From real estate crowdfunding to buying commercial and residential properties in specific locations. We highlight the key assets in which to invest in 2019.
The investment market in Spain maintains a positive dynamic which started in 2014. For the past 4 years, the volume of investment attracted in Spain as a whole has been increasing to exceed €18.800 m in 2018, 39% higher than in 2017 according to the Forcadell National Investment Market Report. Throughout these years, the most attractive assets -prime products- have become less available, with yields exhibiting a slower development. In the RE investment scenario, investment funds have been gaining leadership, increasingly more professionalized and specialized in certain assets. Digitalization has also presented new formats and structures in real estate investment, allowing examples like crowdfunding, which facilitates access to RE investment to smaller investors.
Considering the current framework of RE investment and the trends in the real estate market, we highlight the key assets to invest in 2019:
Real estate crowdfunding is a collaborative system that allows to micro-invest through platforms that select the best opportunities, take care of all the work, like listing deals, doing all the legal work, and then reform or sell the property looking for the best return. According to Miki Manzanas, co-founder and CEO of PropCrowd, a RE crowdfunding startup created by Forcadell and Rentors, “PropCrowd allows you to become the co-owner of one or several properties, starting from a small economic amount.” Through a simple business model, the crowdfunding platform facilitates users to diversify their investment portfolio and to choose between different real estate projects. In the widespread supply of opportunities offered by PropCrowd , currently there are assets offering yields standing from 12% to 20% in a relatively short term: a maximum of 12 months. It is an ideal investment option for small investors –with a capacity between €3.000 and €10.000- or not so small, larger investors that may be looking to diversify their portfolio and reduce their risks.
The yields offered by investment in residential properties may vary depending on their location -prime, second or third lines- . In Barcelona as well as in Madrid, first lines offer yields standing at around 3%. Toni Lopez, partner and director of the Corporate Area of Forcadell, explains, “These are investments that are valued not only for yields gained by renting the house: the investor is opting for a property in a big city, thinking about capital gains, increasing their assets, and/or the profit of the future sale of the property.”
Deciding to invest in a property located in second or third lines will offer in 2019 as well as in 2020 higher yields, up to 7%, although also higher risks.
From a finance perspective, 2019 is the ideal year to purchase a mortgage loan. In the first place, banking entities are offering loans of up to 80%, and in the second place, the euribor is still in negative figures.
Commercial properties, compared to residential properties, require a higher initial investment, offer higher yields and involve less management by the owner to have the property ready to rent, since in most of the cases, it is the tenant who takes care of the reform of the premise. One of the key aspects when choosing a commercial property to invest in is rotation. It is important to examine the location of the property and into which sector it can be introduced, in order to know if the business will work in that area or will be more likely to be rented or sold.
Sharing platforms like Shopinion, which asks citizens what type of business they want when a commercial premise has been left empty, make it easier to find out the commercial needs of the neighbourhood. With this information, the owner of a retail premise is more likely to increase the viability of the tenant’s business and therefore significantly reduce the risk of rotation. Another way to reduce expenses and limit risks when purchasing commercial premises as an investment is to acquire premises already rented, which assures profitability. Investment funds continue leading the investment market in Spain, especially international funds. In fact, 65% of all investment in 2018 has foreign origin, which often have been managed by local operators. In 2018, investment activity by large construction players revolved around expanding their RE portfolios, carrying out mergers with other companies and initiating extensive new construction projects.
Based on the type of asset invested, two clear trends emerge from 2018, which will continue and further increase throughout 2019: the specialization and surge of alternative asset investments.
“In order to obtain greater yields in the same locations and assume price increases, investors have been forced to work with alternative assets”, explains Pau Cabot, investment consultant in the Forcadell Investment department. “The large investment funds, in their search for alternative assets offering higher yields are increasingly opting for sharing modalities”. Ivan Rubio, also investment consultant in the same department, points out “The best example is found in the office sector with the coworking trend, which is in full expansion. In the residential sector, co-living is the latest buzz, but it is awaiting a clear regulation.”
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