While writing the 2020 guide to the Las Palmas de Gran Canaria property market, it occurred to me that there is a big unanswered question about the future.
There’s a new kid on the Gran Canaria real estate block called Housell and initial impressions suggest that it’s a viable alternative to traditional estate agencies.
However, a closer look reveals that Housell’s “cheap” service is anything but good value for money.
Housell makes money every time it doesn’t sell a property!
Housell charges about 1000 euros for its basic package of property valuation, photos and listing on Spanish real estate portals.
It doesn’t guarantee that sellers will get visits or sell their property and doesn’t offer a refund if they don’t.
So, what Housell does is charge upfront for services that all estate agencies offer for free.
As an estate agent, I only charge my clients when their property has sold and all the paperwork is complete. The idea of charging clients when I don’t generate results is unethical.
Housell charges a flat fee with no guarantees: Estate agencies only charge for success.
Housell is a marketing company, not an estate agency
Most of Housell’s budget goes on advertising its packages to sellers rather than on advertising the properties to potential buyers.
Yes, it lists properties on online portals but these only account for about 50% of the sales that I make as an estate agent. The other half come from buyers who have contacted me directly rather than from inquiries from free portals.
So, Housell only makes money if it gets a constant stream of new customers who pay its up-front fee. That’s why its adverts targetting sellers are all over Facebook.
If your Housell advertising package times out, all it wants to do it persuade you to pay again.
Housell has no long-term interest in finding a buyer for a property.
Housell has no skin in the game
Housell sells its service as a cheap way of connecting buyers and sellers but ignores the fact that the hard part of a realtor’s job in Spain comes afterwards.
I spend most of my time talking to buyers, sellers, lawyers, notaries and officials to make sure that an offer leads to a sale. It’s hard work and it’s all about the people involved and the long-term relationships I have with all the parties.
People like bank managers (for mortgages), notaries, lawyers, and especially other estate agents.
To be fair, Housell does have an upgrade where you pay extra for negotiation and paperwork. However, it only has 80 employees working on them in the whole of Spain.
Given that the average property transaction in Spain involves several days of work, I can’t see how they can offer this service properly. And again, all their fees are upfront so if a transaction falls through, you still pay.
Housell charges upfront for a small part of the process of selling a property in Spain.
Housell has a big beast to satisfy at headquarters
Housell is owned by Cerberus Capital Management, a distressed asset specialist and one of the world’s largest investment companies. In the past, it has invested in distressed property in Spain and even in Spanish estate agency Haya.
Basically, Housell is a profit-driven enterprise that focuses on getting people to pay it up-front rather than a service-driven business that builds long-term relationships with clients.
Without a steady source of new clients, it doesn’t make money.
Its business model is a short-term play while selling property successfully is a long-term game that has to put people before quick profits to thrive.
Housell is designed to make money rather than to provide quality service.
Housell’s figures are opaque and we don’t know its success rate
On its website, Housell claims to have sold 1000 properties in Spain in the last year. It’s a big number but what we don’t know is how many people have paid it to advertise without success (because it doesn’t publish the statistic).
If its success rate was high, it would be all over their website so I have to wonder what’s going on.
I suspect that Housell has a low success rate and that a lot of its clients don’t get a sale.
It’s likely that, in total, Housell is taking far more money per sale than the traditional estate agency model. Otherwise, why wouldn’t Cerebus just expand its estate agency?
When I wrote the 2019 guide to Las Palmas property in late 2018 I noted that I expected average prices to rise in 2019 despite a set of moderating factors.
These were; a decline in tourist rental investment, an increase in new-build property, and the inevitable decline in tourist numbers following the recent boom.
We must now add the uncertainty of national elections on April 28 and local elections on May 25.
Let’s have a look at each of these factors in more detail… [Read more…]
The latest Spanish Ministry of Development figures show that the Canary Islands real estate sector turns over just 44% of what it did in 2006 just before the global subprime crash.
The industry turned over 2600 million euros in 2016 compared to 6.100 million euros in 2006; a drop of 56%.
While this sounds like a serious problem it really isn’t.
The Canary Islands real estate market (along with the rest of the Spanish sector) was in a huge bubble back in 2006 and dropped sharply once the crisis took hold.
