsidiaries dedicated to housing rental, although in the past they were differentiated sectors. The report highlights that it is investment funds and Socimis that are driving the growth that real estate investment in rental housing is having, in full debate within the Government about whether there will be a regulation on income.
Both commercial premises and rental housing have become the two products with the highest investment in Spain during the year of the pandemic, due to the collapse of offices, which until now was the main real estate business in the country . The pandemic has caused a brake in this segment of 80%. However, the report considers that there will be a gradual increase in the hiring of offices as it advances that the impact of the increase in teleworking will be limited. He justifies this conclusion by remembering that teleworking will be voluntary, so companies are obliged to maintain their offices, although these will change their design, giving rise to new office models.
However, the report focuses on analyzing the evolution of the Socimis, that real estate investment vehicle that has tax advantages in exchange for some requirements. According to the data of the study, the 80 companies of this type reduced their net profit by 93.4% in 2020 compared to the previous year, after the accounting impact that the lower valuation of real estate assets had on their income statements. In addition, they registered a gross value of their assets of 51,277 million euros, 1.1% less.
This reduction translated into a negative contribution of 360 million euros to the results of these companies, in contrast to the positive contribution of 1,607 million euros that the valuation produced in 2019. In total, the crisis ended in 2020 with an accounting impact of 2,000 million euros.
As a whole, the market capitalization of all these Socimis amounts to 22,000 million euros, which represents a significant discount with respect to the real valuation of their assets in the market and 14.7% less compared to the situation prior to the pandemic. As highlighted in the document presented this Monday, only four companies add up more than the other 76. All this triggered a collapse in the distribution of profits to shareholders of 38.6% and a cut in investment of 45%, accompanied by a increase in total net financial debt of 1.5%.