The Residential Development Handbook

Transcription

1 The Residential Development Investment & Financing Keys March 018 Financial Advisory I Real Estate 1

2 Demand Supply The Residential Development 1 Market Overview GDP growth: +.% 016 (+.1% 017E). Unemployment rate has decreased by 9. p.p since 01, currently stands at 16.6%. 1. m jobs have been created in the last years. 1 million of the total population between - years. Therefore they are potential housing buyers. Spanish housing transactions and prices show a healthy recovery from minimum levels, but when compared to European levels, there is still room to grow. Spanish housing stock decreased heterogen by % from 009 to 016. Heterogeneous per province. New residential mortgages are increasing while aggregated mortgages volume still 018 decreasing. Deloitte Financial Advisory Supply & Demand Started housings have increased by 98% from 01 to 016 but are still far away from run rate levels. New ongoing supply DTTL Observatory:,0 developments and 116k housings. Almost 80% of the total supply is located in 10 provinces. Madrid is leading the recovery. There is a lack of supply with. housings per 1,000 inhabitants. The recovery is selective. DTTL has identified 7 Hotspots in Spain. Big cities maintain a solid demand, whilst several small and medium-sized cities have higher growth rates. Housing sales prices increased by 6.6% from 01 to Q17, showing diversity of the recovery. Investment & Financing Market The residential development sector is still fragmented. The Top players account for ~6% of the market in terms of units delivered and ~1% in terms of ongoing developments. Strong appetite of international investors. The environment is under institutionalization process with listed players with a long-only shareholder base. Equity has been an entry barrier in the development market. Key Drivers & Trends in Spain There is a lack of fully permitted land, therefore investments in land management are necessary. The scarcity of construction workforce may be a challenge. The sector is growing under the ramp-up phase with financing requirements. The industry is fragmented. Players concentration is expected. The Future of Development Digitalisation: Product trends & client focus. Inorganic growth: Size is crucial to gain efficiency. Industrialization: new technologies in construction process and development based on rotation. Platforms scalability: The business model must be adjusted in line with growth.

3 Czech Rep. UK France Hungary Slovenia Poland Irland Italy Austria Portugal Denmark Belgium Spain Germany Netherlands Annual neccesary wages Estonia UK Sweden Luxembourg Finland Malta Denmark Hungary France Netherlands Portugal Belgium Spain Austria Italy Ireland The Residential Development EU countries sample breakdown housing transactions: Housing transactions / 1,000 citizens Source: Eurostat, Ministerio de Fomento, INE, Deloitte.% 0-7.% 0.% -.8% 1 10 Europe vs Spain 6.0% 18.0% 7.7% 1.1% 6.1% UE (Y1): 10. GDP.1% growth in 017E 0 CONSUMER CONFIDENCE INDEX 10.8 points (base 100) GROWTH UNEMPLOYMENT RATE Has decreased since 01 and currently stands at 16% Year Variation (if available) DEMOGRAPHY 1 million potential buyers between - years Spain has consolidated solid pillars for a sustained recovery as shown in the main macroeconomic. JOB CREATION Jobs creation in the RE sector, is not complemented by the Construction sector. 1,0 10,0 8,0 6,0,0,0 0,0 Source: Deloitte Total housing affordability by annual necessary wages 01 Data Source: Eurostat, INE, Euromonitor International 10,9 10,0 8,0 8,0 7,9 7,7 6, 6, Annual wage =,8,,,,1 Average housing unit,7,

4 Thousand housing transactions The Residential Development Transactions & housing sales prices Total housing price trend - Spain Average transaction price ( per housing unit) Source: Ministerio de Fomento TRANSACTIONS TREND 186,000 1,000 1, Source: Ministerio de Fomento Madrid Barcelona Alicante Málaga Valencia TRANSACTIONS BY PROVINCES Source: Ministerio de Fomento 9 1,8 0, ,16 9,08 80, Average housing sales prices increases/decreases By province Data Q 017 Source: Ministerio de Fomento -6% -% -% -% -% -1% Source: Deloitte Pontevedra Salamanca Soria Ourense Alicante Murcia Cáceres Valladolid Bizkaia Teruel Castellón Valencia Jaén Toledo Badajoz Córdoba Zamora Ciudad Real Zaragoza La Rioja Almería Granada Albacete León Palencia Ávila 0% Barcelona Madrid Guadalajara Balears Melilla Palmas Sevilla Navarra Araba Cuenca S.C. Tenerife Segovia Tarragona Burgos Lugo Málaga Coruña (A) Asturias Gipuzkoa Cantabria Ceuta Huelva Girona Cádiz Lleida Huesca Q 017

