A turbulent year for the real estate sector is coming to an end: it began with historic records in transactions and continued price increases, but, as of September, rate hikes and poor economic forecasts have darkened the atmosphere. From Domus, Maribel Bernal Freytas (Associate Director) analyzes the situation and previews her company’s projects to face this new cycle.
Question: To what extent is it affecting the industry and how much do you think it will really affect it?
Answer: The sector is at a moment of maturity and solvency that allows it to face these bad forecasts in the best possible way. The rise in interest rates is a consequence of the inflationary spiral we are experiencing, but we must not forget that the best safe-haven investment in the face of inflation is real estate, and more specifically investment in housing. Current rates, despite the increase, are still reasonable and mortgage efforts per household remain below 40% of household income.
Sales rates continue to be stable and sustained in the last quarter of the year and Domus RS expects the first part of the year to be less dynamic, especially in the most popular part of the market. We estimate that projects aimed at medium and upper-middle income will maintain the good trend with rates and prices similar to those of 2022.
Q: Residential is always one of the key sectors. Many experts point out that transactions will drop even by double digits, but prices will not drop as much because supply will also fall. What do Domus think?
A: The new residential real estate market has maintained a sustained and steady growth in recent years, not even slowed by COVID 19.
At Domus RS we do not see a price decrease in the new construction segment, due to its characteristics of bankable product and medium and long term delivery, it is easier to avoid the market ups and downs in the short term. The demand for new housing is much higher than the supply and the forecasts for future projects do not manage to even out this difference.
Q: How is Domus dealing with this situation? What are your strengths?
A: Domus RS is in a sweet moment, about to turn 10 years old, we have a large portfolio of new residential projects, more than 60, spread throughout the territory, working for major real estate developers in the country.
We have a very healthy balance sheet, a team with extensive experience, tools and information systems adapted to the current situation and a very important implementation and diversification. We undoubtedly believe that 2023 will be another year of success and growth for Domus RS, where we do not rule out inorganic growth through the acquisition of a company in the sector.
Q: Expansion plans: will they continue or be put on hold?
A: Domus RS currently has offices, teams and structure in Madrid, Andalusia, Galicia, Asturias, Cantabria, Castilla-La Mancha, Basque Country, Catalonia, Balearic Islands and Valencia. And in Portugal, both in Lisbon and in the Algarve. Our vocation continues to be growth in those areas where we are not already present and consolidation where we are already present.
Q: What is Domus’ line of action at the moment: strengthening markets already explored, starting in others?
A: As we mentioned before, we want to grow and consolidate in the places where we are and develop business where our clients ask for it and where we can add value. Each opening of an office or delegation involves a detailed study of the market and its potential. We remain committed to the growth and development of the company.
Q: Are you planning to delve into other segments in addition to new construction?
A: Domus RS offers a wide range of services related to real estate asset management. In addition to the commercialization of new buildings, we have a division for the commercialization of bank or foreclosed assets that we market thanks to our network of offices in different areas of the territory.
Additionally, we provide asset manager or delegated promoter services for funds or investors that do not have their own structure, a good example of which are the projects we are developing in the Algarve for one of our clients.
Q: The government seems to be accelerating with its rental plans. Could it be a way out, considering that there will be public and European investment?
A: It is great news for the sector that the Government has approved an agreement between the Ministry of Transport, Mobility and Urban Agenda and the Public Business Land Entity (Sepes) for the promotion of affordable rental housing with which it is estimated that 17,300 homes will be promoted within the Affordable Rental Housing Plan (PVAA). Let us hope that these measures can really accelerate and promote those more than 100,000 housing units that the Government has set as a goal, and that affordable rental housing can be offered to the public, especially to young people.
Evidently, if half of these houses will be, as the Government says, from the public housing stock and the remaining 50% from Sareb, the banks and the European funds will require public-private collaboration within a stable legal framework.
