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Focus on value. What does our client perceive?
Vicenç Hernández / Economist. PhD in Economic Psychology. CEO of Tecnotramit and Treshabitat.Innovation involves much more than applying technology to a particular internal or external process. Technology is a means, not an end, and for its implementation to be disruptive it requires a pre and a post. The pre is a change in the company’s organisational culture, the post is a change in the business model, which describes the basis on which a company creates, provides and captures value. Digital technology makes it possible to generate new business models which, in turn, create a new type of customer value in a new way.  According to behavioural economics, people perceive value in two different ways. Acquisition value.Transaction value[1]. Acquisition value is based on standard economic theory and is comparable to what economists call “consumer surplus”. This term indicates the difference resulting from measuring the satisfaction of the object obtained and subtracting the opportunity cost of that which has been renounced. For a cold person, acquisition value is everything. A purchase will produce an abundance of acquisition value if, and only if, the buyer values the purchase far more than the money he has had to spend in return, thus providing satisfaction or meeting a need. But people in general also tend to value another aspect of the purchase: the perceived quality of the transaction. And that is precisely what the transaction value measures, which is defined as the difference between the expected purchase price or reference price, and the final price at which a product is eventually purchased. Here is an example. Suppose you are at an amusement park and you buy a product that turns out to be identical to the one you usually buy in your usual shopping basket, only in this case it costs three times as much. The product itself satisfies you, as always, but your feeling is that the transaction has been a disaster, as the high purchase price produces a negative transaction value. This is what we usually know as a scam. If, on the other hand, the price is below the price you are used to, i.e. your reference price, then the transaction value is positive, i.e. a “bargain”. The reality is that the place of purchase should not be a relevant factor, since our happiness should come only from the acquisition value, but our competitive mind makes us value a good or service not only for the satisfaction it provides, but for the satisfaction of having made a good purchase. Because of this way of thinking on the part of consumers, sellers have incentives to manipulate the perception of the reference price and create the illusion of having made a good purchase by making it seem like the best possible price. This is called the price trap[2]. Products promoted in this way usually share two basic characteristics: their acquisition is rare and their quality is difficult to evaluate or has a high degree of subjectivity. On the one hand, the low frequency of purchase means that consumers do not realise that such products are always on sale. And on the other hand, when the quality of a product is difficult to measure or has a high component of subjectivity, the recommended selling price can do a double service: suggest that the quality is high (and thus increase the perceived acquisition value) and insinuate the presence of a positive transaction value, since the product is discounted. According to the DBT Centre[3], the main values provided by start-ups that differ at a technological level are 3; cost value, experience value and platform value. The cost value is the one that leaves the most notable competitive consequences and as its very name makes clear, it is the capacity to offer the product or service to the final customer at a lower price. This is possible thanks to the virtualisation and dematerialisation of the different products and services that allows these disruptors to improve cost efficiency, and therefore to put a more competitive selling price with the same or higher margin. Their two main characteristics are that on the one hand they can offer more for less due to the use of analytical tools that allow them to create, analyse and exploit the available information by optimising the management of their operations based on it. On the other hand, they take advantage of technological tools to manage their workforce and supply chain in an unconventional way, improving their operational performance by reducing costs and therefore becoming more competitive. One of the major forces behind cost value is the impact it has on the market when the disruptor performs the intermediation task. Many platforms exert indirect price pressure on the respective industries by providing the possibility to compare prices in order to favour the end user and by restricting the ability of companies that advertise to set prices that are too high.  The value of the experience is to offer the end customer more facilities or control over their purchasing decisions. This value is maximised at a time when the offer is increasingly digitalised, since as the physical disappears in favour of the digital, the offer can be fragmented, allowing the customer to take only those parts that really interest him without the need to acquire the entire product or service offer. This quality allows the customer to choose only those products or services that he values and not the rest. This virtualisation of the offer has been the stepping stoner for start-ups that have been able to detect small market niches within the value chain of traditional companies, and all through digital channels that allow for greater personalisation and a lower cost. This allows for a superior experience value that exceeds the brand or quality values that traditional companies can offer. But where something really new is added is in the platform value. After all, trying to be competitive through cost – and therefore price – or experience is not something that has emerged recently. But the great contribution of digital disruption comes from the creation of a platform or playing field completely different from what we were used to and whose main characteristic is its exponential capacity. The platforms originate a network effect where the number of users and their typology greatly influence the final value[4]. These network effects are common in our daily lives in both positive and negative ways, such as the dissemination of news and/or knowledge, social networks, financial contagion in times of crisis, etc. In fact they are the perfect seed for many gregarious behaviours in the economic and sociological field. This network effect occurs when a large number of users can connect to each other in such a way that a binding effect of energies (also known as synergies) is generated, where the whole is greater than the individual sum of the parts. And this is where platforms have the intrinsic quality of being able to increase value by generating greater benefit to the end customer. In addition, these platforms generate a truly dominant competitive force since, due to their nature, once they achieve a certain success, it is exceedingly difficult to dethrone them from their winning position. This peculiarity ends up leading to situations of absolute victory where the leading platforms such as Facebook, iTunes, Twitter or Google can amass great benefits. The growth of digital density is generating a strong reduction in transaction costs, leading many sectors to move from organisational environments centred on linear value chains to new models where the focus is on data. This data is essential to meet the new needs of customers who were previously served only through traditional value chains. These traditional chains were based on models where physical assets were necessary for the creation of a value proposal, so meeting the needs of a new client generated fixed operational costs resulting in linear growth. This growth was achieved by increasing production capacity in proportion to the costs and investments required. Additionally, this effect increased a hidden risk within the company by increasing the lack of agility as it had a structure focused on fixed costs. But the appearance of information platforms has generated a new habitat where growth is exponential and the capacity to serve a new client has a decreasing marginal cost in cumulative terms, since the main asset of this type of platform is the grouping of data from all the members of the value chain. As IESE International Graduate School of Management[5] points out, in a scenario where the centrifugal forces of digital transformation are much stronger than centripetal ones, there is a tendency for the market to consolidate around information platforms, creating a progressive commoditisation of the traditional value chain and a greater difficulty in capturing value. If these two forces manage to balance out, the traditional value chain may not disappear by combining its linear component with the exponential growth part of the platform because its intangible assets combined with an information platform model open up the range of services for customers. This combination of forces creates new challenges in terms of reliability, privacy and security, as well as opening the door to the emergence of new data exchanges with the aim of obtaining more automation, personalisation and prolepsis. Obviously these three values of cost, experience and platform do not necessarily occur individually as on many occasions the power of disruption comes from the combined strength of these three elements or value generators. So when the three values converge to give rise to new business models and the capacity to generate exponential profits, we speak of combinatorial disruption. Throughout history, technological homogenisation and competition have led to the combination of different technologies giving rise to new innovations, so that different business models can be intermingled and result in revolutionary combinations of cost, experience and platform values. Combined disruption is not only beneficial to the end customer but also to those companies that are able to differentiate themselves by providing a higher level of value. In short, although the war for price and quality has always existed, digitalisation has managed to take a step forward by allowing an explosive combination by adding the competitive advantage of platform value. These new platforms allow for a red carpet for new business models that in many cases are derived from a more core model in addition to a combinatorial disruption that favours a large number of end customers in an exponential manner. These disruptive start-ups are having the ability to generate new value for the end customers by making them stop looking at the more traditional companies in many cases. Only those companies that are able to combine a balanced situation between pipelines or linear value chains and appropriate information platforms will be better prepared to capture and generate value.  [1] According to classical economic literature, one speaks of “utility” instead of “value”. In its broadest concept, utility is the interest or benefit that is obtained from the enjoyment or use of a particular good or service. It is also assimilated to the concept of happiness. As a result, the greater the usefulness of the product, the greater the desire to consume it. In the context of this article we prefer the term value, which is more adapted to the common business language.[2] “Finanzas personales para Dummies”. Hernández, V. Planeta (2012)[3] The Global Center for Digital Business Transformation (DBT) is located in Lausanne, Switzerland and is an initiative of the International Institute for Management Development (IMD) where corporate and academic leaders are joining the forefront of digitalisation to explore and solve the major issues facing business and society today.[4] Network effects are usually associated with Metcalfe’s Law (named after the technologist Robert Metcalfe), according to which the value of a telecommunication network increases in proportion to the square of the number of users of the system, causing non-linear changes. Examples can be found of various types and not only in reference to telecommunications, such as the telephone, a social network or a certain operating system, where each one of them by itself has no value but as the number of users grows its value in the market exponentially.[5] “Las fuerzas centrífugas y centrípetas que inciden en la transformación digital de los sectores”. Zamora, J., Tatarinov, K. and Sieber, S. Harvard Deusto Business Review. Planeta de Agostini Formación, S.L.
