Foreign investors: Saviours or bottom feeders?

The ratings agency Fitch has suggested that the foreign funds now investing in Spanish property might just be bargain hunters, rather than a sign of recovery.

There has been a lot of excitement in the Spanish press about the arrival of foreign investors like Goldman Sachs and Blackstone buying up portfolios of Spanish real estate, potentially heralding the bottom of the market and some sort of recovery. But Fitch have warned that bargain hunters do not necessarily mean a recovery is round the corner.

“Some market actors are interpreting the interest of foreign funds in Spanish real estate as a sign of market recovery,” says a new report by Fitch. “We believe that investor appetite is driven principally by bargain hunting.”

Fitch say that big international investors are looking for substantially bigger bargains than the discounts on offer according to official figures. Using price figures taken from some of the biggest recent deals, investors are buying at a price below 1,000 Euros per square metre, some 40pc below the actual market price recorded by official data.

They also point out that the real estate investment by both local and foreign capital is still heavily depressed compared to the final years of the boom. Overall investment is down around 90pc, and foreign investment is down around 80pc, which helps explain the increase in the relative importance of foreign capital, as illustrated by the following chart.

fitch-foreign-investment-2013

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One thought on “Foreign investors: Saviours or bottom feeders?”

  1. Chris Thorpe

    Lots of rubbish being written about the ‘recovery’ look at the facts:
    Investors will only buy limited stocks at really knock down prices as they need to show profit, bearing in mind the high maintenance costs of poor Spanish buildings and the low rent levels compared to other countries returns. The only way Spain will recover is when the working young people can afford to buy and mortgages become available. Unemployment needs to be addressed – taxes on property need to be reviewed and most important of all transparent laws need to be put in place. Who would risk large sums of money in a country that had such a corrupt reputation and no set rules?

    Until the Spanish government wake up and smell the coffee – nothing will happen here and the Estate Agents can talk the job up as much as they like – its the facts that dictate the market conditions not the opinions of unqualified chancers who just want the property market to improve for their own benefits.

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