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At a recent ESADE event sponsored by Ono and La Vanguardia, Josep Maria Pont, General Manager of the real estate agency MedGroup, warned of a 'sudden stop' in the sale of second homes to foreigners in Spain. In the next 18 months, he said, sales will freeze, although 'this situation will not be equally serious in all regions'. He indicated that certain areas of Costa del Sol and Alicante - such as Torrevieja - have accumulated a very large stock of second homes. In these areas, 'we may see prices drop, because the speculators will want to get out and they won?t mind having to lower the sale price somewhat, since they bought the homes when they were much cheaper'.

According to Mr. Pont, the fact that 'this type of residential tourism is enduring an incredible amount of pressure from the media' partially explains the stagnation. 'I have to admit that we have very bad press at the moment', he added. Mr. Pont also noted that speculative purchasing is moving to other areas with 'greater potential for an increase in value'.

In the medium term - five to seven years down the road - 'we will see quite a different market from that seen in previous cycles; in the meantime, we have to get over the fear of buying', said Mr. Pont. He added that marketed residences will experience a price adjustment with 'a drop between 30 and 35% in the volume of units sold each year with respect to the peak of the most recent cycle'. From 1991 to 2001, he noted, an average of 45,000 holiday homes were sold each year to Spaniards and foreigners. For the 2001-2006 period, this figure exceeded 100,000 homes per year, with 60% being sold to Spaniards. According to Mr. Pont, in the coming years an average of 70,000 to 80,000 units will be sold annually, distributed equally between Spaniards and foreigners. He predicted that it would be much harder to woo back foreign buyers than Spaniards: 'We've lost the British market, but I hope the Germans will become interested. I am also hopeful about the Scandinavians'. Mr. Pont added: 'If anything is going to keep going up, it's the price of land, because the process of creating land is increasingly difficult and will probably be subject to increasing media exposure'.

Mr. Pont expressed his support for a holiday-home development model like the one developed by MedGroup. According to the speaker, this model is more environmentally friendly and harmonious with the landscape. 'Right now, 35% of the Mediterranean coast is already developed. If we don't get smart about regional planning, we'll destroy the coast', he added. 'One essential aspect is to create locations, to turn places into brands', he said, citing the case of 'La Manga Club'. Mr. Pont noted that this model, unlike previous actions, is large-scale, multidisciplinary and socially committed, and features uniform architecture and an elaborate security strategy. He pointed out that, in recent years, the residential real estate market in Spain - especially in areas popular among foreign tourists - has enjoyed the greatest boom of its history. Mr. Pont called this cycle 'unrepeatable', and said it had sparked debate on the environmental impact of such construction.

Mr. Pont criticised the housing supply market, saying it would need to overcome various problems: 'The operators are highly fragmented - much more than in the first-home market, since there are several developers in each town. It's a structural problem'.

Mr. Pont also lamented the entry of unqualified suppliers into the market, which he said had been 'favoured by the excessively beneficial conditions offered by financial institutions'. He was also critical of municipal autonomy with regard to urban planning, saying 'land-use decisions are sometimes made with frightening frivolousness'. In particular, he directed his criticism at towns of 6,000 to 7,000 people: 'They use the land to finance themselves, and then they spend the money on regular expenses. There is no guarantee that city councils can meet the needs of many developments'. Furthermore, this situation 'creates legal insecurity, since zoning can easily be changed'.

Finally, Mr. Pont discussed problems related to the excessive atomisation of land ownership: the lack of an integrated vision for tourism, the severe imbalance between real productive capacity and existing demand, and the progressive increase in all costs. 'Despite all this, developers have not grown', he said. 'Without the increase in the price of land, in many cases their profit margins would be lower than they were six or seven years ago'.

Programme:
This edition of Matins ESADE, entitled 'Residential Tourist Communities: Concepts and Market Trends for the Coming Years' will feature José María Pont, General Manager of Med Group.

Mr. Pont began his career at Banca Catalana and later moved to Borges, S.A.
In 1995, he entered the field of residential development and land management at Aigüesverds, S.A.
He joined MedGroup in 1999 as Director of Residential Communities and became the company's General Manager in 2004.

8.30h  Start of event

Welcome:
Xavier Sanchez, director of ESADE Alumni.

Introduction:
Pere Viñolas, Director of the Chair of Real Estate Management at ESADE

Lecture:
José María Pont, General Manager of Med Group.

9.15h  Discussion

Moderator:
Jordi Goula, Economics Editor at La Vanguardia

10.00h   Clossing address:
Xavier Sanchez, director of ESADE Alumni

Date, time and venue:
Wednesday, 30th May 2007
8.30 am
Multipurpose Room
ESADE Building 3
Av. Esplugues, 92-96
Barcelona

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