Sareb sees home sales rise 8% in the first half of 2023
The company’s newly published Biannual Business Report reveals that total property sales reached €1,165 million between January and June — a 1% increase on the same period of 2022, despite a challenging economic climate in which real estate activity has been hit by mounting inflation and interest rates. Sareb began the year armed with an action plan covering 93% of its social housing stock.
Sareb’s board of directors has approved its Biannual Business Report, which presents an overview of its financial performance in the first two quarters of 2023. The report attests to a dynamic six months for the company, despite more subdued activity in the real estate markets due to strong inflation and rising interest rates. With some extra impetus from Árqura Homes, residential sales grew by 8% to 5,309 units.
Along with income deriving from the sale of other assets in its portfolio (land, commercial property and loans), Sareb’s total income for the period came to €1,165 million — a 1% gain on the same period in 2022. The company has continued to focus on retail sales, rather than targeting the institutional market.
Sareb expects to improve on these figures in the final quarter of the year, given that the early part of 2023 was still recovering in the wake of its servicer migration, completed in the second half of 2022, which held back divestment progress. This prompted a step-up in activity in the second half of the year, and Sareb expects overall income for the year to exceed pre-migration levels.
Residential
While macroeconomic factors may have taken some wind out of the real estate sector’s sails, by June Sareb had succeeded in selling 4,089 homes, plus 4,193 units of ancillary property (parking spaces and storage units) deriving from its divestment portfolio. This activity generated income of approximately €389 million, 15% less than in the same period of 2022. Virtually all of these transactions were retail sales at affordable prices.
Sareb’s overall figures were given an extra boost by its property developer, Árqura Homes, which has grown into a key profit centre for the company. Owned by Sareb, this Bank Asset Fund was created as a vehicle for new housing development in partnership with Aelca. Between January and June 2023, it brought in a total of €172 million, equating to year-on-year growth of 265%.
Since its incorporation, Árqura has sold 2,328 new homes. In this time, the company has approved the development of 9,330 units, representing investment of almost €1,700 million. Of these, 42% had been completed by the end of June 2023.
Over the first six months of the year, Árqura launched 743 new-build units to the market, completed 647 units across eight developments and delivered 946 homes. It expects to exceed 1,600 new-build homes delivered for 2023 as a whole.
José María Arroyo, Sareb’s financial director, remarked: “Business activity picked up in the second half of the year, and forecasts indicate that income will be comparable to 2022 despite a challenging environment characterised by strong inflation and interest rate hikes. We are confident that Árqura will continue to perform well in the second half of the year, and expect to almost double the sales figures reported for 2022”.
Land, commercial property and loans
The Biannual Report also covers projects currently at the land development phase, which Sareb manages in partnership with Serviland. These number 355 in total, of which 311 are moving through the planning system and 44 are already on the market.
As for land sales, the number of units sold over the reporting period was 1,226, down 8% year on year. This dip is less acute than the market average: according to data from the Spanish Ministry of Transport and Sustainable Mobility (MITMA), the number of land sales fell 21% in the first six months of 2023.
Meanwhile, Sareb’s registered commercial property sales came to 1,438 units, with a total value of €90 million — again, 8% less than in H1 2022. As indicated above, income for each business area is predicted to equal that of 2022.
Finally, income deriving from loan sales and management was €317 million, a year-on-year decrease of 8.7%. This difference is in line with the reduction in the company’s financial asset portfolio.
At the close of June 2023, loan activity contributed 27.2% of Sareb’s total revenue. In contrast, real estate sales (including social housing) accounted for 72.8% of the company’s total revenue. This demonstrates that the company’s real estate business is moving increasingly to the foreground.
Loan Conversions
A crucial aspect of Sareb’s work is converting loan collaterals to real estate assets. In the first six months of 2023, this process was severely hampered by various episodes of industrial action throughout the Spanish justice system.
As a result, the company added just 5,971 new properties to its balance sheet over this period, with a total value of €566.5 million: 49% fewer than the previous year. This is mainly due to strike activity and to the much longer legal processing times for loan conversions, but also to the company’s progressive efforts over the last few years to divest of financial assets in fulfilment of its mandate.
These impacts were cushioned by an upsurge in payments in kind to offset some of the decline in insolvency and foreclosure activity.
As well as the necessary legal procedures, many properties acquired by Sareb require upgrading before they can be sold. In the first six months of 2023, the company upgraded 2,041 properties in its portfolio, incurring a total cost of €37.6 million, 24% less than in the same period of last year.
Meanwhile, property management and maintenance costs fell 2.3% year on year, amounting to €126 million.
Here, the company has seen savings as a result of management changes in light of 2022’s introduction of the Public Sector Contracts Act, which will be reflected in future annual accounts.
Financial Position
The 2023 Biannual Report covers a number of uncertainties and risks with a bearing on Sareb’s business activities. However, as far as its asset balance is concerned, the company continues to follow the base scenario set out in June, and this latest report indicates a stabilised equity position.
Interest on loans in the first half increased significantly compared to the same period of 2022: €350 million vs €158 million.
Financial costs associated with senior debt have levelled off in the second half of the year and have been partially offset by a more active cashflow management approach.
“The interest situation has eased in the last quarter, and this, coupled with active cashflow management, has brought us back in line with our business plan”, Jose María Arroyo commented.
Social Renting
The Biannual Report also summarises key figures relating to Sareb’s Social and Affordable Housing programme, launched in 2022. At June 2023, the company had examined the socioeconomic situation of households within the social housing scope, reviewing 93% of 10,000 units with a current action plan.
This work had allowed it to approve almost 6,000 social rental agreements, of which 3,543 were completed by the close of Q2. Meanwhile, 581 individuals had been recruited to its Job Placement Scheme. The remainder were all in the process of joining the scheme, and the momentum achieved by this division of the company after 12 months of work is likely to have pushed up these numbers significantly during the second half of the year.