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Digital disruption. How to digest a new environment in traditional companies.
Vicenç Hernández / Economist. PhD in Economic Psychology. CEO of Tecnotramit and Treshabitat. One of the great dilemmas facing management today is how disruptors create their businesses to generate change and what knowledge and new practices these more traditional companies and institutions should have in order to try to counteract and become disruptive to their own markets. The dynamics of today’s competitive environment demand more agility from companies and institutions in order to change their traditional way of acting and know how to adapt to the new rules of their markets.  Digital transformation is top-down and requires a change of culture and approach by the entire organisation. But this can become mere theory with no relevant practical application if we do not understand the nature of this change and the threat this new generation of companies poses to their existing businesses. By disruption we understand the repercussion and influence that new technologies and digital business models condition the changes in the value proposal and positioning of the companies that form a market. The concept of disruption differs from that of digital transformation in that the latter refers to the changes that organisations should carry out by using digital technologies and business models to improve their performance and build a digital base. This transformation has to be brought about by one or more digital technologies and requires an organisational change impacting on processes, people and strategy. In our opinion the real disruption does not come from the technology itself, but from the need for a radical cultural change within the company. Let’s talk about disruption. Break out of pre-set moulds If we had to look for the main differences between the most traditional business environments and those of companies immersed in a real digital disruption, I would highlight two; the speed of change and the attitude towards risk-taking. Companies with disruptive DNA innovate very quickly to gain market share and stay ahead of competitors who are still stuck in more traditional and slower models. This innovation allows them to capture databases of potential customers in order to offer their services in a more reiterative and efficient way, thus increasing their chances of success. One of the great mistakes of companies based on more traditional business models is to think that digital disruption is only a matter for technology companies. This type of company finds it difficult to understand that this disruption alters the nature of the competitive change it represents, and it is essential to know which business models and technologies are most needed in order to establish a new strategy for the coming years. This new dynamic of digital disruption significantly increases the risk of being pushed out of the market as the force with which it is being implemented makes the changes increasingly rapid. This speed adds a bit of chaos to the different markets in which the company operates bringing in new competitors who until a couple of days ago were engaged in another type of business, and now they have reached a new one by removing possible entry barriers thanks to new technologies. These competitors appear from nowhere and usually come from sectors outside of ours to be a real threat wherever they touch down, so the competitive focus is not only on our conventional market and led by the companies we already know after years of collusion. For traditional companies, their business models and processes are or have been good for their past businesses, but they are no longer valid from a point of view of the agile competitiveness that disruption triggers. One of the two big problems that this generates in the face of the challenge of innovation and digital disruption is that on the one hand, if it has gone well … Why change? If they have been able to adapt in recent years, they will also be able to do so now. This problem of complacency leads us to the second problem. When the market inevitably forces them to change, but in a much faster and different way than before, they find themselves with extremely bureaucratic, slow and flimsy structures that hinder them from making the necessary changes in mentality prior to having a strategy focused on technology. This does not mean that it is a problem without a solution, since more traditional companies can count on tools and solutions to change this trend as long as they are clear that the previous step is a change in organisational culture. This change will require more tools of psychology applied to organisational behaviour the larger the company is and the more bureaucratic processes it has. New companies focused on disruption have the advantage of more agility, faster action and a corporate culture based on experimentation. In addition, they have the ability to take risks so that they are not heavy structures and can grow and displace traditional companies more quickly. In contrast, traditional companies have the advantage their positioning gives them, thanks to the strength and notoriety of their brand, a consolidated client portfolio and easier access to financing.  But the new rules of digital disruption are giving these advantages a fragility that makes them ephemeral when the factor of scalability comes into play. This scalability is what allows a strong optimisation of investments at a faster speed than we are used to. The defensive bastions they have had until now can now be flanked more easily by calling into question the supposed barriers to entry into the sector under which they have always been sheltered.  The mere redefinition of a product or service or a new platform where the customer can access it, can reconfigure entire sectors by new competitors coming out of the woodwork or other sectors where innovation has landed them in a new activity where some time ago they did not even think they would be. So to think that this will never happen to me because my sector is very concentrated and the barriers to entry are high, is wrong thinking. A clear example of this is the technological start-ups in the financial sector (better known as fintech) and the real estate sector (known as proptech), which have been able to break down many of the more traditional products and services, breaking down the entry barriers that were involved in offering the full range of services. The right combination of technologies and business models allows them to digitise their offerings and focus their attack on more than one business, meeting the needs of a clearly underserved market. These types of disruptive companies manage to offer similar or even greater value without the need to apply traditional business models and more conventional implementation. And all this by means of the digitisation of products, services and processes to deliver more value to the final consumer avoiding the bureaucratic methodologies that the most traditional companies have. Their focus is on the value they bring to their customers, not on the value chain needed to generate it as this minimises time and difficulty. Many companies are convinced that capital costs, regulatory barriers and the difficulty of many business models are insurmountable barriers to digital disruption. It is true that today it is hard to deny the evidence of the importance and relevance of technology in all areas of business, but the “this will never happen to me” bias is more prevalent than we think in many managers and business owners. But what they are not aware of is the speed of all these changes. In fact, we are no longer talking about independent technologies, but rather about combinations and convergence of different digital mutations (big data, AI, the cloud, etc.) which, when they come together, cause the companies that carry them out to dissociate their sources of value, resulting in new forms of competition. In fact, as we said before, the concept of sector or industry is blurring due to the increasing degree of digitisation, which causes many sectors to break up and be recreated in a totally new and different way than before.  Self-confidence ceases to be a virtue and turns into complacency when we believe that this will not happen in our sector, since we think that its limits and boundaries that distinguish it from others will always be immovable. These changes, which until now were linear, become exponential when we realise that it is too late to replicate them. Disruptors are not willing to play by these rules. Their strategy is to precisely change that, the rules they have to play by. The different phases of the value chain can be digitalised in all industries, and this is precisely the focus of the most innovative companies, which find in these small details the way to optimise and make profitable their staging in sectors that have not always been their usual ones. More traditional companies can take advantage of these technologies and adapt them to generate new business models for their recurrent activities. Many times companies make the mistake of thinking that diversifying is only about doing completely different things that are either so different from their core areas that they end up with an inhomogeneous portfolio of products and services or are derived from their traditional activities but end up distorting their main focus of value generation. This operation is based on the theory of diversification, which seeks to create a portfolio of products and/or activities whose diversity generates a decrease in non-systematic risk (that which can be eliminated by diversification) due to the low correlation between the assets that form part of the portfolio. Another way of diversification used is geographical expansion and internationalisation which, under the effects of the so-called river fisherman’s syndrome, which thinks that the best fish are always on the other bank, it was fairly widely assumed that the policy of geographical expansion could be an appropriate way of growth without paying attention to the high costs and risks involved in this decision. The problem is that this way to go is the source of many business failures because they do not focus their experience and knowledge on extracting the value they still have in their traditional activities. If they spent more time digitising their operations and internal processes they could get much more value for money without having to experiment in areas they don’t know about. The great threat for those who do not make this internal prospection is that we are going to live in an era where margins at a general level are going to fall (are falling) as emerging economies and companies with a greater predisposition to digital disruption are going to make an appearance in all industries, introducing new business models in sectors that are totally new to them. Large platforms are the perfect gateway for this type of company, which are more agile and can compensate for their lack of visibility and positioning, as well as the scarcity of capital resources.
