(I) Empty neighborhoods, sad homes…

17 August, 2011 No Comments

…are what we have inherited from the crisis. They are located in the peripheries of some of the cities in Spain, Ireland, or in the US such as California….. and for other reasons, specialists also have estimated millions of empty homes in China. For example, in California, since homes are built of wood, and therefore their deterioration is faster, public officials proposed the demolition of homes, and reclassify the land as undevelopable land. Talks in Spanish and Irish markets have shared the same idea, although until now, only buildings that are clearly illegal have been demolished.

The remaining homes are considered to be slowly absorbed by the market, because the number of dwellings per thousand inhabitants in both countries is lower than the European average.

Analyzing the problems that raise ghost neighborhoods we see that:

* The majority are groups of homes, either for one or various households, with or without gardens and communal areas, where few people or almost no one live in them.
* Some buildings are near completion while others are under construction, where cranes and building materials are still untouched giving the impression that workers are gone for the weekend and that they will come back on Monday.
* to the small number of buyers that moved there, they were sold the house with the idea that they would get public transportation, shopping centers would be opened, etc …  in the best cases they only have minimal water services, electricity and gas…. and often, streets are unfinished.
* The question is, what to do with these empty neighborhoods?…. Because empty homes or unfinished buildings suffer damage; after 6 years plants start to grow, cracks start to appear, concrete begins to break and eventually become inhabitable. The more time passes the more likely it is for them to get destroyed. And, who takes responsibility for the costs that they can generate?
* In Spain, from the coast to the outskirts of big cities, one can see these remains, silent witnesses of the housing bubble that wait for a recovery that does not seem to appear.

People who bought properties in these areas face an uncertain future, where their main concern will not only be to sell or rent the house at some point, but to inhabit it. If we take a look at this picture we see this mega urban development, located in a desert between two highways in the middle of nowhere…

There is a great article published in the WALL STREET JOURNAL, Real Estate, 16/09/10, in regards to this topic. To learn more about the WSJ article: http://online.wsj.com/article/SB10001424052748704476104575439783253733728.html

This article is a research of the Spanish Real Estate market and of the consequences for that will face for the economic recovery.

And in particular, discusses mistakes like the one of the Lugano Tower in Benidorm, which was supposed to be one of the tallest towers in Spain, attracting national and international investors with the promise to build a luxury tower, with glass elevators and magnificent views to the Mediterranean sea. The article gives details about the current state of the building: the windows do not close, there are no glass elevators, and toilets do not work. The serious construction problems have led buyers to make a claim against the developer. This is really the end of the party and period in which us, Spanish people,  “thought we were rich”.

€240 million, a rare price for a two floor penthouse…

17 August, 2011 No Comments

…. And possibly the most expensive sold so far ….

The penthouse has an area of 1625 m² and occupies the two highest floors in the “Belle Epoque”  building, in Monte Carlo. Its former owner, banker Ed Zafra, sold it in 1999 to British Developers Candy who have made a complete and costly renovation to continue with the building’s original decorative trends.

For the year 2009, in areas such as Monaco and the French Riviera, St. Tropez and Cap Ferrat, prices of luxury homes have risen due to the higher demand from Russians and Arabs. This can be seen as a sign that ‘the wealthiest’ return to the traditional luxury house market, as in recent months record prices also have been reached for homes in Hong Kong and London.

It is not a common three-bedroom apartment.

Each suite of the apartment has its own movie theater, kitchen, dressing room, 2 bathrooms, spa, library and garden/ patio. It also counts with a security room, shielded, in case of theft (new homes are currently being equipped with this type of room also referred to as “The panic room”).

The terraces combine a decoration of vegetation and sculptures. In this picture there is a piece of the author Lorenzo Quinn, called “Reflections.” The decorative elements of the main terrace are quite baroque with views to the port.

In the dining room, tapestries are hand-painted and the use of glass is quite noticeable. On the floor are details of marquetry, and the roof is finished with a coating of platinum.

2010 World Expo Shanghai, China

17 August, 2011 No Comments

Much has been said about the Expo, which closed its doors on October 31 2010, but there are always uncovered pictures and details that dazzle and we were not aware of. The central theme of the exhibition is “A Better City, A Better Life,” representing the common desire of all societies to have urban nucleus in accordance with modern life, welfare and sustainable development.

