WellTax Blog

In Europe we are starting to build new houses again

December 7, 2017

We are starting to build again, even where the real estate crisis has hit hardest.

According to the latest analyzes on the sector, winds of recovery are blowing across Europe in the residential sector «in particular in those capitals that have maintained a low profile, with modest growth in values, during the most acute phases of the crisis, such as Amsterdam, the Northern European cities (especially Stockholm), German metropolises such as Frankfurt and Munich” explains Alessandro Ghisolfi, Abitareco research office. «In these cities, in the last two years, the nominal increase in prices has been in double digits (between 10% and 17%), including both newly built and used homes» he says. We have to ask ourselves whether all these new houses will be needed or whether in some situations it would not be better to recover the existing one.

In Spain, having emerged from the heavy economic and real estate crisis, we are once again seeing house prices rising. Over the last year, the prices of new homes in the top areas of Madrid and Barcelona have grown on average by 12% compared to 2015. «While in Barcelona the growth is homogeneous, in Madrid it is concentrated in some areas, such as Chamberi, Chamartin, Hortaleza and Salamanca where the prices of new homes do not fall below 8 thousand euros per square meter and sometimes exceed 15 thousand euros” says Ghisolfi.

According to CBRE, new buildings are insufficient to meet demand. «Construction – they say from CBRE – is concentrated precisely in Madrid and Barcelona, where over half of the demand is of foreign origin».

In London and Paris, which have always been the driving force, the situation is different. London, for the first time in over ten years, is experiencing a decline in the values of new residential buildings of 3-5%, both in the top areas of the center (Westminster) and in the more external areas (Islington). However, the market’s momentum, despite Brexit and signs of a slowdown in prices, does not seem to be stopping. According to Jll, a supply problem remains in London. Every year for the last 20 years, less than half of the 40-50,000 homes needed have been built. The problem is destined to remain in the coming years too.

Even in Paris it seems that the market for new residences is taking a breather. In the most valuable areas, initiatives are rare and prices even exceed 20 thousand euros per square meter. In the last year prices on average have not increased more than 3%, compared to +11% in the past. In the central districts, new buildings are now selling for above 10 thousand euros per square metre. Scenari Immobiliari reports many innovative projects in the city including the Edison Lite building designed by the Manuelle Gautrand Architecture studio. The new building will have many common spaces such as a roof garden, a cellar-laboratory and outdoor kitchens to share. In Rue Jean Antoine de Baïf on the Left Bank, the In Vivo project includes three buildings characterized by bio-facades with solar sensors, cultivable terraces and tree-like silhouettes hosting vertical gardens.

In Milan, investments in residential development amount to over 7.4 billion euros for a total of 1.85 million square meters arriving between now and 2020 according to Scenari Immobiliari. «Milan is the city with the most convenient valuations: the real prices (excluding inflation) of homes in general today remain around 20% below the 2007 level» says Ghisolfi. On the Milanese residential market, investor demand (especially private investors) has grown at a rate of 7% per year over the last three years. Investors who turn 90% towards the new. Demand follows supply and not vice versa, experts say. Today the offer in Milan is distributed rather homogeneously both in the central, semi-central and peripheral areas. Sales prices in the prime areas range from 6,500 euros per square meter in the semi-central areas to a maximum of over 10 thousand euros.

The Amsterdam market is lively, with constantly growing demand due to the influx of new residents arriving from smaller cities. The two main residential development projects in Amsterdam are the tower called Amstel Tower (see adjacent article, ed.) and the mega redevelopment project of the Food Center area. The redevelopment of the Food Center is the most important and innovative project, with the creation of residential and logistics areas on over 23 hectares. Approximately 200 thousand square meters will be for residential use and 95 thousand for the new Food Center with shops and warehouses. The apartments, 1,600-2,000, should cost 4,000-4,500 euros per square metre.

In Berlin in 2016, the construction of 45 thousand new units in two years in 12 urban areas was announced.

450 thousand new homes are planned in Stockholm over the next five years. In the more central area, 140 thousand new units are expected between now and 2030. Among the largest projects is that of the Hagastaden area. For 2025, the area between Stockholm and Solna, see, will see the birth of a new neighborhood with parks, residences, shops and offices, as well as headquarters of important pharmaceutical multinationals and medical research. There will be 6 thousand apartments from 45 to 130 m2 in 99% of cases. Prices should not exceed 5 thousand euros per square meter.

Article from “Il Sole 24 ore”

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