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Accreditation of training in the real estate sector, the linchpin of professional reputation
Vicenç Hernández / Economist. Doctor in Economic Psychology The need for training Talking today about the importance of training in any professional activity is obvious. In the same way, we would discover nothing new when talking about the benefits that this training generates in return, not only to the professionals themselves, but also to the organisations and clients they serve. Professional training involves the development of knowledge, skills, behaviour and abilities necessary to carry out a professional activity efficiently. But in spite of being a generally accepted topic and as we say, something that is rather obvious, in our country we still find a practical reality that is far from the theoretical postulates. Many professionals consider training to be important as a starting point for their professional development, even though this training is acquired through daily practice and practical work. But these same professionals reject basic theoretical training for the simple reason that it is an investment in time and money which, while not a compulsory requirement, does not generate a return in the short term. In this article, we intend to draw attention to the urgent need for training and subsequent qualification of all the agents involved in mediation and advice in the real estate sector, both to provide a more efficient service to their clients and therefore to the companies and organisations in which they provide their services, and to give prestige to a profession that in the eyes of society moves to the sound of fashions in the establishment of businesses on the street.  The positioning of the real estate consultancy and mediation profession must move away from the current vision of easy business that anyone can access after fulfilling certain administrative requirements. The importance of the profession and the financial and economic consequences for clients of poor professional practice should be pampered when selecting the professionals who will form part of the group. This professional training must be accredited by national and European institutions in order to manage more effectively the regulation of the profession at its different levels of action. Property training Without wishing to be exhaustive and to draw up a catalogue with all the training available in the sector in our country, we will address the situation of the sector as a whole. We note that there are no official training paths that serve to accredit real estate professionals, and it is generally characterised by its atomisation both in terms of the different specialities (legal, technological, commercial, financial, etc.) and in the scope of professional activity (real estate agent, property manager, developer, etc.). There is an official regulated training, essentially at a higher level, which coincides with the university level in its different levels (graduate, master’s, etc.) of each of the specialities. Sometimes, this university degree training touches on generic aspects of various specialities without going into a specific area of professional activity in depth. But in short, it is difficult to find transversal training that develops specialists with a wide range of skills in the sector. If we analyse the training on offer at a second level, such official training is practically non-existent if we leave out the formal declarations of some collective agreements in the sector in order to train the different types of jobs in companies. This official training is hardly being practically developed as professional training to facilitate recruitment of trained professionals for the real estate sector. Real estate companies need to hire managers, collectors, sellers and administrators with sound knowledge of their sector, which will provide them with the necessary skills to carry out their functions. Finally, in the property training market, there are numerous entities and trainers who often provide non-regulated training to a large number of agents working in the sector. Such training often does not follow a pattern oriented, within a defined itinerary, at comprehensive training of a technician or real estate specialist. The training of professionals in the first business link of mediation, management and property administration In accordance with the above, there is no specific regulation in our country on the training of real estate professionals, especially in the field of mediation, management and real estate administration techniques, aimed at guaranteeing companies and consumers that these professionals have the necessary skills to provide the services they are entitled to. The relevant dimension of the country’s real estate market, with a relevant weight in its macroeconomic figures, generates an important labour market that increasingly needs to have better trained real estate technicians with a prestigious accreditation that guarantees its clients transparency and good professional work. Therefore, in our opinion, it would be necessary to have a professional, real -effective and efficient- accreditation that really guarantees the correct and strict training of most of the employees of the first link of the real estate companies, giving them the necessary training for their professional development, and with full professional, operative and ethical guarantees for their clients. For this to be effective, real and not just nominal, it is essential that there is complicity and collaboration between the real estate companies and the accredited training centres, as well as an independent body that regulates, supervises and controls the good work of the accredited professionals, taking care of the reputation of the certification.  This professional real estate training must be, together with university training, the gateway to professional real estate certification, which must be recognised by all actors in the real estate sector: administrations, companies and consumers. Professional certifications  Professional certifications measure skills and knowledge based on practice-based programmes. They are evaluated by independent committees and are granted by recognized entities in the market without commercial orientation.Professional certifications are born with the idea of becoming standards of professional practice. The difference with academic qualifications is that the certifications are not lifelong; once obtained, it must be guaranteed at least biennially that sufficient continuous training has been carried out to keep up to date professionally.These professional certifications are based on real data of what constitutes the practice of the profession.The examinations for certification are based on job analysis, are linked to performance needs and are appropriate for the sector’s own service industry.The content programmes required for the examinations are common throughout the territory of application.The certifications offer a number of advantages for the professionals who hold them:Permanent expansion of your knowledge to progress professionally.To advance in the quality of service and in the satisfaction and loyalty of the clients.Acquisition of professional prestige and for hiring.Adaptation to current and future regulatory requirements for professional qualifications.The professional certifications, imply for the student/professional:To be previously in possession of a qualification that accredits the minimum necessary knowledge to access the certification training.No criminal record for intentional crimes, no expulsion from school or professional association and no final sanction for a serious offence.Proof of experience -in some cases a priori and in others a posteriori– in the sector.To develop the training activity inherent to the certification: classroom training, self-study and knowledge tests.Signature of the code of ethics and/or declaration of honour.To contribute with the periodicity that will be determined the certificates of accredited continuous training.By way of example, we will refer to the EFPA certification, which accredits and certifies personal financial planning and consultancy professionals throughout Europe. This certification is mandatory for all those professionals in the financial sector who carry out these functions, whether they are employed or self-employed.EFPA establishes four categories of certified professionals[1]:  European Investment Assistant. The person who recognises the qualification required to provide information in accordance with ESMA’s guidelines and the criteria they set out on knowledge and skills for providing investment information.European Investment Practitioner. The person who recognises the qualifications required to provide advice on a regular basis in accordance with ESMA’s guidelines and the criteria they set out for knowledge and skills in investment advice.European Investment Advisor. Person who certifies the professional suitability to carry out tasks of advice, management and financial consultancy to individuals in personal or private banking, financial services oriented to the individual client and any professional banking, insurance or independent function that involves offering an integrated service of wealth and financial consultancy.European Investment Planner. Person who certifies the professional suitability to carry out comprehensive personal financial planning tasks of a high level of complexity and volume. European real estate certification, a need for training for technicians in the second link of the real estate sector In our opinion, just as there is EFPA in the financial and insurance sector, certification of real estate professionals at a European level is necessary. All those real estate professionals whose professional performance without adequate training could be detrimental to consumers, and therefore generate a reputational risk that could affect the whole sector, should be certified. Therefore, the scope that should be given to these certifications should be considered by means of an itinerary for each of the standard positions in the real estate companies that allow the professional growth of the certified professionals. In our opinion, several competence levels should be established, with a standard certification for each of them. As a mere theoretical exercise and in the absence of a specific technical nomenclature, we suggest that three levels of competence be established: Higher level. This person would be the manager who accredits his or her ability to manage real estate companies, in the broadest sense and therefore with extensive and contrasting experience and broad knowledge of management, technology and regulations governing the various real estate services.Medium level. This person would be the specialist who accredits