Barcelona: the leading real estate city in Spain
Today we would like to introduce you to our new guest, Mr. Arturo Lueches, independent advisor for real estate investments and CEO of lueches.com, a portal dedicated to the whole real estate business in Spain.
It is a pleasure to bring you firsthand information about the Spanish real estate market.
HalloCasa: “Mr. Lueches, before starting our conversation, let us welcome you to HalloCasa and wish you the best successes in your profession.”
Arturo Lueches: “Thank you very much for the opportunity to share with you my experience in the investment sector and to open opportunities for collaboration.”
HalloCasa: “Please give us a brief description of the area in which you work, which city in Spain your main focus is and please give us a brief overview about your experience in the Spanish real estate market.”
Arturo Lueches: “The main area in which I work as a real estate consultant is Barcelona, which in turn is the city where I currently reside.
However, I work as a real estate consultant across Spain and all along the Mediterranean coast, since in those areas there is a lot of movement with respect to real estate investments right now. My job is to provide advice, be it for banking products, judicial processes or foreclosures, among others. Furthermore, I am involved in negotiating with various entities, support with mortgage purchases and subsequent management of the properties. I also advise interested investors in foreclosed properties.
HalloCasa: “Which changes has Barcelona experienced in the field of real estate during recent years?”
Arturo Lueches: “Barcelona has undergone many changes. On the one hand, concerning investments in hotels and apartments for tourism purposes, a new legislation came into place, which implies that there will not be any new licenses allocated to property owners with properties which fall into those categories. This has had a huge impact on sales prices. This triggered a price jump in real estate properties which belong to, I would say, rather touristy types which used to suffer price fluctuations and now prices of real estate properties in those segments have increased.
On the other hand, the low and also already expensive supply of land for construction purposes and the high demand by investors of such have caused prices to rise, making it more difficult to find good investment opportunities in Barcelona.
While in general, there is more demand than supply at the moment, I personally think that the greatest demand across Spain is coming from foreign investors, since domestic investors prefer Barcelona and Valencia, regardless of the entire coastal area of the Mediterranean and the Balearic Islands.
I think prices have grown very quickly, but there is still a lot of demand in all types of investment. During last years you could find yields at 6 and 7% and currently Barcelona capital is above 3 and 4%.
If the investor is seeking more profitability, he has to expand his vision and invest in other areas outside the urban area or other Spanish cities.”
HalloCasa: “It is said that Barcelona and Madrid have gradually become two of the major engines in the world of real estate business, thereby leveraging economic growth and job creation. How has the evolution of the rental market in the two big Spanish cities such as Madrid and Barcelona been?”
Arturo Lueches: “The rental market in Barcelona, due to tourism, has changed radically. The vast majority of second-hand property purchases is dedicated to short-term tourism, even without the corresponding license, ie. you are required to have the respective license for this type of real estate. An example are rentals of properties to tourists who only stay for a day, a week or various weeks.
In Barcelona, profitability of such rentals is very high which is why a lot of property owners are attracted by it. Currently, it is regulated by the city which imposes sanctions on individuals and websites dedicated to real estate transactions of such type without the necessary real estate license.
This has created real problems in several areas of Barcelona for people who want to rent for years, as prices have spilled over to other areas of Barcelona, due to tourism.
Logically, when buying a property for investment purposes, investors look for the most profitable properties and currently this type are properties which are used for rental for days or weeks. The city has changed quickly since new businesses have come, especially hospitality businesses and services. These changes have triggered closures of shops and the opening of franchises dedicated to serving all this tourism.”
The Real Estate Market in Spain: renting is here to stay
HalloCasa: “There is a saying: “there are not two Spains, there are many Spains and in all of them there lie opportunities.” What are the main cities where rental prices are competitive and therefore make them the first option when choosing housing solutions for rent?”
Arturo Lueches: “An investor chooses where to allocate his capital. One option is to buy a property and then rent it out so that he obtains a certain return on his investment. There are currently a lot of business opportunities in many cities in Spain, but the problem is that investors work by fashion. And the current fashion or trend in Barcelona is to buy expensive, but also to rent expensive.
These investors prefer cities like Barcelona, Madrid, Ibiza, and Marbella. What happens is that demand has surpassed supply by far which has triggered a price increase. Obviously, this makes it increasingly difficult to find good real estate investments.
This overdemand creates a situation in which it is all about to “sell” and not to “advise”. What happens next is that the buyer then rents out the property which he purchased, even though he might not have the necessary license.
All it means is that, at the end of the whole process, the real estate investor never obtained a proper consultation and therefore bought the property and then rents it out without professional guidance by an experienced real estate consultant.”
HalloCasa: “From your perspective, what are the biggest challenges for the Spanish real estate market at the moment?”
Arturo Lueches: “Some of the biggest challenges for the Spanish real estate market for the remainder of this year is that the projects that have been paralyzed must be recovered and rehabilitated. We need to think about building in a coherent way and, above all, including proper planning. We have to assess what our needs are, especially when we look back at the changes which were abrupt and we have had. There have been a lot of projects which were carried out “on the fly”.
We have to provide investors with impressive projects and with a good return, so we will be attractive to them. However, in order to have that, we need to work with patience, not on the fly as it has been the case lately. This means: planning and with a sophisticated methodology.”
HalloCasa: “The housing market in Spain is attracting a growing number of foreign investors, what do you attribute it to?”