At this Expo, cities were able to directly participate, and for that reason, a space referred to as Best Urban Practices Area was created, where several cities around the world presented their experiences and proposals, as well as their point of view of a better model of urban development. Spain was represented by three cities: Madrid, Barcelona, ​​Bilbao.

Given the size and the number of participating countries, the Expo was considered the largest international exhibition to date, with the representation of 192 states and 50 international organizations.

The Chinese Pavilion aimed to show visitors the Chinese culture and its traditions. Its shape was inspired by the ancient Chinese imperial crowns, and the facade, with four columns and a central body in the form of a truncated pyramid, is covered with painted steel beams, twisted in accordance to the Dougong Technique. The ceiling has the shape of a Sudoku. The urban development in China from old times to present times was shown in the Pavilion.

The Expo Cultural Center, designed by the ECADI team of Chinese Architects, was one of the 5 buildings that would remain intact after the Expo disappeared. It looks like a flying saucer, which at night, becomes what appears to be a floating city.

The EXPO HUB, a 1km walk that acts as the access point of the streets and the river, is built with a plastic membrane supported by 50 masts and six funnel-shaped columns.

this picture is the interior of one of the pavilions. They delve into different aspects of urban development:

* The Thematic Pavilion: based on the architectural techniques Shikumen (typical of Shanghai), with two facades with an origami design.

* The Urbanian Pavilion: dedicated to people living in cities. Made by the Dutch architect Herman Kossmann and Mark Jong

* City Hall Being: shows the daily life in the cities, seen as living organisms.

* The Urban Planet Pavilion: represents the process of urbanization at a global level and its interaction with the environment and the countryside.

* The Urban Footprints Pavilion: its purpose was to cover the development of cities from ancient times to current times.

(1) L’Immobilier à Paris, flambe…malgré la crise ou à cause d’elle.

2 August, 2011 No Comments

It is surprising to read that in the U.S. the housing slump raises fears of another recession (talks are of a W-shaped recovery with fall backs and improvements until getting out of the recession, triggered by a credit bubble).

SPANISH real estate sector is also in a terrible or worse situation due to the lack of tax incentives and the financial sector, among other reasons, widely discussed in previous posts.

……… on the other side, in FRANCE BUILDINGS ARE MORE EXPENSIVE THAN BEFORE THE CRISIS AND WITH A HIGHER ROTATION!!

The real estate market in France, especially in the principal cities like Paris, Bordeaux or Lyon, in recent months has been characterized by rising prices with an increase in demand faced with a shortage of product for sale. Buyers want to take advantage of low fees and the role offered by the housing market as a safe-haven.

This is mainly due to four factors:

1 – The low amount of properties for sale, to this day, in the housing market: even though for a person who owns a property it is the best time to sell, the ones that do not need to sell, choose to wait an maintain high prices because they know they will have a buyer and a price that increases each month. So they decide to seat and wait to get a higher profit (prices of flats have risen 9.3% in the last 6 months, and professionals predict a total of 15% increase since June 09) .. average prices are around  7,080 € / m²

2 – Low interest rates: Public notaries responsible for the legal aspects of real estate transactions confirm that the fact that banks have started to lend funds again, along with low interest rates have helped to restart the French real estate market. However, a full recovery will depend on the stability of the economy in France and its labor market.

3 – Government aids, which have always existed for the real estate sector, seemed to decrease beyond 2011. Thus, it is no longer possible to fully benefit from these assistance. An example of aid being cut, is the “loi Scellier de defiscalisation immobiliére” active since December ’08, which allows that, if a new property is purchased in Scellier, and is put up for rent from 9 to 15 years the owner gets a tax deduction of 25 to 37% of the purchase price of the new building up to 300,000 €, which can add up to a deduction of 75,000 € divided by 9 or € 111,000 over 15 years (for more info check http:/ / loi-scellier.trouver-un-logement-neuf.com/conditions-loi-scellier.php). In addition to this tax benefit, do not leave aside the gains from the subsequent sale, the result = Jackpot!!

