real estate

The Catalan Government put 4 buildings up for auction this Friday, following a plan to rationalise the spaces it uses, reduce spending and increase revenue in order to reduce public deficit. The headquarters of the Catalan Finance Ministry, located in a 8,000 square metre Art-Nouveau building in Barcelona’s Rambla Catalunya, has been bought by an Italian pharmaceutical company through FINAF 92 for €23.2 million. The other building, with a surface of 7,200 square metres, was used by the Catalan Police and is located in front of Barcelona’s Ciutadella Park. It has been bought by the German hotel company MO Düsseldorf Immermannstrasse GmbH & CO. KG for €14.1 million. On Thursday, the Catalan Government announced a plan to reduce its office space by 45% in the coming year by concentrating services. The plan includes selling the most attractive buildings.

The Catalan Finance Minister presented on Thursday a ‘Space Rationalisation and Optimisation Plan’ that foresees to partially leave Barcelona’s city centre and set up offices in cheaper areas. Nonetheless, the measure does not include citizen information and care centres such as schools and community health centres. Furthermore, the initiative also plans to reduce the global office space by using previously-empty floors and concentrating services without laying off staff. The objective is to pass from holding 377,000 square metres to fully occupying 207,000 square metres, a 45% reduction. By doing so, the Catalan Government expects to reduce rents by a 20% average, to cut off indirect costs by 50% and to decrease energy spending by 30%. Furthermore, it will sell the most appealing buildings.

Housing prices increased by 0.8% in Catalonia during the third quarter of 2013, which is the first quarterly increase in the last three years. However, despite the positive figures, in annual terms prices at the end of September were 8.1% lower than those registered 12 months ago, due to the price falls registered in the second half of 2012 and the first 6 months of 2013. Between July and September 2013, prices of newly-built flats and houses in Catalonia rose by 5.7%, while those of second-hand housing were still decreasing (-0.3%). However, overall figures suggest that the real estate market may have reached the bottom and that its recovery might be about to start. In the whole of Spain, housing prices rose by 0.7% in the third quarter of 2013.

The real estate subsidiary of Catalonia’s second largest financial entity, Solvia, increased sales by 56% compared to last year’s same period. The company posted its provisional results for the first half of the year, although it has decided to extend its seasonal sales campaign until the 15^th of August due to the high demand. Banc Sabadell made €1.27 billion from the sale of 7,747 properties. The forecast for the whole year is to sell 16,000 properties. Statistics released by the bank show that 15% of buyers are non-resident foreigners while 33% purchase to invest.

The Catalan Government will continue to occupy the facilities as a tenant, annually paying €16.2 million in rent over the next 20 years. The decision to sell Catalan Government properties had been taken to ease the difficult financial situation and obtain liquidity. The initiative is part of the austerity measures adopted to reduce the public deficit and increase revenue. Taking this last sale into account, the Catalan Government will have sold 17 properties for a total of €266 million since 2012. The Catalan Minister for the Presidency, Francesc Homs, emphasised that the revenue generated by these sales will allow the Government to undertake fewer budget cuts.

The Wealth Transfer Tax, which is levied on sales of second-hand housing units and any other used real estate, will be raised from 8% to 10% as from the 1st of August. The Catalan Government expects to earn an additional €50 million in 2013 and €150 million in 2014. The Catalan Finance Minister, Andreu Mas-Colell, argued that the rise in the tax rate is equivalent to the VAT charged on sales of new housing units and that both taxes should be “parallel”. He also added that other Autonomous Communities had previously raised this tax to similar levels.

In March, 2,750 flats and houses were sold in Catalonia, 13.9% less than a year ago in the same month. 32.5% were newly built homes and 67.5% were second hand ones. The previous worst month of the economic crisis had been December 2011, when 2,778 housing units were sold. However, the results from March represent the lowest level of housing sales since January 2007. The reasons behind this drop are the economic recession and the crisis of the real estate sector. In the whole of Spain, housing sales dropped by 12.6% compared to a year ago, with 22,086 flats and houses sold. However, at a Spanish level, the worst month in the last few years is still April 2012, when 21,551 housing units were sold.

The new tax would not affect individual citizens neither would it be implemented in areas without housing demand. The tax aims to put apartments and houses, owned by banks and real estate companies that remain empty despite being in areas with a demand for housing, back on the market. The expected effect is an increase in the amount of housing on offer in those areas and to make renting cheaper. The Catalan Minister for Public Works, Santi Vila, announced the new tax on Monday morning. A few hours later, the Catalan President confirmed they are considering it, although no final decision has been made. The Left-Wing Catalan Independence Party (ERC) stated that the measure was part of the agreement reached with the Centre-Right Catalan Nationalist Coalition (CiU).

The 2,885 housing units sold in Catalonia during December increased by 4% compared to the figures from a year ago. The main reason for this rise is that, in January, the Spanish Government’s tax benefits applied when purchasing a house – approved to reactivate this economic sector after the collapse of the real estate market – will no longer exist. 66% of the houses and apartments sold were second hand, while the other third were newly built. For the whole of Spain, housing sales increased by 2.3% in December. In 2012, house sales dropped by 11.3% over 2012.

House sales maintain a decline as results show that sales have fallen by 19% in first half of 2012. Despite the negative overall trend, Lleida and Tarragona saw a boost in sales last month, making up for the reduction in sales experienced in Barcelona and Girona, culminating in a 2.7% overall increase in sales this June for Catalonia. In Spain, the fall in the first half of the year was 21% and in June, in contrast to the increase Catalonia, there was a fall of 11.2% compared with June 2011.

House prices have dropped for 17 consecutive quarters in Catalonia. Last quarter’s drop was the highest since the crisis in the sector began in 2008, falling by 14.6% in the last 12 months. In Spain as a whole, house prices dropped by 11.8%.

A research study carried out by Barcelona’s Universitat Pompeu Fabra (UPF) has concluded that there is a constant trend of decline. Between 2006, when prices peaked, and the end of 2011 Spanish property prices have dropped by 41.7% as average. The coordinator of the study, José García-Montalvo, pointed out that there has been an accelerated fall from the second half of 2010 and the same period in 2011 when prices dropped 19.7% in Spain. García-Montalvo added that this trend would not change in the short or mid- term if the credit market does not recover.

The bank created from Catalan savings bank CatalunyaCaixa is expected to be sold within the next two months. CatalunyaCaixa was intervened by the Bank of Spain last September 30th, as it could not reach the required core capital. The Spanish Fund for Orderly Bank Restructuring (FROB), owned by the Spanish State, currently owns 89.74% of CatalunyaBanc. The FROB has decided to disinvest in the Catalan bank, which starts a competition process that will sell 100% of CatalunyaBanc’s shares.

The Spanish Minister for the Economy, Luís de Guindos, wants to speed up the process and have the entire Spanish banking system restructured before the summer. The Spanish Minister also said that he is expecting further concentration processes of other financial entities to be announced in the coming weeks. CatalunyaCaixa’s banking business had a profit of €304 million, although the €1.5 billion provisions for the real estate business caused a €1.34 billion loss in 2011.

A study by a Catalan savings bank CatalunyaCaixa recommends helping young people to rent empty apartments in order to reduce the stock. The stock is expected to rise to 131,100 houses in Catalonia, while in the whole Spain the figures will reduce to 693,000 by 2015. However the situation is not the same throughout Catalonia, and some places such as Barcelona have a smaller stock in relation.