Hedge fund billionaires George Soros and John Paulson have made significant bets on Spanish real estate, a sector that once brought the country's economy to the brink of collapse five years ago. However, at this moment, analysts and newly released data indicate that bets on the country's property market are worth close attention.
According to a regulatory filing released last week, the real estate investment trust (REIT) Hispania has raised 314 million euros from investors, including Paulson and Soros.
The latest data released by the global real estate consultancy Savills shows that the transaction volume in the Spanish real estate investment market grew by 200% in 2013, rising from 320 million euros in 2012 to 850 million euros.
This significant increase in transaction volume stems from the purchasing interest of international funds, which indicates that many institutional investors believe now is an excellent opportunity to invest in the Spanish property market, especially in Madrid and Barcelona.
Gema de la Fuente, head of research at Savills, stated, “Multiple international institutional investors have entered or are entering the Spanish property market due to the improvement in the country's medium-term economic outlook. Some have waited years for this excellent investment opportunity, while others have already tested the market in advance through online platforms.”
In a separate study, the company also found that the market share of commercial real estate in Madrid rose by 35% in 2013.
After joining the Eurozone, Spain experienced a long period of prosperity, with a real estate bubble and cheap loans fueling this economic boom.
At the peak of the Spanish real estate boom, housing prices rose by 44% from 2004 to 2008, but plummeted by more than one-third after the bubble burst. Spanish banks were hit hard by the housing market crisis due to holding large amounts of bad real estate debt.
Investors also have reason to pay attention to the country as Moody's upgraded Spain's sovereign credit rating in February. The reason for Moody's upgrade is that the country's economy is moving toward a more sustainable development model.