Real Estate Market Report MR-2022

AN ATYPICAL YEAR.

We can only define 2022 as a year of many contrasts, both in the rental market and in the sale market. At a general level, activity has remained very high, in terms of a record according to official data, but we have all seen that the year has gone from more to less and that in the last month there has been a clear stoppage in activity.

However, with activity data considered very good, from our point of view, these 2022 problems that we have been dragging on for years have worsened. And additionally, other factors such as the energy efficiency of homes, hitherto ignored, have gained

strength and will be decisive in the coming years.

So in 2022 we could value it on a double level, a good year of activity, but also a year when, more than ever, the two great challenges facing the sector have been put on the table. The difficult or almost impossible access to housing for many segments of the population, especially young people, and the need for a profound energy transformation of the buildings and homes that make up our housing stock. Both are challenges, not only for the sector, but for society as a whole.

Guifré Homedes Amat Director General

RENTAL MARKET

First, to clarify a concept, when in this report we talk about renting or the world of renting, we are referring strictly to long-term renting.

In our annual reports we have been warning for some time that in the rental market, in the areas where we work, the lack of offer available is the main limitation we have. 2022 has been, basically this, a year of small offer, and we have closed the year at historic lows. In Amat 75year history, we have never had so small offer available.

RENT - Contracts and Prices

Amat Immobiliaris Data

After several years of growth, 2022 has meant a change in trend for us, where we have made a 9% fewer new contracts.

We started 2022 at a similar pace to that of other years, as the year has progressed, the offer has been decreasing, limiting the ability to carry out new contracts, while the demand has been and continues to be high, and we do not have the offer to meet it.

During the first quarter of the year we were still in a regulated rental market, but the regulation fall coincided, on one hand, with the increase, very significant, of supplies costs and, on the other, with the 2% limitation on rent increases by CPI in the current contracts, imposed by the Government. Two relevant facts in the rental market.

In this context of maximum uncertainty, the rents evolution remained essentially stable, growing again by the first semester in an overall way, and more significantly in Barcelona city.

When analysing the data, we like to differentiate between Barcelona city and other areas such as Sant Cugat del Vallès, Sant Just Desvern and their surroundings. We also believe it is important to highlight the impact, which we already detected during the past two years, of foreign tenants.

Long-term foreign tenants

The percentage of this type of tenant is one of the most notable differences between Barcelona and other cities. They are, mainly, young Europeans who come to work, either for companies established in the city or, in lots of cases, teleworking for companies located somewhere else.

Barcelona

Before Covid, they represented 15% and currently it stands between 40% and 45% Besides, these tenants have an upper average economic capacity, which absorb the rent increases the city has had. They usually compare the rental market in their origin countries with Barcelona, and for them, it is very competitive in this regard.

Sant Cugat del Vallès and Sant Just Desvern

It has grown here too, but it stands at 20-25%, even being locations with established international and multinational schools. Evidently, rents have risen much more moderately than in Barcelona city, and according to the more limited capacities of a much more local market.

Long-term foreign

Most of the contracts that we have carried out have, once again, been above 1,000€ in monthly rent. In fact, the margin that has grown the most is the one above 1,500€/month.

The average income has been above 1,200€ per month in all our offices, the highest average value in recent years.

Analysing the repercussion prices of the Barcelona districts, we see that Les Corts, Sant Andreu or Ciutat Vella have remained stable compared to 2021, while Gràcia, Eixample and Sant Martí have experienced strong growth compared to the previous year with growth of between 14% and 31%, and Sarrià – Sant Gervasi ranked as the district with the highest repercussion price.

RENTAL

contracts evolution by price segment

RENT REPERCUSSION PRICE IN BARCELONA 2022

RENT - Offer

Amat Immobiliaris Data

From our view, this is where we have the big problem in the rental market, since the offer has been low for many months now.

The graphic shows the new offer entering the market on a quarterly basis, where we see that the last two 2022 quarters have been the worst in the past 5 years. There is only one worse, the second quarter of 2020, in which we were confined, and the market stopped for weeks.

Here is where we enter into the great debate on how to resolve housing access. The solution implies having a context in which the public and private offer is much more significant than it is today.

framework, 12 in 4 years, decleare the owner-lessors, mostly small, as speculators, and devolves in them the Administration social responsibilities. This situation is pushing these owner-lessors to:

A) Stop investing and, therefore, stop generating new offer.

B) Sell the properties they have for rent, which obviously is not bought by another investor, but by someone to live in it, therefore we reduce offer.

C) Assign the properties to other rental modalities. We continue to reduce offer.

The public administration has not contributed anything significant in this regard either and has lost 3 great opportunities:

1. Before 2008 promoted in sale regime, not to rent, much of its best soil. A public land that own administration privatized.

2. In the worst years of the real estate crisis, when mortgage evictions were constant and the SAREB was created,, the lost the opportunity to get part of that real estate park and allocate it to social or affordable rent.

3. The public administration, by itself, has neither the resources nor the knowledge to act on all the available land and needs public-private collaboration to generate significant supply. In recent years, trust between the parties has not been restored, and a stable legal framework has not been established, losing a moment of unique financing conditions that would have facilitated many rental projects.

