Mikel Echavarren began his professional journey at Arthur Andersen. In 2002 he launched his own consulting firm, Irea, which he led until 2018. During that period, Colliers International, a multinational real estate consultancy, acquired Irea in Spain, where Echavarren now serves as CEO. One notable achievement was his early warning about the impending 2008 real estate crisis. He described it as “a bit of foresight, a dash of luck”, a viewpoint that has since become a reference in the sector.
How is the housing market today?
The housing market is segmented into two main areas: corporate investment and the market for individual buyers both in Spain and abroad. In terms of sales, last year saw around 700,000 units sold, with about 80,000 being new builds and the remainder resales. At the start of the year, developers scaled back promotions due to rising construction costs. An expected 100,000 new homes were anticipated to begin construction, but the more cautious estimate now sits around 70,000. Project approvals do not always translate into starts because costs are uncertain. This nuance is often not reflected in visas that track permitting rather than actual construction progress.
The buying behavior follows a straightforward logic: if wallets tighten or future prospects dim, demand cools. Estimates show a loss of purchasing power around 42 billion euros driven by higher Euribor rates and rising family expenses. For newly built housing, demand remains constrained by high costs and limited supply, which tends to keep prices steady or slightly rising. In contrast, the second-hand market reacts more directly to financing pressure, with expectations of softer price movements as financing costs rise.
How many transactions are expected?
There is no dramatic collapse on the horizon. Price declines typically occur when sellers are compelled to exit the market due to job losses or financial distress. While employment declines may surface later, the current signal is not yet definitive.
Leading banks in Spain have offered varied forecasts: BBVA, CaixaBank and ING anticipate a 2% rise, while Bankinter suggests a 3% fall. With inflation hovering around 7%, a 2% increase or a 3% decrease is relatively modest in the broader economic context. The 2008–2010 downturn largely stemmed from overleveraged contractors needing to sell; that dynamic is not the same today. Ongoing promotions and strong pre-sales, coupled with developer access to land without heavy debt, keep the market resilient. Those who expect a sharp drop may be mistaken.
If the question is whether Madrid is a buy right now or a year from now, the answer is nuanced. For personal use, buying decisions are driven by emotional and practical needs rather than pure finance. Caution remains prudent to avoid overextension, but the notion that a city like Madrid would suddenly become unaffordable is not supported by current conditions. In many markets, a similar logic applies to residents who choose renting when mortgage access is tight. The idea of a legacy-free rental generation invites debate, but data shows that historically, renting has been a stable option for many households, especially when ownership challenges loom large.
What about rent controls set to 2% through 2024?
Constitutional principles come into play. Article 33 protects private property and requires compensation if the state intervenes in negotiations in a way that damages a party. If rent caps disrupt market functioning or cease to reflect true costs, compensation or other adjustments may be warranted. Experience from bread market regulations illustrates how price caps can lead to shortages and informal markets. When rent caps constrain supply, landlords may limit or exit offerings, which compounds housing shortages in a crisis.
How might mutual funds respond to today’s rental housing landscape?
The corporate rental segment has contracted, but new arrangements have formed in recent months in anticipation of a stable cashflow environment. Investors and funds typically operate with five-year financing cycles, paying interest along the way and settling principal at maturity. If current financing terms tighten, the landscape for new financings could shift. In Europe, a misalignment between buyers and sellers is expected to narrow over six to twenty-four months, with market dynamics differing by city. Income-generating assets generally face a 10% to 20% price adjustment, depending on leverage and debt costs. The human element remains crucial; buyers and lenders will pause to assess risk before acting, not only in Spain but across other markets as well.
What is the year-end forecast for real estate investment?
The market is projected to close the year with investment activity in the range of 17 to 18 billion euros, reflecting ongoing inertia. Nevertheless, strong segments persist, including land disposition, residential projects, hotel ventures, and value-added operations. The most viable trades currently revolve around rehabilitation or repositioning, closely tied to hotels and office assets. The core rationale is that enhancing a property through tenant improvements or strategic relocation can deliver value beyond the cost of debt and risk, with required returns evolving from traditional 10–15% to a current expectation near 16–17% in many cases.
What about build-to-rent projects?
Turnkey developments built to rent depend on land pricing. If land costs are low, such deals can be profitable, but the margin often tightens from previous expectations of around 25% to about 15%. Transaction viability hinges on land value, particularly when the investor secures land at prices well below market levels.
Are corporate transactions likely?
Market chatter is cautious. While large-scale corporate deals have been debated, practical constraints make such operations less likely. Some observers consider niche consolidations among smaller real estate companies, but buyers must align price with fundamentals. The idea of selling at any price is not realistic in a volatile climate. Companies should apply imagination and discipline in pricing rather than chasing aggressive offers.
How far might interest rates move?
Debt markets are tightening access to approximately 3.5% in Europe and around 5% in North America. Rates are unlikely to revert to the 1% level soon. The current inflation backdrop, influenced by central bank policy and emergency liquidity measures during the pandemic, has left rates elevated. The future path will depend on how inflation translates across sectors and regions, with gradual normalization likely over time.
What is the outlook for real estate investment next year?
Forecasts point to investments ranging from 10 to 12 billion euros, roughly 30% to 50% below this year’s activity in many segments. Yet family offices and other long-term buyers with lower debt levels may find opportunities to acquire assets that institutions usually pursue, particularly as markets adjust to tighter financing conditions.
Who stands to gain in this environment?
Wealthy families and long-horizon investors can benefit from disciplined buyers who pursue assets at favorable prices. Those with patient capital can capitalize on opportunities that arise when market participants pause to reassess risk in both mature and emerging markets.