his or her ability to manage departments and/or real estate offices, with experience and knowledge of management, technology and regulations governing real estate services in his or her specialty.Basic level. This person would be the specialist who could prove his or her ability to advise clients, with experience and knowledge of operations, technology and regulatory standards required for real estate services in his or her field. Each level must therefore have a series of obligatory subjects that are necessary, according to the criteria of the certifying body, to enable the correct exercise of their profession and to guarantee the market that the professional is equipped with the necessary tools to provide the best service to their clients. Continuing education Ongoing training is that which guarantees the maintenance of the professional’s training standards in order to continue providing their services effectively for his or her clients, with up-to-date knowledge. This is all the more important because of the speed at which “new knowledge” is circulating today, especially technological knowledge, which requires the permanent recycling of the agents providing the services. In certain EU countries, accreditation of further training is a prerequisite for real estate agents to maintain their operational “licence”. In professions such as auditing, it is essential to have accreditation of continuous training in order to be able to continue practising the profession and therefore be authorised by the Spanish Official Registry of Auditors to carry out official audit and advisory work respectively, and to have the authorised firm responsible for the corresponding reports.  Professional certifications also require the permanent retraining of certified professionals, so that they remain valid. They are usually required to justify an accredited training with a teaching dedication -presential or online- determined to be carried out in biannual periods. In our opinion, continuous recycling is also a key element for professionals in the real estate sector, so that they can provide a high quality service to their clients. The continuous changes in legal and fiscal real estate regulations, directly motivated by the Administration, and also indirectly by the social agents, make this necessary. Let us not forget either the evolution of marketing techniques, consumer psychology, professional ethics and above all, the dynamism of technology, which is the key to making the service efficient and also as an instrument that differentiates it from the competition. For all these reasons, we maintain that it is essential that all the professionals in the sector, once they have reached the appropriate level of training, must necessarily maintain it through duly accredited retraining at a contrasting level, by means of the appropriate certification.  Conclusions and recommendations In our opinion: In our country, we currently do not have the precise homogeneous training of real estate technicians in terms of quantity and quality.The real estate sector needs more and better trained professionals with up-to-date knowledge to provide an adequate service to clients.The real estate sector needs rigour and transparency to allow a better reputation for professionals who meet the requirements of the relevant accreditation.It is necessary in the country the effective development of the training of the first professional real estate link, as a previous instrument of the training of the basic personnel of the sector.At European level, there is a need for the certification of real estate technicians, as an instrument to regulate the labour market and to serve the consumer.Continuous training of all real estate professionals is essential to guarantee a constant improvement of a service of vital importance for most families. We the authors would be satisfied if after reading this article, we have generated interest on the part of professionals on how to improve their training and that they assume that this is not limited to specific training or obtaining a degree or accreditation, but to a continuous process of training throughout their professional life. Likewise, that the ad hoc European bodies and the administrations of the different countries begin to consider the need for this accreditation as one of the instruments for providing a quality professional service to consumers, without which the rights of the latter will be effectively called into question. Although in this article we have made express mention of mediation and consultancy professionals, our proposal for certification should broadly cover other professional groups related to the sector and which in practice are complementary activities for the same end client.[1] Source: EFPA Spain (www.efpa.es)
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Measures to control the price of residential property rentals.
A review of recent international historyVicenç Hernández Reche / Economist. PhD. in Economic Psychology / CEO of Tecnotramit and Treshabitat. Summary In recent years, there has been a sharp increase in residential rental prices in many of the main metropolitan areas of the most advanced economies. The impact of this growth ranges from affecting the disposable income of families to the difficulty of access to housing by certain more disadvantaged groups. That is why in Spain the debate on public sector intervention in the rental market has had more repercussion with the aim of curbing the potential negative effects that a price hike could generate on the country’s macroeconomic and social stability. Generally speaking, the interventions from the public sector can be divided into three categories: price control by prohibiting the exceeding of a certain amount, the increase of public supply through the provision of rental housing, and finally, a set of measures aimed at both incentivising the private provision of rental housing and facilitating access by certain groups at a rental price appropriate to their possibilities. As these are not new measures and we can count on the experience and quantification of results based on measures taken in the past, we can now make an analysis of the possible impact of the consequences derived from these interventions. The present document aims to review one of these measures, and that is the control of rental income prices. Price control measures for residential property rentals Economic orthodoxy establishes that when a rise in the price of a good occurs it is due to an increase in demand above the growth of supply or a decrease in demand below the decrease in supply. Be that as it may, this imbalance generates an upward impact on prices with serious consequences from a country’s macroeconomic and social point of view. The increase in demand has been focused on different groups such as households with a lower level of income and young people of emancipation age, focusing on the geographical areas with the highest level of economic activity. Among the most important factors determining the increase in demand for rent, we could highlight the stagnation of the level of wages among the younger working population and those with less training, the greater tightening of credit conditions established by financial institutions following the last international financial crisis, the change in mentality regarding the concept of ownership by a new generation and the concentration of migratory flows in the main capitals with the highest level of economic activity. For its part, supply has remained stable, generating a relative shortage of housing in comparison with the rise in demand, providing an asymmetry in the market which has led to greater difficulty in accessing residential housing for certain more disadvantaged groups. The shortage of rented housing not only has a negative impact on society, but also affects the proper functioning of the labour market, the level of household consumption and the financial stability of the economy. Firstly, a more dynamic and agile rental market facilitates the mobility of the unemployed towards those populations where new jobs are generated or there are vacancies between existing jobs[1]. Secondly, greater expenditure on renting reduces the proportion of disposable income destined for consumption, especially in those groups whose predisposition is higher than the rest. When reviewing this type of public intervention measure, it should be borne in mind that transferring past experience to current environments can generate distortions for two main reasons. On the one hand, if the comparison is made for the same geographical area, we have to bear in mind that these are different moments in time, with different economic and social situations. On the other hand, if the comparison is made on different geographical areas, we must take into account diverse cultural realities and very heterogeneous geographical markets. Policies which establish controls on the price of rents present a series of challenges when it comes to their design and implementation. For example, what is considered a standard or comparable housing from which to establish reference prices in a regulated area, from what level of price increase can a market be considered sufficiently tense for its intervention, the administrative difficulty in controlling the application of the established rule as well as the cost involved in its compliance and the generation of sanctions, or the subjective decision to set limits and the permitted growth rates. All these difficulties have led to different conflicts between landlords and tenants, and therefore a higher indirect public cost for the establishment of control and arbitration systems to ensure the proper functioning of the control measures implemented. A review of recent international history Both the First World War in Europe and the Second World War in the United States marked the beginning of this control mechanism. The concentration of industrial activity focused on certain areas due to the geographical relocation imposed by the war effort, led to the first measures being taken to contain the rise in prices on the residential rental market. This phenomenon has been called the first generation of rent controls[2], and it occurred both in cities in advanced economies and in various cities in developing economies. The preservation of this regulation led to the creation of dual markets where a market of regulated prices that experienced a reduction in real prices coexisted with an unregulated market whose prices continued to rise. Already in the 1970s the second generation of rent controls appeared, in which the main characteristic was the limitation of rental income associated with the evolution of a reference index capable of measuring the increase in the cost of living. In this way, real rental income was curbed due to the inflationary trend produced