4 – Surprisingly the housing crisis strengthens the real estate sector as a safe-haven (same as gold). When the economy becomes uncertain, French people begin to buy real estate considering real estate properties a safe haven. The best-selling buildings are medium size flats to put them for rent and get an steady income. Otherwise, what could they do with the money during these troubled times? There is no incentive to invest in the stock market, banks lack investors confidence after the bankruptcy of Lehman Brothers that rose doubts about the solvency of financial institutions and its savings strategies. Thus, buying a real estate asset is something that becomes a property, which in the long run creates wealth.

The size (in square meters) is important!

28 July, 2011 No Comments

When I visit a property that is put up for sale (either a house or a flat), I always ask a question that rarely receives a specific answer: What is the exact area of the property ??….. And it is not an easy question to answer, as it depends in every case.
If there are more than one owner selling that property, they usually glance at each other to see who has the most approximate footage, since nobody is certain. As a consequence, doubts arise and owners start giving various opinions of the property’s size without agreement.

If there is only one owner, he often has an answer, but when he is asked specific questions: e.g. the exact useful space (in square meters), whether he refers to m² as a total, or whether he includes terraces / porches, the garage (the parking spaces), or the common areas of an apartment building… uncertainty starts to spread out!

-value properties

In recent years, it was very important to know the exact number of m² of the property being sold because there were scales, such as  X€ / m², for different locations, which in addition to the property’s condition, gave a good estimate of the market price. However, times have changed and as I mentioned in previous posts (ref. appraisals) in a changing market, X€ / m² paid in different areas are no longer crucial to determine the market price. Nowadays, an agreement is reached between what the owner requests and what the buyer is willing to pay. However, it is still important for the buyer to know the exact size in m² of the property he/she is buying.

Valuations were of great support, because the property’s measures came out to be very accurate. The problem is that now owners avoid valuations because they are expensive, and the price the valuation determines today, may not be of reference 4 months in the future due to the continuous market changes.

At the time of the sale, it would be fair that the original architectural plans be presented to the potential buyers in the initial meeting with the owners, or an updated version if additions have been made, as well as the deed of the purchase. In reference to the assessed values, if they differ, there is still the possibility to update / correct them later on.

In some cases, when dealing with old properties no documents can be found, which makes it difficult to determine whether the size of the terraces or patios (e.g. and one in a flat in “l’ Eixample” could add many m²) is included. If a client was very interested in a certain property and found himself in this situation, I would suggest him to take a trip to the property with a surveyor / architect / decorator to take a measurement of the building site before signing the earnest deposit.

To fix this and to give a greater service to the buyer, when dealing with old or second hand homes that need a complete rehabilitation, QUALinHABITAT hires an architect responsible to raise the original plans, with an updated footage and who also presents a design model of how the rehabilitation should be done. This information is delivered to the customer and will dramatically speed up the process (where questions about problems of structure, risers, main walls, or m² arise). These questions tend to be already settled in these planes. From that point on, the buyer only has to ask his technician for a final advice, which saves him time and money because all the data needed to make a decision is available.

Please take this as a suggestion as during the summer there is plenty of time to prepare and find the documents, which with the everyday rush, the task is usually postponed and to find the papers of a 20, 30, 40, 50+ year old property, the plans of reforms made to the property, or previous sales, if any, can take a loooong lo0oong time.

The denial of the Diagonal Avenue’s reform = potentiating effect for Rambla Catalunya

27 July, 2011 No Comments

Despite the efforts, no changes will be made to Diagonal Avenue, since the project of building a pedestrian zone and convert it into a commercial area was postponed after Barcelona’s citizens voted against it.

This may be one of the factors that have made Rambla Catalunya (another street downtown Barcelona) to have a rotation again of over a month to cover an available store space. The area with the highest demand is along the middle of the Rambla where several Zaras and the Pink Boulevard are located.
In comparison to Paseo de Gracia, the public who shops in Rambla Catalunya is more local, where in the first, is highly international mainly because there are several must-see buildings for tourists in Barcelona, ​​and the supply for dining is growing fast. In Rambla Catalunya there are still traditional businesses (Quilez, La Selecta or Mauri), which in comparison with newer fashion brands, may make it look a calmer environment.

