Since mid-2022, the market for large-asset real estate transactions has faced an unusual dip. After the European Central Bank began raising interest rates, now at 3.75 percent, owners paused liquidating assets. A widely observed trend in the industry is a wait-and-see attitude as potential buyers look to invest more cheaply. In this climate, seasoned investors emphasize patience and discipline, recognizing that the timing of exits and the quality of opportunities can define outcomes for years.
Today there is about a 20 percent gap between asking prices from sellers and the offers that buyers are ready to make, according to Antonio de la Fuente, managing director of the Corporate Finance department at Colliers during the Madrid Real Estate Show SIMA. The gap signals a shared hesitancy: sellers must reassess pricing, while buyers remain cautious, awaiting more favorable financing terms and clearer visibility on demand. Market observers note that the spread reflects a broader recalibration across asset classes, with negotiation leverage increasingly favoring well-capitalized buyers and resilient asset types.
Federico Bros, head of the M&G fund in Spain, predicts that this situation will persist in the months ahead. He argues that if rate hikes continue, investor returns will not stabilize. All forecasts point to a weak first half, with the downturn likely to extend through the year. Transaction activity dropped by 35 percent in the first quarter. As institutions adapt, liquidity remains constrained and competition intensifies around assets with durable income streams, especially in multifamily and logistics sectors.
Despite the uncertainty, de la Fuente believes that investors who have been unable to participate in recent years due to high prices may now find opportunities. Family offices and private investors are positioning for long-term bets where demand remains steady, particularly in rental housing. The shift suggests a more selective market where value creation hinges on strategic asset management, targeted renovations, and tighter operating disciplines. Industry insiders remind buyers that steadier rent growth and quality covenants can offset near-term price volatility.
During the Madrid Real Estate Fair, investors pressed the central government for measures to expand their operations. Mariam Martín Ferreiro, managing director of the Víveme management company, noted that 25 percent of the sale price of a newly built home goes to tax, a factor that affects final prices. Authorities are urged to implement lower tax rates to stimulate activity. The discussion underscores the role of policy settings in shaping deal economics, construction timelines, and housing affordability.
Tax considerations also influence rental housing development. Jorge Pereda, housing director at Grupo Lar, explained that leases under the Urban Lease Law are exempt from VAT. This means the VAT incurred during construction cannot be shifted to tenants, creating a financial hurdle for projects. Practically, developers must account for upfront costs and the impact on project economics when negotiating capex plans and financing terms.
Another issue discussed at SIMA concerns the maximum selling price of subsidized housing. Since these caps are set by each autonomous community, some regions such as Madrid have not updated them in a decade. Luis Roca de Togores, head of the Valdecarros Compensation Board, urged the managers to raise the base module prices. If land and construction costs exceed the selling price, subsidized housing may not be viable, he warned. This points to a broader challenge: balancing social objectives with market viability and investor return thresholds.
Participants also called for the removal of bureaucratic hurdles and for clear start-to-finish timelines. The objective is to move capital quickly. Currently, projects often face a 24- to 30-month cycle, which makes quick industrialized construction less attractive if the process loses momentum through delays in obtaining building permits. David Botín, real estate services manager at Aedas Homes, emphasized that immediate capital movement is essential and that rushing to build without permitting certainty ends up costing more in the long run. The conversation here centers on streamlining approvals, aligning public and private timelines, and reducing the friction that dampens deal execution.