Arturo Lueches: “This is mainly due to the fact that Barcelona is simply a great city with a diverse lifestyle:, tourism, culture, fashion, events, weather, food, beaches, mountains, tranquility, environment, security, Spanish character. This city has options for everyone.
Apart from that, I think that Spain offers a different value for each investor, regardless of their idea or their wishes. An expression comes to my mind which illustrates quite nicely what I am trying to say: “Tell me where you want to invest in and in Spain we have it.”
We cover, I think, all the needs and tastes for each kind of investor. An investor can perfectly, if he wishes, buy a town and completely renew it. The range of possibilities is very large.”
HalloCasa: “How is the process to which a foreigner, who wants to invest in Spain in real estate businesses, must adhere?”
Arturo Lueches: “The process depends on your investment intention. First, you have to be clear about what you want. That would then be the question which the foreign investor should ask himself: What am I looking for?
That means you should know if you want to buy on your own or with the assistance of a real estate professional. Then, you have to consider what you want to invest in.
There are many investors who are looking to obtain access to the European community. So, they invest here to have that access. In Spain, we talk about a required amount of 500,000€. In such a case, the investment purpose is less about the ROI but more about the visa.
You have to be clear about what you will do with that property in the future and it is also important that you know if you are going to make a simple purchase with the goal of a good ROI, or whether to invest the same amount of money in the stock market, or if you want to flip that investment with a profit and invest the proceeds again. There are many aspects to analyze.
Generally, investors seek security and first and foremost they want to make sure that their money is allocated in a safe asset, because, in the end, it is their money which is at stake and a bad investment will undoubtedly affect their savings.”HalloCasa: “From your perspective, what are the biggest challenges for Spanish real estate companies for the coming years?” Arturo Lueches: “One of the great challenges is the construction of new homes, since this type of offer does not exist. The market is mainly based on second-hand properties, and that is where real estate companies are currently focusing all their work on. Another challenge is the sale of bank properties, which offer financing advantages directly to the investor. This means that there is no advice for the investor by real estate agents or real estate consultants. Another important aspect is the opening of new real estate agencies with franchises like Remax, Century21, or Tecnocasas. The creation of a very good collaboration network between professionals is very important.”
Real estate agencies and Spanish construction companies
HalloCasa: “What is the role of the big construction companies when designing efficient buildings to save scarce resources such as water and energy? Long distances, tree-lined areas, access to public transport are aspects that are always taken into account or prevail lower prices?”
Arturo Lueches: “On the contrary, large construction companies as much as small ones increasingly use new technologies to attract buyers. Additionally, this is an important element in the renovation of buildings. Access to public transport is another important element since investors value this a lot when investing in any existing real estate property or a new project.”
HalloCasa: “How strong is the link between commercial construction companies and real estate agents as well as brokerages? Is it important to operate in collaboration or do both parties rather work in total independence and autonomy?”
Arturo Lueches: “The entire sector is very diverse and there are players who collaborate tightly while others prefer to work independently. However, I would say that collaboration between professionals of the same field becomes increasingly important, that is, collaborative work between real estate advisers. Doing so brings multiple advantages for investors, such as access to a much wider real estate portfolio with diverse locations and types of properties. For example: if I do not have a property in the location which the investor is looking for, a partner within my network might and we can join forces to satisfy the investor and all parties win. It’s a win-win-win. This in turn translates into a more professional and time-saving service for both parties, that is, the advisor and the investor. Therefore, collaboration is very important to me.”
HalloCasa: “What are aspects which make the difference for an investor?”
Arturo Lueches: “For me, the difference lies in the person, the professional, who ensures that the client is always very well advised. It is not the same if you show a flat or advise someone which include the process to understand their needs and to see their economic capacity in order to come up with a good proposal. Showing floors can be done by anyone, the advising process is where the difference begins.”
HalloCasa: “Based on your extensive experience, what recommendations do you give to new real estate investors? What are the means of information and advice someone should choose?”
Arturo Lueches: “The most important element is that they know what they want to achieve with their respective investment and that in case they do not know it they take the time and find a professional who can advise them according to their initial ideas and expectations and then together make a good decision which is aligned to the means and the expectations.
During that initial process, it is important that the investor has an open mind because there are many potential investment options and being willing to look at them can enrich his investment process. If the investment is in a country which the investor does not know, the best is to work with a trustworthy person, to filter and specify the investments which may be interesting, according to the investor´s preferences. If not, the investor will receive lots of information, the vast majority without having been analyzed beforehand (this is what we usually call “passing papers”), so that the investor will waste a lot of time by looking at proposals and projects that are not suitable in the first place.
Ideally, or at least it is how I work, the advisor always focuses on the buyer during the intermediation service, not the seller. Of course, the advisor must defend the interests of the investor, allowing him to obtain the best service along all the processes involved in a real estate investment negotiation: price negotiation, required documentation, etc.”
HalloCasa: ”Mr. Lueches, we are very pleased with this valuable information that you have shared with us today. If our audience would like to contact you, via which channel can they do so?”
Arturo Lueches: “Preferably through HalloCasa. I am very grateful for this valuable opportunity to publicize a little of this beautiful city like Barcelona and this beautiful country like Spain. Thank you.”
HalloCasa: “Thank you very much, the pleasure has been ours. “
Arturo Lueches: “Thank you very much.”