However, we should not forget that another reason for the increase in demand from local brands in Rambla Catalunya, could be due to the lower price asked to rent a store caused by the current crisis, which in the past, made it impossible for these brands to access the street. A third reason, not less important, could be that the payments for the transfer of store space have gradually disappeared.

Some store spaces that recently were held by banks or restaurants have been replaced by new retail brands. The people involved in the sector (expansion 7.10) state that there are no longer opportunities and that the demand of brands for these spaces already exceeds the available supply of stores.

In 2010 brands such as Custo Growing, Etxart & Panno, Imaginarium, Tuc-tuc, Pretty Ballerinas, Aninoto or GC Watches have entered the  Rambla.

(I) SACRESA competition: refinancing problems

29 June, 2010 No Comments

All the media are reporting that the bank has refused to refinance the debt and has not accepted the plan submitted by SACRESA, which in its attempt to become one of the largest Spain real estate entered into an excessive debt (with the purchase of Metrovacesa), which has led it in an economic collapse situation.

To undertand how this could happen in 3 years, to be on the top of the top ten ranking real estate companies to fall into insolvency, it is necessary a bit of company history and the evolution of its growth.

Like other real estate developers, Sanahuja’s family company began building homes in Barcelona due to the high emigration suffered by this city and its industrial belt during the 60s. From building blocks of flats in popular neighbourhoods went to make bigger real estate developments. In recent years, they have been present in large transformation projects of Barcelona, like Illa Diagonal, Basketball City Badalona, the shopping center Les Arenes and the underway project Porta Barcelona, next to residential area of Barcelona. After that, their expansion covered the rest of Sapin to go ahead in the foreign market.

Sanahuja entered the capital of Metrovacesa, a company owned by Joaquin Rivero and, to gain control of the company displacing Rivero, winning the presidency and control 80% stake in the compoany. It had to assume a debt of close to  € 6.000 million. This project went wrong when the bank not allowed the fusion of Metrovacesa and Sacresa; this union would hace made more affordable the debt incurred by Sacresa, all further aggravated by market crisis and the current slowdown in sales.

After having take Metrovacesa’s control, with 80% of capital (which he lost a year later), began buying important product based on debt, and do went to buy the headquerters of HSBC bank, one of most expensive buildings in Europe by € 1.600 million, competinfçg with a major Saudi group.

Perhaps one of their mistakes was not looking at the value of what they bought, and so again Metrovacesa resell HSBC bank tower a year later by € 1.000 million. But there have been billions of euros that became an unsustainable debt that has led to this situation.

Sources: La Vanguardia, Expansión and Cinco Días newspapers.

(I) A reverse mortgage: home ownership as an ATM

27 June, 2010 No Comments

The reverse mortgage becomes a formula created for retirees supplement thier pensions, so that older homeowners may obtain some extra money by charging an annuity, in exchange for their home, without sacrificing ownership or use thereof.

The requirements of the law are:

• That the applicant and the beneficiaries are 65 or older or are suffering from severe dependence.
• That the property on which the mortgage is either the main residence.
• That the debtor of the loan amount available through any regular or unique.
• That the debt will only be payable by the creditor when dies last borrower.
• That the property was rated ans insured against damages.

With a reverse mortgage, homeowners can continue living in their home, without having to leave it, until their death. This assures that they will remain owner of the property.

When the owner of mortgage dies, his heirs may get the house, returning to the bank the payments it has made the mortgage more interest. It corresponds to the heirs liquidate the situation with the credit institution. In this case, the institution can not demand any compensation for the cancellation of the mortgage. Once they have paid and the heirs have released its load housing mortgage, can inherit it in the same way as any other good.

If the heirs do not want or can not cancel the mortgage, the institution may foreclose and collect the debts due more interest. But the agency may only collect the goods they have in the inheritance, without being able to collect anything from the personal capital of the heirs.

In this type of mortgage, the homeowner receives a periodical payments or a single payment for a maximum amount, which determines the percentage of the valuation at the time of the mortgage creation, and to reach that figure, they stop have income, but the debt continues to generate interest.