5 Housings / 1,000 inhab. Number of housing units (Thousands) The Residential Development CURRENT ONGOING DEVELOPMENTS Ongoing developments Number of ongoing housings per province Source: Deloitte Grúas Analysis.9 Deloitte has analysed a national sample of almost 116k ongoing housings Cantabria 6.7% Vizcaya % Sevilla 6.7% Madrid % Málaga % Guipúzcoa 87.8% Zaragoza 60.6% Alicante 10.6% Valencia 109.7% Barcelona 7 16.% < > 00 Source: Deloitte Grúas Analysis 6% of the total new ongoing housing are located in provinces. Madrid has the highest number of new ongoing housing. Source: Deloitte

6 The Residential Development HOTSPOTS BY CHANCE OF SUCCESS Hotspots 7 A #76 Extremely high 8% B #19 Very high 7% C #67 High % Source: Deloitte Grúas Analysis 7 Hotspots have been identified in 18 locations in Spain. Most of the Hotspots are located in Madrid, the Mediterranean coast and the north of Spain. Madrid Source: Deloitte Deloitte Observatory This study based on an algorithm filled with Deloitte Big Data Analytics, defines Hotspots as locations with high chances of success for the real estate residential development business. Ranking of municipalities Top 0 By Hotspots areas Source: Deloitte Grúas Analysis Torrejón de Ardoz Terrassa Pamplona Palma de Mallorca Oviedo Gijón Coruña, A Benidorm Badalona Sabadell Murcia Marbella Bilbao Málaga Sevilla Alicante Zaragoza Valencia Barcelona < > Hotspots By province Source: Deloitte Grúas Analysis 7 7 # 1 6

7 Small & medium-sized developers The Residential Development 8% % 6% 100% 90% 80% Developers # Developers >60 # Developers >>> # Housings # Housings >116k 1% >>> 1% % >>> 19% Most of the residential development business comprises small & medium-sized developers: 61% Top Developers 9% 9% Rest of the Market 70% 60% 0% 0% 17% >>> 9% i) 80%* have less than ongoing developments. ii) c.96%* of them are developing 70% of the total ongoing housings. Source: Company s Public Available Information Most of the residential development business is comprised by small & mediumsized developers: 018 of Deloitte them Financial Advisory are developing a 0% 0% 0% 10% 79% >>> 0% < developments - 1 developments 16-0 developments > 0 developments Source: Deloitte Grúas Analysis * The significance of small & medium-sized developers could even be greater; however, the available public information shows these market shares 7

8 The Residential Development COMPETITIVE LANDSCAPE Investment trends Solid fundamentals Institutional profile New competitive landscape Different typologies of players Spanish residential market continues to be attractive for international investors. High investment activity 8

9 The Residential Development INDEBTNESS OF FAMILIES TREND Standard finance term sheet Finance developers Land Finance Traditional Banking Depending on location and project visibility Institutional investors / Debt funds bn Jan 06 8bn Jul bn The Developers financing through the traditional lenders has returned to the market but they are demanding more controls and requirements. Dec 17 8bn 0 Jan-06 Jul-07 Jan-09 Jul-10 Jan-1 Jul-1 Jan-1 Jul-16 Dec-17 Source: BdE Requirements Term & Conditions Pre sales Project Monitoring Clients scoring Initial grace period of - years Bullet amortisation Spread 10 0bps 70 1,0bps Others Available corporate debt to large institutional players with sustainable LTV levels and stable recurring cash flow Structuring and specific warrantees 9

10 The Residential Development Key factors Demand & Supply Diverse speeds of growth with and demanding customers Lack of supply and risks of productivity capacity M&A Advisory Capital Advisory Valuation & Business Modelling Debt Advisory & Treasury Services NPLs/REOs Expertise Growth/Land acquisition Lack of Fully Permitted Land land Entry barriers Construction costs Scarcity of qualified workforce Technical Advisory & Project Monitoring Multidisciplinary DD Prop Tech Land Management Material costs Financing Financing has returned Higher control and requirements Players Fragmented industry Changing landscape 10

11 The Residential Development WHAT IS NEXT? 11

12 The Residential Development The Future of Development Inorganic Growth Digitalisation LEADING SUSTAINABILITY CERTIFICATIONS Residential Development Trends BREEAM and LEED certifications are the most significant sustainability certifications worldwide. Both standards are 018 Deloitte updated Financial Advisory in line with the market. Platforms scalability Industrialization 1

13 Deloitte. Alberto Valls, MRICS Managing Partner Gonzalo Gallego, MRICS Partner Juan Ramón Rubio Zalabardo Director Francisco Boiso Director Pablo Rodríguez Fominaya Senior Manager Mónica Cayuela Manager Javier Cuartero Associate The Residential Development Investment & Financing Keys #TheResidentialDevelopment Jose Luís Martin Pérez Analyst Juan Galobart Analyst Angela Larrabeiti Analyst 1