by the oil crisis of that decade[3]. During the 1980s, the new wave of liberalisation and deregulation that invaded European economies led to a large part of the regulations governing rental prices disappearing or being simplified due to the high level of complexity in both their measurement and control methodology. This led to smaller interventions with greater administrative simplification, such as the so-called rent stabilisation policies, which limited the maximum growth of rental income over the life of the contract[4]. Despite this, price regulations in certain segments of the rental market remain in place in different countries in both Europe and the United States, and often affect an older housing stock whose tenants have long-term contracts. At present, the sharp increases in rental prices have promoted strong social demands that the authorities have been happy to study and legislate to set limits on the maximum growth of rental income. Many of these measures are being carried out according to administrative criteria of dubious effectiveness which, in both form and substance, infringe on individual freedom and in some cases on private property. Let us look at the case of some reference countries. Germany Due to the importance of its rental housing market, which reaches 50% of households[5], the Mietpreisbremse will take place in June 2015 with the express aim of curbing the growth of home rentals. This tool gives the green light to the governments of the Länders (federate states) to allow their municipalities to establish price controls for a maximum of 5 years in those rental markets that are under stress, and this involves meeting one of the following four requirements. If at the local level the average income growth is higher than the national average.If at the local level the average ratio of rental income to income is significantly higher than the same ratio at the national level.When there is a strong imbalance between supply and demand in the population because there is a low rate of available housing compared to the existing demand.If the capacity to build housing in the observed area is lower than the growth rate of the local population. Following the introduction of the Mietpreisbremse, 11 Länders have adopted this measure affecting more than 20 million inhabitants in 300 municipalities, and covering 25% of the country’s housing stock[6]. The maximum rental price established is the average of the rental income for comparable homes rented in the same municipality during the last 4 years, plus 10%. These average incomes are obtained from the so-called Mietspiegel, or rental mirrors, which estimates the average prices of comparable housing in a given local market. This system of mirrors has been used in Germany since the 1970s as a reference for updating rental income once an initial agreement between landlord and tenant has been established. The Mietspiegel obtains information from different associations of owners and tenants regarding the characteristics of the housing (typology, size, location, facilities, etc.) and the levels of rental income for the last 4 years, in order to calculate comparable rental reference prices. This indicator has to be updated at least every 2 years and is available for almost 300 municipalities considered representative of the market evolution at state level. If you are located in a different municipality outside the scope of this comparison, the solution is to consult an expert in the area or use the agreed rent for 3 comparable units located in the same area as a reference[7]. We found 3 exceptions within this system of mirrors. Rental contracts on homes built after 1 October 2014.The first rent agreed after extensive renovation of the property by the owner.In the event that the rental income from a contract prior to the entry into force of the new regulations is higher than the maximum price established, the owner has the power to maintain the price in successive contracts. However, the Mietpreisbremse has not succeeded in curbing the problems of access to housing in some of Germany’s most dynamic cities, such as Berlin. For this reason, the federal state has passed new legislation (Mietendeckel) introducing a maximum rent for housing from 2020 and a freeze on rental income for 5 years. This system establishes a price per square metre that cannot be exceeded in those rental contracts on homes built before 2014, allowing rents to be updated from 2022 in line with the evolution of the Consumer Price Index (CPI) and being considered abusive if the rental price exceeds 20% of that maximum, generating heavy financial penalties for owners. This will allow tenants who are paying more than the maximum price established to claim the corresponding reduction. This maximum price established is only increased in cases of high quality homes or homes located in certain areas of the city. Likewise, the regulation allows these maximum incomes to be updated in the event of significant maintenance reforms in the buildings, establishing a maximum of 1 euro per square metre in addition to the reference price established by the regulation. The Berlin Parliament recently approved the above-mentioned Mietendeckel to freeze rents for a period of 5 years, and to set a ceiling on the price of rental housing at 9.80 euros per square metre for properties ready for occupation by 2014. The consequences of the introduction of this regulation will have to be seen in a longer period of time in order to correctly assess its importance and impact, but everything seems to indicate that, as previous experiences have indicated, the limitation of rental prices has a negative impact on the supply of rental housing in the residential market. United States In the United States, the design and implementation of these types of measures are heterogeneous and reveal various singularities in terms of the local real estate market to which the regulation applies. The regulatory limits established are intended not to be totally detrimental to the owner, establishing limitations on the growth of income above inflation, but below the growth observed at the time of the establishment of the regulation. This allows for real rent growth by providing economic viability to the investment made by the owner. In the case of California, increases in rental income for 10 years from 2020 are limited to 5% per year plus inflation for homes over 15 years, excluding rentals to small single-family owners.  If the property is owned by legal entities or institutional investors, rent control is not conditioned by the age or size of the property. This regulation is in addition to others of a local nature such as in the case of New York City, which is particularly significant as it has maintained controls on price levels, as well as on price increases from the 1940s to the present. Controls on rental levels for older housing are gradually disappearing, as they only apply to housing in buildings constructed before February 1947 and to housing occupied by the same tenant before 1 July 1971. But with regard to controls on maximum increases in renovations, these apply to all buildings with 6 or more dwellings built between 1947 and 1973 and to those dwellings whose tenants change and which were subject to rent limitations. In addition, the controls are limited according to one of these 3 parameters. The duration of the contracts.The maximum increase in rent when there is a change of tenant in an already rented property.The increase in income in cases of housing reforms. France Since 1989, France has had an automatic instrument for updating rental income in the case of contracts already in force and their corresponding updates, which is associated with a reference index of rentals that progresses in accordance with the cost of living. This reference index, known as the IRL (Indice de Référence dels Loyers), has been linked since 2006 to the CPI excluding the rent and tobacco component. The Alur law (Accès au Logement et à un Urbanisme Rénové) passed in 2014 allows for rent limitations in cities with upward price pressure on the rental market. This law establishes a limitation of 20% in relation to reference price indices per square metre by comparable type of housing and area of location. However, the Alur Law allows a series of exceptions depending on certain characteristics of the property. This system was implemented in Lille and Paris until the Paris Administrative Court suspended the regulation in November 2017 on the grounds that it should not only be applied in the Paris municipality. With the aim of resuming the regulation for the control of rent ceilings, the French Constitutional Council approved the Elan Law in 2018, which came into force in the summer of 2019. This law will be in force until 2023, at which time its effectiveness and repercussions on prices will be reviewed, and it affects new rental contracts, both in the case of homes that are already rented out and first rentals, and renewals that can be made at a later date. Cities that wish to make use of this regulation will limit rent increases to 20% above an average reference price level that will be determined according to the area where the home is located, quality and number of rooms or the year of construction, among other variables. Spain In the case of Spain, the 1946 Urban Leasing Law introduced the freezing of rental income and the indefinite nature of contracts[8]. Previously, the Royal Decree of 21 June 1920, known as the Bugallal Decree, had already established the freezing of rental income, generating a strong impact on the country’s main cities[9]. Royal Decree-Law 2/1985, better known as the Boyer Decree, established freedom to set the price and duration of new rental contracts, as well as the elimination of forced extensions, which gave rise to a dual market where new rents coexisted with those already in force known as “old rentals”, which remained at significantly lower prices than the new ones. With the aim of eliminating the differences between the two types of rentals, the 1994 Urban Leasing Law[10] established mechanisms to alleviate the effects of this duality, as well as the establishment of the CPI as a reference index to determine the maximum updating of rentals during the four years following the signing of the contract. With this law, in the absence of an express agreement between the owner and the tenant, no updating of the rental income was applied during the term of the contract. Years later, Law 4/2013 dispensed with this maximum revaluation clause associated with the CPI and established that, in the event of not reaching an agreement on the criteria for annual updating, the CPI would be established as a mechanism for automatic annual updating of rental income. The Netherlands In the Netherlands there is price regulation in both the private and “social rent” markets, implemented