Unlocking Spain’s Real Estate Potential: How Alternative Lenders Are Helping to Drive Housing Supply

The Global Financial Crisis (GFC) of 2008 destabilised property markets globally, and not just in the US and UK but Europe, too. In Spain, prices fell by roughly a third.

In the years preceding 2008, Spain, according to some estimates, had been building as many properties as France, Germany and the UK combined. It’s that abundance of supply that left the country — and specifically its banking community — so exposed.

Though the GFC is now in the rear view mirror and the property market in Spain has been delivering robust house price growth for a number of years, the market currently faces a new supply issue: not the surplus of supply that defined the market pre-GFC, but, perhaps ironically, its lack.

While bureaucracy and red tape are one contributor to supply constraints in Spain, a far bigger one is the understandable caution in the traditional banking community. While major commercial banks are exceptional at providing financing on mature and yielding assets, there is significantly less appetite for riskier, more leveraged or less conventional developments, especially transformative assets.

That risk could be due to developments having few or no presales agreed, or being funded at higher loan-to-values, which for many traditional banks has a distinctly Proustian effect. It transports them to a time they would rather not revisit. Equally, it could be due to the asset in question being non-prime or the borrower being located overseas, which again creates perceived risk.

Or, increasingly, it could be due to the nature of the developments being proposed. In many cases, commercial banks in Spain do not yet have the risk tools to analyse and evaluate the new breed of real estate developments, whether student, luxury, co-living or senior living. The real estate market has evolved significantly over the past decade and many commercial banks are not yet fully comfortable with its direction and emerging themes.

The result is a significant gap in Spain’s property finance market, but it’s a gap alternative lenders are well positioned to fill. Alternative finance providers not only lack the scars of the established banks but are agile and have the tools and experience to assess risk in whatever form it comes and whatever the nature of the development in question.

Alternative lenders can provide forward-looking and innovative developers with the finance that they may struggle to get from traditional lenders, and at rates that are becoming ever more competitive.

Even then, it’s incorrect to assume that alternative finance providers exist to compete with established banks. In fact, in a growing number of cases they are actually working with them.

Where established banks often commit to longer-term financing for stabilized or lower-risk projects, alternative finance providers like Maslow can offer both short- and medium-term solutions—from bridging loans to development finance of up to four years.  At Maslow, we have worked with banks in this way on multiple projects and see them as partners, not opponents.

The real estate market in modern Spain is thriving and represents an opportunity for developers and lenders alike. Alternative finance providers will play an increasingly important role in supporting that opportunity, giving viable projects that may not quite match the appetite of commercial banks the funding and solutions they need.

By working with both property developers and banks, they can ensure the future of the Spanish property market is not held back by its past.