Avatars of the crisis on emblematic buildings of Barcelona

4 June, 2010 No Comments

Walking in frotn of the old building BANESTO in Plaça Catalunya of Barcelona, 10-11, corner of Passeig de Gracia, you wonder what fate awaits it and who will be the next owner …

Maybe back in the hands of banks or funds that were in Spain and it seems to slowly come back, or perhaps some FO … Of course, the building’s location is unbeatable.

It is another building in Barcelona that seems to always been there, and it becomes uncommon to see the state of neglect in which it is now, pending a settlement of the bankruptcy that is immersed in the present owners, Monteverde Group Ballester and real estate from Valencia.

Still have hung posters where it began to advertise the future promotion. Projected starting any building project in the short term this is not feasible, therefore, what happens is most likely decline over time which gives a bad image to the thousands of tourists who visit Barcelona in general daily.

This unique building was acquired in 2006, worth approximately € 100 million for the Monteverde Real Estate. This Valencian real estate gruop, together with the group Ballester, formed the partnership society Andybal for the rehabilitation of buildings in privileged enclaves, with the acquisition of buildings in Madrid and Barcelona, for the promotion of exclusive homes. In this case it was a construction project of 52 exclusive apartments with parking, but the resulting paralysis of the real estate market led the project, like many others, would slow down at first, then stopped altogether.

Currently the building is already in the market for a potential buyer.

Another building also for sale is a former hospital dated from s.XV, in Barcelona city center, which is at an advanced stage of rehabilitation, respecting the old structure which has a central cloister surrounded by arches. The project was to make a small hotel, even luxurious, but the owner’s heirs decided to sell it.

However, due to the evolution of the current economic situation, the few aid given by banks on credit or mortgage, plus the uncertainty in the price of current market value of the property, make purchase transactions be difficult to be reached.

Why + who + what + how to invest in real estate today?

2 June, 2010 No Comments

We have been seeing for several months, studying, analyzing past, present and future problems of housing market.

Rarely could be made an optimistic forecast about it. But maybe today I would at least contribute something more positive after having reflected on past crisis.

… And considering some of the ideas of Warren Buffett, the Oracle of Omaha, which broadcasts to their customers / shareholders, where:

• It makes the anticipation that the U.S. housing market in 2011 will be out of the crisis, although prices are not still the ones of 2005.
• Advises that people always has to have a good cash position to take advantage of investment opportunities when they arise.
• Indicates that it is much better to invest in business models, which are easy to understand. 

ABOUT HOUSING, if we make a historical note that after previous downturns, people in general turned to buying a house or brick, whether to make a safe investment, have wealth in their old age, leave a legacy or make a donation their children.

For any reason whatsoever, prices are now falling. The problem is not to know if we bought an appartment or brick which is purchased from a market price today and is well bought, or bought only half right, since it is difficult to set prices in today’s market, in recession, because today taxation prices for sure in a month or two are no longer valid, and in most cases should be aware of the offer that makes you a potential purchaser to come to negotiate.

The good idea is to have purchased at the time the market price was low, so that in time, as happened after the other crises, we may see that real estate property will be worth double or triple.

I’m just speaking from the point of view of the experiences had during the time and that is expected to be repeated within + / – long time, as the housing market is cyclical, plus being one of the engines of our economy.

But always thinking in case that a real estate purchase has been made with an accouracy study, for example, in a city like Barcelona, buying in any of the areas that usually have been easy to sell, foreseeing that in future there will still be enough demand (in streets such as Passeig de Gracia, Diagonal, etc.).

ABOUT CONSTRUCTION OF HOUSES, reflecting the thinking that makes Garcia-Montalvo, economics professor at 23.05 Vanguardia, whether it is right to build in a place where there are many houses to sell, the immediate response that comes to the head is not.

But he believes it, and the example is Las Vegas, where despite having a large portfolio of empty houses, and prices suffered a decline of 60%, construction has doubled. And the trick? since the fall of the price of land and construction costs of the new homes are very competitive against surplus product already on the market.

This is a warning to Spanish developers who have not reduced prices below the mortgage value.

… Let no one take it as a council to follow, since it is only my view … a feeling + the history of past crises + the pulse of the street + how to invest today for wealthy + opportunities market price + Euribor down + …