through a system of points that are allocated according to the size of the house, location, facilities, physical characteristics, and the environment surrounding the house. The maximum monthly income is determined according to the number of points. There is a limit on the number of points on which the maximum price is set. Once the contract is signed, the tenant has 6 months in which to complain about the price they are paying to the rental commission (Huurcommissie), which resolves disputes between landlords and tenants in the event of discrepancies regarding the maintenance of the property and the distribution of responsibilities. This regulation excludes those homes of higher quality and which, therefore, have a rating that exceeds the points associated with the maximum income. In 2019, the maximum rent was set at 720 euros per month and it is estimated that more than 70% of rent within the private market sets its prices on the basis of this point system. In recent years, due to the emergence of parallel markets or inefficiencies in rent setting, there has been a gradual liberalisation of rents by changing the point threshold to reduce the scope of regulation on higher quality housing or for households with a higher income level[11]. Sweden In Scandinavia, free agreement between landlords and tenants is conditioned by a system of collective bargaining at municipal level involving representatives of private landlords, municipal housing companies and representatives of the tenant community (Swedish Tenant Unions). A rental reference price is established annually for different types of housing with equivalent utility values, and the maximum increase in rental prices. The utility value system is the set of variables that reflect the value given by the tenants to the homes according to a certain number of parameters such as geographical location, quality, location of the home within the building and value of the environment where the property is located. Therefore, there is freedom for private negotiation between owner and tenant to freely agree on the initial price of the rent. However, if the landlord considers that the rent established for his property differs by a high percentage from the reference price estimated in the collective bargaining, he has the right to report his situation to the regional rental court. This reference pricing system affects almost 90% of the total rental housing stock in the country. In the rest, the agreed prices are below this system of collective bargaining. Positive and negative effects on price control In the face of the different measures implemented both to control rental prices and their increase over time, there are diverse opinions where in some cases social welfare and the common good prevail, as in others where individuals’ freedom of negotiation and respect for private property predominate as the fundamental norm. Advocates of the first argument argue that these control measures are particularly relevant when tenants face more strained housing rental markets and when these policies favour lower income tenants. Conversely, several authors have highlighted that the setting of controls on the price of residential rent can create inefficiencies in the housing market that can ultimately harm social welfare. Several authors[12] consider that social welfare gains are produced when regulations on rent increases protect the tenant from an asymmetric contractual situation where the owner has some market power against the tenant, whose mobility is costly. In addition, price control reduces concerns about tenants’ labour and consumption decisions. These same authors defend certain contexts where policies to secure rental income produce significant welfare gains. Specifically, they consider that redistributive policy in the form of income controls can generate social welfare gains in the face of income increases when regulations affect households with a more unfavourable income distribution situation. In those metropolitan areas with the greatest inequality of household income, price controls are a tool for reassurance in the face of upward price dynamics. While the immediate effect of these policies is an improvement in the welfare of affected tenants, the implementation of these regulations generates consequences that pose potential losses to social welfare in the medium and long term. Let us look at some of these negative effects. Economic theory predicts that the administration’s setting of a rental price below the market price generates a reduction in the supply of rent. This is due both to the lower investment in the construction and/or rehabilitation of rental housing, and to the greater incentives for owners to sell their rented property, so that the quality of housing in the long term would be adversely affected. Additional efficiency losses could be generated if such regulations favour the emergence of dual residential rental markets, where price controlled housing coexists in different areas of the same city with housing under freedom of establishment of rents. In housing rental markets where this segmentation occurs, negative externalities can be created, negatively affecting labour mobilisation, and leading to a deficient allocation of housing supply. The reduction in returns from housing investment and the population segmentation resulting from such regulations adversely affect the aggregate value of property asset values in a market with regulated rents. In addition, the reduction in the aggregate supply of residential rent due to non-investment in this type of asset will inevitably lead to an increase in prices in the non-regulated segments. In the medium term, the response of landlords leads to a reduction in the supply of rent for households with lower purchasing power. Therefore, there is an increase in the construction of new housing for households with higher income levels, the reform of housing to escape regulation or even its sale, thus generating a greater segmentation of the population and a reduction in the supply of housing for rent, putting upward pressure on rental prices in the city. Evidence from different studies[13] shows how rent controls have had a negative impact on the value of both rented housing and property and equipment in those areas where regulated housing is concentrated. The empirical analysis shows that in areas where prices were regulated there was a significant drop in prices while in non-regulated areas the upward impact of prices was more than proportional. This last fact has generated an inefficient allocation between households’ dwellings producing an evident loss of social welfare. Another study[14] shows evidence of how these same regulations have impacted on the price of developable land, since in order not to discourage investment in new housing for rent, the regulation left out housing built from October 2014. The authors of the study show how investment in new housing construction would have increased in the municipalities that adopted the regulation to escape the established limitation. This increase in investment raised the price of land, as well as the rental price of new unregulated housing, so that regulation on the one hand encouraged the construction of new homes, but on the other hand pushed up the rental prices of part of the housing stock. The opposite of the proposed overall objective. In short, although there are certain common conclusions in very diverse contexts, the efficiency of policies in the residential rental market is subordinated to interaction with the current macroeconomic situation, the local casuistry of the market and a set of regulations and standards that affect the income of households that demand rental housing, such as fiscal or labour policies. [1] “Unemployment: Questions and Some Answers”, Economic Journal, 108 (May), pages 802-816. Nickell, S.J.  (1998)“Housing liquidity, mobility, and the labour market”, Review of Economic Studies. 79(4), pages 1559-1589. Head, A., and H. Lloyd-Ellis (2012)[2]  “Rent Control”, Palgrave Dictionary of Economics. Malpezzi, S. (2017)[3] “La intervención pública en el mercado de alquiler de vivienda: una revisión de la experiencia internacional”, Documentos ocasionales no. 2002, Banco de España. López-Rodríguez, D., and M.ª Ll. Matea (2019)[4] “Assessing the Evidence on Rent Control from an International Perspective”, Housing Supply & Rents, Occasional Reports, Regulations & Enforcement Reports, Residential Landlords Association. Whitehead, C., and P. Williams (2018)“Policies to promote access to good-quality affordable housing in OECD countries” OECD Social, Employment and Migration Working Papers, no. 176, OECD Publishing, Paris. Salvi del Pero, A., W. Adema, V. Ferraro and V. Fréy (2016)[5]  “EU Statistics on Income and Living Conditions”. Eurostat (2019)[6] “Empirics of the causal effects of rent control in Germany”, Friedrich-Alexander University (FAU) Discussion paper in Economics 24/2017. Mense, A., C. Michelsen and K.A. Khlodilin (2017)[7] “La intervención pública en el mercado de alquiler de vivienda: una revisión de la experiencia internacional”, Documentos ocasionales no. 2002, Banco de España. López-Rodríguez, D., and M.ª Ll. Matea (2019)[8] “La intervención pública en el mercado de alquiler de vivienda: una revisión de la experiencia internacional”, Documentos ocasionales no. 2002, Banco de España. López-Rodríguez, D., and M.ª Ll. Matea (2019)[9] “La transformación del mercado de alquiler de fincas urbanas en España (1920-1960)”, Biblio 3W. Revista Bibliográfica de Geografía y Ciencias Sociales. Barcelona. University of Barcelona, 15 August, vol. XVII, no. 988. Artola, M. (2012)[10]  (Law 29/1994)[11] “La intervención pública en el mercado de alquiler de vivienda: una revisión de la experiencia internacional”, Documentos ocasionales no. 2002, Banco de España. López-Rodríguez, D., and M.ª Ll. Matea (2019)[12] “Time for revisionism on rent control?”, Journal of Economic Perspectives, 9(1), pages 99-120. Arnott, R. (1995)“Affordable housing and city welfare”, NBER Working Paper 25906. Favilukis, J., P. Mabille and S. V. Nieuwerbourgh (2019)[13] “Out of control: what can we learn from the end of Massachusetts rent control?”, Journal of Urban Economics, 61(1), pages 129-151. Sims, D. (2007)“Housing market spillovers: evidence from the end of rent control in Cambridge, Massachusetts”, Journal of Political Economy, 122(3), pages 661-717. Autor, D., C. J. Palmer and P. A. Pathak (2014)“The Fall of the Labor Share and the Rise of Superstar Firms”, NBER Working Papers, no. 23396. Author, D., D. Dorn, L. K. Katz, C. Patterson, and J. van Reenen (2014)[14] “The effects of second-generation rent control on land values”, AEA Papers and Proceedings, 109, pages 385-388. Mense, A., C. Michelsen and K.A. Khlodilin (2019)
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Real Estate Crowdfunding.
