Winds of change in the real estate sector. Traditional firms coexist with the new players that emerged after the crisis. According to experts, they are all moving towards a new scenario in which there will be increasingly fewer but larger players, which will allow them to “withstand better a change of cycle”.
“We are going to see greater concentration in our sector; I have no doubt,” said the president of Asprima, Juan Antonio Gómez Pintado. “It’s a matter of scale efficiency, as has been the case in most industrial sectors in the country, who have already gone through these concentration processes,” he added during his speech at a real estate developers meeting organised at IESE.
The developers highlighted two factors conducive to this scenario: the concentration that has already taken place in the financial sector, and the fact that few companies will have the capacity needed to generate land.
Firstly, only “six or seven financial institutions” have allocated resources to finance the real estate sector, compared to more than 40 before the crisis. “Not everyone has the same appetite”. Additionally, it can be concluded from the analysis of the bank’s annual budgets for financing this sector that there is “not enough financing available for what is coming down the line,” said the president of the developers.
In this regard, Gómez Pintado explained during the meeting “Housing: new approaches”, organised by the Real Estate Monitoring Centre, that some 100,000 new works are expected to be approved. This, together with the average mortgage in Spain, which is around €160,000, support the finding that there is financing available for about 65,000 homes only. “The first concentration is the outcome of a natural selection by financial institutions when they need to decide which projects will be financed,” said the president of the developers.
Another factor that will encourage further concentration in the sector will be the capacity to purchase land with own funds, especially land zoned for development. “The natural trend will be towards larger companies that have that capacity,” Gómez Pintado added.
“In the previous cycle, the size was not so important because banks were willing to finance. Small companies could access large swathes of land, allowing them to access the raw material at a competitive price. However, this is no longer possible today because banks rarely finance land, so you have to buy it with your own resources,” the executive recalled.
In this new scenario, some medium-sized companies will find a niche to operate in two or three provinces, and smaller companies will be present in only one city. These will be specialist companies; however, “their activity will not be stable enough to ensure their survival,” explained Gómez Pintado.
Discerning the future of the real estate sector and the level of concentration is another major challenge. What seems clear is that there will be intercompany transactions to increase volume and capacity for survival within the sector. Realty firms will also join the IPO bandwagon, including those already announced. “There are only eight or nine firms that can be listed. I believe that they have the adequate market size, and we will see them in the not too distant future,” he said.