14.02.2023   Articles . Residential Real Estate

Investing in Spanish residential real estate

 
 
The development of investment strategies and the allocation of real estate investments have always been subject to the general economic environment and are reflecting the sentiment of investors in general. 
The development of investment strategies and the allocation of real estate investments have always been subject to the general economic environment and are reflecting the sentiment of investors in general. 

This was also visible in the renewed focus on core investments in 2020 and 2021 as well as the high investment activity in the more crisis-resistant considered residential real estate sector of institutional investors, which followed as a reaction to the Corona pandemic and emphasised their security affinity.

However, rising construction prices and interest rates since the beginning of the year 2022 have increased the pressure on a market already characterised by high demand and corresponding yield compression. The core markets in Central and Northern Europe, which were already affected by falling yields before the Corona pandemic, were particularly hit.

The existing tension between risk tolerance and return expectations was resulting in a more visible willingness to adjust the risk profile in the end of 2021 and beginning of 2022. But also influenced by the alignment of the actual and target allocation in real estate following the high investment activity in recent years, many European investors started adopting a cautious stance from the second half of 2022 in anticipation of possible price declines as a result of falling demand in connection with the persistently high interest rate level. The lowered growth forecasts in many countries in the course of 2022 in combination with continued high, albeit declining, inflation and the increasing sustainability requirements of real estate products also tended to increase the preference of European investors for investments in core products again.

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