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.