Neinor Homes reports today its strongest start to a calendar year since 2021 having recorded pre-sales of 1,173 homes. This underlines the continuing strength and resilience of Spain’s residential housing market, which continues to benefit from a growing imbalance between demand and supply, a buoyant Spanish economy and further potential decreases in interest rates.

Improving macroeconomic outlook for the Spanish economy

In the year to June 2024, GDP growth for Spain is forecast to reach 2.3%, significantly ahead of the Eurozone average of 0.7%, according to Bloomberg consensus. For 2025, Spanish GDP is forecasted to grow at 2.0%. The underlying strength of the Spanish economy is being primarily driven by the continuing growth of household consumption, which is itself supported by the resilient labour market, with growing employment and increasing real wages, in addition to above average savings rates and a flourishing tourism sector. Furthermore, the prospect of further interest rate decreases by the European Central Bank further strengthen the positive outlook for the Spanish economy.

Further strengthening of the Spanish residential market

Spain’s residential market continues to benefit from very favourable and sustainable supply-demand dynamics. There has been a substantial increase in net household creation in Spain, from 50,000 new households in 2015 to 275,000 new households per year on average in 2022 and 2023, according to a report from the Bank of Spain. The supply of new-build housing has failed to keep pace with these population demographics, with only 90,000 homes finished on average per year since 2021.

Neinor pre-sold 1,173 homes in the first half period, its strongest start to the year since 2021

From January to June 2024, Neinor’s build-to-sell strategy is continuing to record strong growth in sales, increasing 30% year-on-year to 836 homes. In total, pre-sales amount to more than €300 million, implying an average selling price per unit of c.€370,000.

On build-to-rent, Neinor has secured the sale of 337 build-to-rent homes to a vehicle owned by Avalon Properties, which has one of the largest PRS portfolios in Spain managing more than 6,500 housing units. The project, completed during Q4 2023, has a Gross Leasable Area (GLA) of 39,624 sqm spanning three newly built buildings, which all benefit from achieving AA-rated Energy Performance Certificates (EPC). Located in the fast-growing municipality of Alovera (Guadalajara), where the population has increased by 27% in the last 20 years, the development is a 30-minute drive from the city centre of Madrid and inside Corredor del Henares, the fastest growing logistic hub in Spain.

Over the last 12-month period, Neinor has successfully sold 1,030 build-to-rent homes across six developments. These sales have generated nearly €250 million in revenue, agreeing deals with both institutional investors and family offices across the provinces of Madrid, Guadalajara, Valencia and Malaga.

Shareholder remuneration plan on track, offering 31% dividend yield for 2024-25

To date, Neinor benefits from a strong forward sold position on target deliveries scheduled to take place during 2024 and 2025, providing excellent visibility on Neinor’s target to distribute €325mn to shareholders in dividends (DPS €4.34/sh) in the coming two years – leaving the Group with the highest dividend yield (31%) in the IBEX35 and Eurostoxx 600.

Borja García-Egotxeaga, Neinor Homes CEO commented: “Over the course of the year, we have seen a further strengthening of the macroeconomic backdrop and outlook for the residential sector in Spain. Together with an anticipated stabilisation in construction costs and decreasing funding costs, we expect a benign outlook for margins in the coming years, which Neinor Homes is well-positioned to capitalise on to deliver attractive returns to our shareholders and much needed homes in Spain.”

Jordi Argemí, Neinor Homes’ Deputy CEO and Chief Financial Officer, commented that: “Our disposal to Avalon of 337 BTR homes announced today is a key milestone of our strategic plan by providing further visibility over our FY24 target to distribute €200mn in dividends to shareholders. Accordingly, Neinor is accelerating 40% of its annual distribution target to shareholders to the months of July and October/November.”