The Spanish Real Estate situation and its capacity to attract the investor flow was one of the main points analysed in detail at the cycle of conferences International Real Estate, organised by IESE Business School between 29^th and 31^st May in Barcelona, where the Chief Financial Officer of Neinor Homes, Jordi Argemí, also participated.

The core theme of this international meeting, that gathered recognised Real Estate, financial and homebuilding professionals, focused on the analysis of the Real Estate business and the differences established in the market after the crisis, as well as the relation between homebuilders and housing developers with the capital markets.

Accompanying Neinor Homes’ CFO in the 31^st May session, also took part Denis Nakagaki, economist in the Banking Strategy Unit of Strategic Planning and Research of CaixaBank and Mark Stücklin, Shario.org director and an international property market expert.

All of them analysed deeply the changes experimented by the sector in the last years and the perspectives of future from their own professional experience in each of their companies.

In this sense, during his speech, Jordi Argemí explained, from the point of view of the housing development company which he represents, that in the past the earnings driver was in the land transformation. “There was an over-demand which hardly allowed housing developers to focus in the product quality or in the attention that the customer deserves”.

As he affirmed, it was sold almost 1 million of homes in Spain for a population of 45 million people, something he consider completely absurd.

By contrast, the companies which nowadays operates in the homebuilding sector must focus on the product, the industrialization process, the customer and the digital transformation.

Another of the main problems suffered by the market in the past was the fact that this was a fully financed business. “The land was financed, the construction was financed in its entirety and also the final customer was financed, this latter even above 100%. For this reason, there was no equity in the value chain, resulting in a completely fragmented market, very individual and, logically, without the necessary professionalization”. 

“Housing developers we need to learn from the past and, thereby, we must be very disciplined and cautious about financing. The market needs equity, especially at the land acquisition phase”.

The homebuilding sector is a capital intensive business and, as a result of this, the financial dimension is gaining importance and is critical to include some ratios like IRR, ROCE, CRM, LTV, among others, to take important decisions. As a conclusion, he underlined the idea that this is a new business with high entry barriers and few professional operators.

Investors believe in the Spanish macroeconomic reality

Neinor Homes’ CFO consider that international investors clearly believe in the Spanish macroeconomic situation because of many factors.

“We have a strong GDP outperforming the one of the other European countries, unemployment rates are decreasing, from 26% in the peak in 2013 to 18% this year 2017 and the families consumption is increasing since 2014”, he explained.

He also highlighted that the consumer confidence level is today higher than in the last 10 years and there is decreasing significantly the leverage of the families.

The growing potential of the homebuilding sector

In his opinion, the sector presents a growing potential, because, as he predict, the market size could tripled in a short period of 2 or 3 years, giving it the opportunity to complete its consolidation.

This context offers an important business opportunity to the investors in a market which has to resolve the housing over-demand caused by a 7 or 8 years period with a very limited construction activity.

Furthermore, this imbalance between supply and demand have implied an increase in the prices (around 7.3% for new houses and 3.5% of existing houses). “In 2016 all the homebuilding projects which were started, around 64 thousand units, were completely sold”, he assured.

The key of Neinor Homes, an experienced team with a flexible work model.

Concerning to the evolution of his company, Jordi Argemí explained that the main key of Neinor Homes’ business pace is to count with an experienced team with a flexible work model.

“This is a cyclical business, so the company must be permanently adapted to the demand”, he affirmed.

Finally, among the fundamental and necessary aspects for the company development, he stressed the high quality of the land bank and its pipeline and the visibility obtained from a commercial point of view in relation with level of presales. He also remarked the implementation of an industrialized model permitting to deliver on time and on cost, as well as the fact of being a company financially oriented.