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Opportunity in Iberian build to rent as young squeezed

David Martinez, CEO, Aedas Homes

The PRS market in Iberia has real potential, experts agreed at Real Asset Media’s Outlook 2021 –Iberia briefing, organised with Iberian Property, which took place online recently.

“The pandemic has speeded up trends and there’s a great opportunity for build to rent in Spain now,” said David Martinez, CEO, Aedas Homes. “The market is still small compared to other European countries, but there is no demographic justification for such a contrast.”

Last year 60,000 units were delivered to the market, compared to 250,000 in the UK, 300,000 in Germany and 400,000 in France.

“Young people don’t have a chance to save and get on the property ladder, so they will continue to turn to the rental market,” he said.

Investors are showing an interest and raising funds to develop BTR projects, but there are still question marks about the market.

“Investors want certainty, not rules that keep changing, and that’s their concern in Spain and Portugal,” said Alvaro Otero, partner, corporate M&A, real estate and construction, hotels and leisure, CMS. These rules, “tend to be strong on tenant protection and less friendly to landlords.”

The pandemic has also led to other changes in the residential market. The chance to work from home has led to a need for more space, while the emphasis on health has led to a desire for greener surroundings.

Market shifts emphasis from multifamily

“We’ve seen a definite shift from multifamily to single family, detached or semi-detached houses,” said Martinez. “Before the pandemic, developments were 80% multifamily. In a year they have gone down to 70%, and people want outside space, gardens or at least courtyards and terraces.”

In Portugal the residential market is evolving in that direction as well, but demand for city apartments also continues to outstrip supply.

“Outdoor space has become more important,” said Pedro Silveira, chairman, Grupo SIL. “A trend we see is people choosing to have a bigger house with a garden outside of town, being willing to do longer commutes as they only go to the office two or three times a week.”

As not everyone can move to a detached house, city centre apartments continue to be in demand, but the architecture and layout are changing in line with customers’ preferences.

“In Lisbon it is difficult to get projects approved so supply is very constrained, so we know our apartments will sell,” said Silveira. “But now people are spending more time in their  homes, so for every project we talk to the buyers, the husband, the wife and even the children and adapt to introduce improvements in line with their needs. That adaptability is built into our DNA.”