Francisco Pérez from Barcelona is the CEO of Culmia, one of the major Spanish developers. Coming from Solvia, a subsidiary of Sabadell, the real estate company has its sights set on the development of new homes without losing sight of affordable ones. To do this, it calls for collaboration between companies and administrations, and also legal certainty.
How do you see the real estate sector?
It has strengths. New housing continues to perform well. After the pandemic, the war in Ukraine and the rise in material costs, the sector is not able to put more than 100,000 on the market, when the pace of home creation is 200,000. Now the pace of sales has slowed down, but Spain has not yet reached the average price of 2007. It is at 95%, when in other countries like Sweden it is 200%.
How do you think prices will behave in the future?
If we are able to build more, they will stabilize. Now they rise about 3% for new housing, although it is below inflation. I believe that this trend will continue if there is no very important damage to oil due to the conflict in Israel.
Spain has not yet reached the prices of 2007, and I believe that the trend of increases of 3% will continue”
And how is Culmia’s business going?
Last year we invoiced about 300 million euros after delivering more than 500 homes and selling 600. This year we will repeat, but in 2024 we will take a significant leap. We are going to double the billing. We will deliver some 370 homes in Catalonia that we have sold to CBRE Global Investors.
What are the strategic lines?
We had three: build to rent , build to sell and land management. Now we can also focus on affordable housing as a complementary strategic activity, although it has little scope. We saw that the Spanish market had shortcomings and today we have contracts from Plan Vive 1 and 2 from the Community of Madrid and the City Council. There are about 3,500 homes in total.
Do they make affordable housing in Catalonia?
We don’t have one because there isn’t any contest going on yet. Given what the Community of Madrid has done, we are proposing to Catalonia to use land for the provision of idle equipment since 2007. There are lands where, by taking out the tender, we could start now.
Is the Madrid Plan Vive applicable in Barcelona?
In Vive, no matter how many political disagreements there are, they have gotten their act together. In thirteen months you have the homes. It is the path we have to follow also in Barcelona. Let’s copy Madrid’s Plan Vive. Let’s copy what works.
Is there a social problem with housing?
The security cushion for Spaniards has always been home ownership. Families are resilient once they have the apartment paid for. The problem lies in 1.3 million families who are in market rent and who pay more than 30% of their income for housing, for renting.
And what is the solution?
We have just presented our proposal for the next ten years. We think that 6.6 billion euros of public funds must be allocated per year to have an impact. For this year there are about 3,200 million in the State budgets which, together with the autonomous communities and city councils, reach 4,000 million. It is 0.23% of GDP, but it should be 0.45%.
We must dedicate 6.6 billion a year to housing to have an impact; now we are at 4,000”
What would the expense be used for?
2.5 billion would have to be allocated to social housing from public accounts to build 45,000 homes a year. Another 2.75 billion would go to affordable housing to make 75,000 a year. But let’s not forget that our strong point as a country is property. 770 million would have to be allocated to purchase aid and 700 million for 1.6 million people in need to supplement the rent.
Can administrations do it alone?
We have to convince investors to come to make affordable housing in Spain. Construction aid should be given and interest rates should be subsidized. We have done the calculations and it would be possible. Let’s make agreed long-term policies that do not depend on electoral cycles and we will be able to address one of Spain’s main problems.
What is your experience in affordable housing like?
We have incorporated industrialization into the process. Large construction companies do not have enough staff. We work with a factory in Aranda de Duero capable of building 2,000 homes a year. They do it in a warehouse, with more technology and female employment. We reduced deadlines and, above all, we stabilized prices, which have risen 26% since March.
How can the lack of soil be solved?
It is one of the most important problems we have, and not only for housing. Either we take land management very seriously or we will not improve. We see that 50% of the population lives in cities and in a few years it will be 70%. Let’s prepare to face these challenges. You have to plan it well.
We have incorporated industrialization; “We have a factory that can build 2,000 apartments.”
What problems do you see in urban planning?
In other European countries there is a legal certainty law for urban planning matters. In Spain this law is needed. It was tried, but it was not possible. In our surrounding countries the law says that, if there is a problem with urban planning, it must be solved and not go back to the beginning. If it is not resolved within a period of time, the judge will make the decision. Today in Spain entire developments are paralyzed. This is fixed by also having a medium-term vision of how cities will grow.
Has the Housing Law benefited or harmed the market?
There has been little application so far. It has some things that could be used, such as the rental tax credit for certain groups. What I look at with distance is price control. It has not worked in any country in the world. In Sweden, for example, which has concentrated greater intervention, there is no private investment.
Do you think that a Ministry of Housing is needed in Spain?
Without powers, no. Housing issues depend on budgets. To the land problem we must add the tax problem, especially for affordable housing. Let’s review the VAT reduction for all social housing. The impact of taxation on housing exceeds 20%.
Is Culmia owner Oaktree preparing for an IPO or the entry of a partner?
Going public has been proven not possible by the experience of others. The capital outflow is planned for 2025 or 2027, although the real estate sector is changing. We are going from being a real estate company to a real estate operations management platform.
With new allies?
International investors in Spain want to get into new housing, but not manage it. We are evolving towards a real estate project management platform. The investor participates in the project as a majority, and we, as a minority, are the managers because we are attached to the construction license.
Is there a lack of labor in construction?
Without immigration the construction sector could not move forward. We’re going to have to count on her. Welcome.