Vicenç Hernández Reche / Economist. PhD in Economic Psychology / General Manager of Tecnotramit and TreshabitatUntil relatively recently, if someone wanted to launch a project and funding was needed, they had a number of fairly limited options. From the well-known option of applying for a loan from a financial institution or requesting a grant, to the well-known 3F (friends, fools & family). But in recent years there has been a new option that is not so well known to the general public but which is gaining more and more followers. This is crowdfunding or micro-patronage. By crowdfunding we mean the collective cooperation carried out by people who make up a network with the aim of obtaining money or resources to finance initiatives by other people or organisations. This network is carried out through a web platform that enables a meeting point between supply and demand of money. Crowdfunding came about from the initial Open Source projects where developers offered their work in a disinterested way. Due to their success and the hours of work required, they began to ask for donations. Once again, the proposal was a great success. Crowdfunding came about among users demanding creative projects and willing to pay for them, and creators needing to finance their projects.  This new option opened up a field of possibilities for the financing of creative projects thanks to the small contributions of many people. Today there are several crowdfunding websites that help finance different projects, which has brought a bit of fresh air to such a highly banked Spanish financial system. The typology of projects financed by crowdfunding has not stopped growing and today it is easy to see many ranging from start-up projects to charity projects. How it works depends largely on what kind of crowdfunding we are talking about (rewards, donations, investment, and loans) but the basic functioning always follows remarkably similar patterns. First the entrepreneur or publicist sends the project to the website indicating description, funding required, time limit for fundraising and reward offered to the investor. Some of these projects are evaluated in a community way and others are evaluated by the web itself. The website promotes the project and publishes it by giving a number of days within which contributions can be received. After the deadline, the project receives funding, or not, if it has not aroused any interest from people.In short, we could define crowdfunding as a system that allows people with money to trust people with ideas to move a project forward. What does this type of investment/financing have to do with the real estate sector? Crowdfunding or micro-patronage has arrived in the real estate sector. Crowdfunding real estate allows anyone with a modest amount to invest in property and benefit from a return through monthly rental income, plus a capital gain from the sale.  Other types of projects include funding for construction or renovation of buildings, among others. Real estate crowdfunding does not elude achieving the same objectives as traditional crowdfunding we talked about before, since it pursues on the one hand that a person can invest a modest amount to purchase a home or lend money to a developer, and on the other hand it eliminates the dependence that the latter has on bank financing. In Spain, several platforms are making a place for themselves in this emerging market. The platforms that are dedicated to Equity Crowdfunding (investment) establish the minimum investment in the participation of the purchase of homes, premises, and industrial buildings between of approximately 100 and 500 euros, although this amount may vary depending on the project and the platform that promotes the project. In Spain they have already adapted their systems to comply with the limits established by the crowdfunding law. This will mean that non-accredited investors will have a limit of 3,000 euros per project and a maximum of 10,000 euros invested in 12-month period on the platform. Accredited investors will have no investment limits. Equity Crowdfunding companies allow diversification of investment in different homes to minimise non-systematic risk, and each project enjoys a different return depending on whether the purpose is to rent or sell the home. The property can be sold once the target value has been reached or the sales period has been reached. But this does not mean that investors cannot extend the marketing if the target return has not been achieved. The ideal option is that this type of platform allows investors to sell their shares in a domestic market if the investor needs liquidity before the maturity of the investment.  There are platforms that allow you to invest in real estate indirectly, since the money is not destined to buy a property directly, but the money from the investors goes to Listed Companies for Real Estate Investment in Vehicles (Socimis) which are the ones that invest directly in real estate. In contrast, platforms that are dedicated to crowdlending allow investors to finance property developers’ projects with small amounts of money. The Wanda Group used this formula last year to finance five of its major complexes. This form of micro-patronage enabled theChinese group to attract more than 72 million euros from individuals and 648 million from institutions and companies. Finally, we must point out that real estate crowdfunding has nothing to do with the three most well-known legal figures in our extensive legislation on real estate law. Timeshare, co-ownership, and housing cooperatives are different figures from crowdfunding and it is necessary for the investor to distinguish the three fundamental differences. The first is that the joint purchase of the property is carried out by the vehicle company created expressly for this purpose once it has gathered the funds. Therefore, the owner is the company, the investors are participants in that company in a proportion equal to the capital paid for the purchase.  The second difference is that with crowdfunding you do not have the option of enjoying the property being invested in either. Thirdly and finally, it is indeed a cooperative by concept, but of an investor and profit-making nature. The estimates of the different agents are that the Spanish real estate crowdfunding market will reach a turnover of around 60 million euros during this year. An ambitious figure in my opinion, considering that the level of financial culture in the country is still low, that real estate investment is still conceived in the traditional way and that the new investment channels and platforms are still a reason for mistrust by the average investor. We will see, therefore, if real estate crowdfunding reaches the notorious quotas that are being reached in England, the United States and a many South American countries. For Spanish investors, finding alternatives for placing their surplus savings that do not require a large outlay and offer a return that exceeds inflation is a cause for joy.  Not to mention the property developer, who despite the current desire of financial institutions to open the credit tap, still find different obstacles to carry out their projects. Therefore, it was necessary to breathe fresh air into investment and project financing modalities and the most forward looking investor will certainly receive this with special attention, but its global implementation in Spain will still be slow and will require more promotion and, above all, transparency.