For example, in 2011, the sector turned over just 1.717 million euros. In contrast, last year’s figure was the highest since 2008.
After a decade of correction, prices are now back at reasonable levels and the market is looking healthy.
The figures point to a gradual and (most importantly) controlled increase in real estate activity; a healthy rather than a heady rise.
See the figures here in La Provincia newspaper here (PDF).
In support of this assessment, the general secretary of the Santa Cruz de Tenerife’s Federación Provincial de Entidades de la Construcción (Fepeco; the Tenerife construction industry body), Isidro Martín, has recently stated that he expects 2017 to be a transition year before a healthy recovery in 2018. He expects the real estate market in the Canary islands to rise by 20-30% over the medium term (referring to turnover rather than property prices).
To back up his assessment, we have figures from BBVA Research, (the research department of BBVA bank) which found that the number of real estate transactions in 2016 rose by 12.1% across the Canary Islands (the average across Spain was 13.9%).
BBVA Research also reported that the affordability-to-risk ratio for Spanish families is currently 30% above the long-term average meaning that they are currently well-placed to buy property. This is mainly due to lower prices and low interest rates.
BBVA Research did warn that the number of sales to foreign nationals is significant in the Canary Islands and that Brexit could weigh on the market in areas of high foreign demand (especially due to the fall in the value of the pound against the euro).
The Las Palmas property market
How does this all affect the Las Palmas property market?
Las Palmas is a busy city and there is plenty of pent-up demand from locals who are looking to upsize after years of recession and strict mortgage conditions from local banks. Tourism in Gran Canaria is at record levels and local employment is growing.
All in all, it looks like a positive year for property in Gran Canaria and Las Palmas; residential rental rates in Las Palmas are increasing, the banks are being more reasonable, and the tourist rental market is also pushing up demand for investment properties in high-demand areas of the city such as Las Canteras beach and the Puerto District.
I’d expect the number of transactions to rise this year and prices to remain level or increase slightly all over Las Palmas in 2017/2018 (barring any outside economic shock). The high-demand areas in the Puerto and around the beach, where prices are already rising, will lead the way.
As evidence for rising prices in Las Palmas, the Spanish property portal Idealista produces a detailed breakdown of the prices of second-hand property across Spain. The latest report, including figures for Q1, 2017, shows that while property prices in the Province of Las Palmas (including Gran Canaria, Lanzarote & Fuerteventura) are flat, they rose in Las Palmas city by 0.5% in the past 12 months and were up 2.1% year-on-year in Q1 2017 (see page 15 and image below).
Idealista also tracks monthly price fluctuations in Las Palmas.
As for Brexit, while non-residents are a significant minority of buyers in Las Palmas, the high demand from locals and other nationalities is likely to mitigate any drop in demand caused by Brexit worries and the weaker pound.
I’m Laura Leyshon and I’m Las Palmas’ resident British estate agent. I specialise in helping foreign buyers and sellers in the city and I’m always available if you have any questions about property in Las Palmas and the surrounding areas.
Lots of my clients want to buy a house or villa in Las Palmas de Gran Canaria city.
The problem is that Las Palmas is a dense, high-rise city with few typical suburban areas. Houses, especially villa-style houses with gardens, are in short supply.
However, they do exist and the process of buying one is the same as for any other property. The challenge is finding a good one.
Here’s my guide to where to find a house or villa in Las Palmas city…
The Guanarteme district of Las Palmas is about to get 300 new apartments if a new build project comes to fruition.
A 20-strong investment consortium that includes Satocan (owners of the Gran Canaria Sheraton) and the Dinosol supermarket group plans to resurrect a 300-property building project from the pre-crisis days.
The group now owns the 8000m² build site (the guide price was €30m) that was originally acquired and cleared by the now-defunct Spanish company Martinsa-Fadesa. It planned to put up a huge 13-storey building called the Gran Guanarteme but went bankrupt before building started.
The plot in question is at the western end of Mesa y Lopez street and is bordered by Mario César, Fernando Guanarteme and the Plaza de América.
The site already has permission for up to four buildings that can be 10, nine and seven storeys high although there are no public plans for what the new investors plan to build.
We do know that the consortium plans to start work before the end of 2017.