‘Bounce back expected in Iberia’
The Spanish and Portuguese real estate markets will bounce back from the current lows due to the Covid-19 crisis, delegates heard at Real Asset Media’s Iberian Investment Briefing, which was held online yesterday.
‘2020 will see sharp falls in values but we also expect a sharp rebound, with economic growth returning in the second half of the year,’ said Simon Wallace, Global Co-Head of Alternatives Research & Strategy, DWS. ‘Iberian markets will be at least as good as other European countries and will exceed them in some sectors’.
DWS’s forecasts are for the Logistics, Office and Residential sectors in Iberia to outperform the EU average this year, with Madrid, Barcelona and Lisbon performing particularly well.
‘The Iberian market will remain very active and attractive for the foreseeable future, so my advice is to keep looking for opportunities,’ said Wallace.
The market has slowed down this year but it has not ground to a halt, said António Gil Machado, Director, Iberian Property: ‘There is still activity in the market, foreign investors are interested and new deals are being done’.
The Spain that was plunged into the health crisis was in much better shape than the pre-financial crisis Spain.
‘There is no oversupply and overbuild in Iberia now like there was before 2008, so we don’t expect a huge increase in vacancies,’ said Wallace. ‘There are reasons for optimism, but it is important to remain cautious, as the crisis is not over and it will continue to have a bearing on economic activity and on the real estate market’.
The last few years have seen a remarkable turnaround. Unemployment had halved, positive GDP growth had returned, there has been a current account surplus and investments had flourished.
‘Spain’s increased competitiveness is now the key to get out of the current crisis,’ said Maria Jesús Fernández, Executive Director, ICEX – Invest in Spain.
The government has acted swiftly to support companies and workers, providing liquidity, credit guarantees and a tax moratorium, with measures worth 14% of GDP that will have an impact on public finances.
‘It was a costly but indispensable first line of defence that will allow the economy to return to a path of sustainable growth,’ said Fernández. ‘There are some signs of economic recovery already, positive PMI index, consumer confidence and more spending’.
The current EU forecast is for a for a 9.4% fall in Spanish GDP this year, followed by a +7% rebound next year.
Portugal is also set to bounce back: ‘I’m optimistic that in a year’s time we’ll be back to normal or at any rate to a new normal,’ said Pedro Coelho, Chairman, Square Asset Management.
‘In the recovery phase investors need to be selective and focus on two aspects: sectors where there is distress but with long-term fundamentals, and anything specific to the Spanish market that offers opportunities,’ said Cristina García-Peri, Head of Corporate Development and Strategy, Azora.
The hotel sector ticks both boxes, she said: ‘I would choose the hotel sector over all others because there will be tremendous opportunities in terms of price but also of types of assets that will come to the market’.
An overwhelming majority (85%) of market experts believes that there will be more opportunities in distress over the next 12-18 months in the Iberian markets, according to a snap poll conducted by Real Asset Media. 12% believe opportunities will remain the same and only 3% that there will be less.