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Some reflections on the economic and real estate panorama in Spain
Vicenç Hernández Reche / Economist. PhD in Economic Psychology / General Manager of Tecnotramit and TreshabitatAt the beginning of the year everything indicated that 2020 would be marked by a sharp slowdown which, with the right actions, could avoid a recessionary scenario. But the COVID-19 attack has been an exogenous shock of supply and demand until now unknown, of indefinite duration, without precedent and with a strong impact on the health of people that will undoubtedly remain engraved in the memory of an entire generation. Furthermore, it is a global crisis and therefore not focused on a particular geographical area, which would allow other areas not affected to show economic and financial solidarity. Fiscal or monetary measures require strong and solid public and private leadership, as well as more imaginative solutions with little track record.The prospects are therefore not at all promising. Commodity prices are expected to fall completely, capital movements and above all, international investment will be reduced at high rates.  The value chain relocation processes carried out during the last few years will have a return ticket, protected by trade wars and economic protectionism policies that will aim to embrace each of their national flags.Mixing health and economic aspects does not help to resolve them. Firstly because finding a solution that balances the moral obligation to save human lives with the responsibility to manage an economy that can lead to social conflict is not a trivial matter. Moreover, from the health point of view, it requires no less time for research and from the economic point of view, the operations diagram for converting the vaccine into a mass solution that gives results and is capable of reaching everyone is full of obstacles.For those adept at saving the economy above all else, their argument rests on the valuation of human life centred on the concept of opportunity cost.  In this way a person is worth his or her capacity to generate productivity in the future updated today.  Under this criterion, the life of any retired person or those with incapacity to work should not be saved, and therefore this criterion is not acceptable from an ethical and moral point of view.All these complexities require, as I mentioned earlier, imaginative, and innovative solutions aimed at saving companies with viable business and liquidity problems, on the one hand, and allowing final demand not to lose levels of consumption and savings.  These solutions are still part of monetary and fiscal policy mechanisms, but both options were already being used before Covid-19, generating a sharp increase in public debt levels. Once immersed in the crisis, more public expenditure commitments are being made as well as additional efforts by the main economic authorities to provide unlimited liquidity. But all this monetary overstretch will have consequences that will have to be compensated for by future austerity that will not be to anyone’s liking, since managing – and repaying – the debt as well as trying to regain monetary balance are matters that will have to be on the table of the competent authorities sooner or later.Therefore, the forecasts for the beginning of the year are going down the drain and we are facing a deep recession that will affect the vast majority of economies. There are indeed some optimistic scenarios for recovery – not fast as the timing is exceedingly difficult – but strong. However, until this happens we are going to move in scenarios dominated by fear of possible resurgence and a worrying uncertainty derived from business results and the unemployment situation which will lead to a strong contraction in income.This reduction in income can only be addressed in two possible ways. Either production is affected or resource prices are affected. In the first case, a large part of the population could maintain its level of income but would have to compensate the rest who would inevitably become unemployed, and therefore suffer a drastic drop in income. This compensation through social transfers may not be sufficient to counteract the frustration of a crisis that combines economic and health misfortunes, so the risk of social tension is quite high. In this case, establishing more rigidities in the labour market is highly corrosive.In the second case, and with the ultimate objective of maintaining employment, all members of the country’s productive activity should accept a proportional drop in their income through a reduction in dividends, real interest rates and, of course, salaries.   This would entail a number of consequences in terms of tax collection since, in the case of wages, taxes directly on labour as well as social contributions would be reduced accordingly, with a subsequent reduction in the social consideration for citizens. But considering the mismanagement of public resources there is much room for improvement in terms of efficiency. If we consider the current high unemployment rate and the crippling effect on wages in Spain, it seems that this second option is the most plausible.The downside of this solution is that for this second option to be implemented in perfect conditions, a flexible labour market and a leadership independent of political colours that leads the negotiations between employers and trade unions are needed on the part of the public sector. For its part, the private sector must demonstrate exemplarity in the remuneration policies of companies in which the remuneration of many managers and boards of directors is not strictly moral (which is highly debatable) but absolutely illogical in view of the company’s business results and asset situation.At the property level we must analyse different aspects.As far as the recovery of the real estate activity is concerned, there is much talk of a U or V shape recovery, there are even more pessimistic voices that consider an L shape recovery. My opinion will be that we are going to live in a more or less optimistic present moment, in which we will be tempted to think about an immediate recovery due to a demand that has been restrained during these months. There is a percentage of the population who have not lost their jobs and do not anticipate short-term risk, and additionally during the confinement they have had time to make decisions regarding a change of house or mobilise their capital in search of a return without the volatility of other asset types. But that demand is short lived and the reality of a W will come, which will not be symmetrical in shape, as the peak will not be too high, but will produce a second, longer, less steep drop.There will be a greater demand for it in the wake of this pandemic.  Aspects related to the layout of a terrace or garden, or simply in relation to the size within the circumstances of each family will be important and may lead to decisions to carry out reforms to adapt the properties to new needs.  There will be a greater predisposition to move to areas that are further away from large metropolitan centres and that allow for greater comfort and a higher quality of life, as long as the option of teleworking is adopted as a valid option. Again, making the company incur more additional costs will not help to promote this measure.With regard to rents, there is still an imbalance between supply and demand, the latter being much higher.  Large investors and property developers are focusing their investments on Built to Rent, but as always, the qualitative aspect will be important and not all housing will have the capacity to generate rental income that can make the investment profitable. But there is no doubt that this is a very valid trend and that made with good prior information on market demand it can be a good option for the private sector to expand the supply in the rental market. Public-private collaboration and less political interference than has been shown so far in price control will be key to bringing affordable rental housing onto the market. Policies cannot be made to favour tenants while demonizing landlords. Restricting supply raises prices and incentives must be put in place to allow empty housing stock to be brought onto the rental market.The large investment focuses are being avoided in the retail, hotel, and office sectors, taking refuge in the residential sector, which has a greater capacity to recover profitability via rent.  Another major beneficiary of the investment will be the logistics necessary for more local distribution in the field of ecommerce to the rise of this system of purchase. This type of investment requires higher volumes, so there will be investment vehicles related to crowdfunding and collective investment to give access to small and medium sized investors. But we must not forget that the country will be less attractive due to the increased attractiveness of other geographical areas due to market momentum and the price situation, and on the other hand, political interventionism that makes large investors insecure.The granting of mortgages will be more restrictive and there will be an increase in arrears due to the unemployment situation. This level of unemployment will mean that the next 3 years will see new NPL portfolios in the market and an increase in mediation processes. All this will generate a dynamization of sectors related to the outsourcing of services as well as new players in the market offering alternative financing options.Many flats bought at high prices while waiting for rents that would allow for a good return are going to be left without tenants due to the decline in tourism. This conversion to traditional renting will push the price down, firstly because of the nature of this type of renting whose rents are lower, and secondly because of an increase in the supply of rent. This will also affect the buying and selling market.If unemployment levels are high and structural unemployment is high, finding ways to support those most in need and bringing affordable rental housing to market will become a priority. This does not mean that one should not be incredibly careful with regard to the criteria for granting and maintaining aid. Support should be focused on rent and on a finite time basis for as long as the situation of vulnerability lasts. Establishing criteria that do not follow these parameters can lead to increased social tension and a slowdown in the improvement of unemployment.There are no easy times ahead.  We may not be facing a deep crisis, but we may be experiencing a slow recovery, which could generate a serious feeling of impact on investment and consumption decisions.  But certain paradigms are going to change, especially in the way of working and interacting.But fishermen make their day in troubled waters. There are many opportunities in the sector as the market for buying and selling will fall and prices will be adjusted according to areas, with some populations experiencing sharp falls of more than 20%. But in other areas there will be no significant price variation so the average could be around a 10% drop. Additionally, this crisis is accelerating technological innovation in the sector and the implementation of new marketing, financing, and management systems. So new players are entering the market bringing fresh air and competition that always results in an improvement for the final consumer.We are moving from one way of living to a vastly different one, from one way of working to a completely unknown one. We do not know if the new destination will be better or worse than what we left, but for now … let us try to enjoy the journey.
Solidarity Dinner – Enriqueta Villavecchia Child Oncology Foundation
May 2018. Solidarity Dinner – Enriqueta Villavecchia Child Oncology Foundation. The Enriqueta Villavecchia Foundation, set up in Barcelona in 1989, is a non-profit charitable care Foundation, whose goal is to meet the needs of children and young people receiving oncological treatment and those of their families.On May 29 the Foundation held a solidarity dinner at the Modernista del Hospital de Sant Pau in order to fund its projects and where TECNOTRAMIT participated as a collaborating company of the Foundation.There were more than 300 people at the event, which was presented by the journalist Ana Boadas and featured a performance by the musician Joan Dausà. The evening raised €18.500 for children and young people with cancer and other serious illnesses and for their families.The event was attended by some of the leading CEOs of TECNOTRAMIT, who were able to see at first hand all the activities carried out by a Foundation with whom they have been working for years.