Housing claims to be one of the main real estate drivers in Europe and, above all, in Spain. At least, that’s according to a report by DWS, Deutsche Bank’s asset manager, which claims that high demand for residential and logistics assets will allow the brick and mortar sector to begin its post-pandemic recovery.
Leaving aside the current challenges and risks in traditional real estate such as offices, weighed down by the drive for teleworking and a change in the space and economic savings needs of many companies, the German firm predicts very high housing returns over the next five years. It will, in fact, be the star asset.
If we look at the specific case of Spain, DWS calculates that the profitability of housing will remain at around 9% between 2021 and 2025 in Madrid and Barcelona, being the most prominent real estate asset. One step behind would be logistics assets, with a yield of approximately 8%, compared to 6% for offices or shopping centres.
“The fundamentals of the private rented residential sector remain healthy. Madrid and Barcelona’s population is expected to grow by 5% and 2%, respectively, over the next ten years, and real household incomes by almost 2% per annum. These factors combine to suggest strong demand for housing. On the supply side, Spain is well positioned for rental growth, especially in Madrid, where rents are not constrained by regulation,” says the manager.
According to the study, Madrid is more attractive than Barcelona in the housing market, while the Catalan capital reigns supreme in the logistics field. However, in both cases, they would be behind the returns that the fund manager expects for logistics in Lisbon, which it crowns as the most outstanding asset in the Iberian market with a yield of close to 10%.
Another of the study’s conclusions is the growing interest in the metropolitan areas of the country’s two largest urban centres. Specifically, DWS believes that the highest yields in the coming years could be in Getafe and Badalona, two submarkets where the population is growing, thanks to more affordable rents than in Madrid and Barcelona and good connections to their major urban centres.
Deutsche Bank’s asset manager states categorically in the study that “the European real estate market is entering a period of recovery” and believes that by the middle of this decade, the yields on real estate assets will be higher than the average recorded so far.
In the case of housing, it expects average rental growth of around 3.1% per annum over the next five years, although it will be higher in the main Spanish cities, London, Berlin and Munich, due to the shortage of supply.