For some years now, the developer and investment sector have set their sights on the rental market, not by an explicit conviction, but mostly forced due to figuring that the promoting to sell model is increasingly complex, both from the land point of view, and final demand. However, the projects that are being configured little by little are not well-thought-out for the great thickness of the rental demand, since they do not fit either by configuration, services offered, or income available by a large part of the local and family market.

If we were to summarize really quickly why are we in this situation, the conclusion would be that the media, the political machinery and the constant changes in the legal

Getting out of this situation is very complex, since we have an alarming lack of supply today, and generating it is very slow. There are numerous of policies and actions that can be carried out to generate supply in the medium and long term, but what cannot be done, in any way, is to legislate hotly and constantly, thus only managing to destroy the little existing offer and aggravate the problem.

RENT - Property typology

Amat Immobiliaris

Data

In the infographic, we can see the main properties characteristics that we have rented this 2022. We already said it a year ago, and today it is more valuable than ever, we have a very energy-poor rental estate park and this means that tenant families have to face greater expenses in supplies.

If the legal and media framework constantly prejudice the owners, they have no incentive to rehabilitate or improve their properties. Additionally, if we add a component to the property when talking about Next Generation subsidies for rehabilitation, when the energy efficiency affects much more to the tenant than to the owner, we do not encourage the improvement of this rental housing stock either. Without investment in this

RENTED PROPERTY TYPOLOGY 2022

rental park, tenant families will have higher supply costs and worse comfort, just for the fact of living in a rental property.

RENT - Tenant typology Amat Immobiliaris Data

As we have already commented before, one of the most outstanding events of this 2022 is the entrance of significant number of foreign tenants in the rental market, especially in the city of Barcelona.

Also note that compared to 2021, the tenant average age has increased, the majority between 40 and 50 years old, which, once again, shows the trouble that young people have to emancipate nowadays and that it does not look to be improving in the past years.

TYPOLOGY 2022

RENT - Conclusions

Amat Immobiliaris Data

We can comment on many topics, but it is worth noting the critical moment we are in from the point of view of supply, which continues to decrease, and the intrinsic flexibility of the rental that has been broken, currently no one leaves their property for lack of alternatives to the market to change. Our outlook is for 2023 with a very significant reduction in the available supply, which will obviously cause price and social tensions due to the impossibility of finding properties to rent.

SALE MARKET

Overall, 2022 has been a very good year from a transaction standpoint. Analysed in more detail, we observe different behaviours between the sale of second-hand and the sale of new construction throughout the different quarters of the year.

In second-hand sales, the increase in transactions has been very significant and sustained throughout the year, slowing down only in the last quarter.

New construction has been totally different, since after a very good start to the year, in March many projects were frozen for months or completely stopped until autumn, leaving sales to a minimum.

2nd Hand SALE Amat Immobiliaris Data

In 2022, the second-hand sales activity has grown by 21% compared to 2021, and this increase accumulates to those already experienced in previous years.

As is commonly commented, the rate of second-hand sales is closely linked to our ability to generate more or less attractive offers. When we have generated this offer, the demand has responded quickly, and the average time to sell a second-hand property during 2022 has been three and a half months.

As was the case last year, the average price of all sales of second-hand made has been around €500,000 Only our Sant Just office has seen its average sale price increase, the rest have remained stable or experienced a slight decrease.

We always emphasize that this value must be interpreted correctly, and it is basically related to the supply that we have been able to capture and sell during the year. See graph “average price evolution” of recent years.

It should also be noted that, as in 2020 and 2021, the bands that clearly grew were those above 600,000€, this year it has become more standardized, and the activity has been more distributed among all the price bands.

2nd

SALE Average price evolution

SALE Price evolution repercussion

HAND

In other words, the highest ones have remained the same or increased slightly, and the low ones have experienced a more pronounced growth than they had in the last two years.

In the graph “repercussion price evolution” we can see the quarterly evolution of the repercussion price of the last 10 years. Considering 2013 as the year in which the bottom was reached in terms of prices and where the average impact of the sales made, in all markets, was between 2,000€ and 2,700€/m² built, whereas today, in the markets themselves, are located on average between the 3,700 y 4,500 €/m² built.

Barcelona

This year, we have placed ourselves an average of 4,450€/m² built, 8% less than the previous year. Breaking down by district, the impact price has been lower, except in Sant Martí and Gràcia, where the average impact has risen compared to 2021, as can be seen in the infographic.

We repeat that these data are conditioned by the offer that we capture and sell annually. The data for Nou Barris must be understood in accordance with some specific operations that we have carried out in the area, but they surely do not represent the real average for the district. Operations repercussions higher than 2022 we have made them in the Eixample and Sant Martí, standing by above €6,800/m²built in both cases.

2ND HAND SALE PRICE REPERCUSSION IN BARCELONA 2022

Sant Cugat

It is where the average repercussion has grown the most from one year to the next. One of the factors is related to the offer sold, since in 2021 many houses were sold, which due to their characteristics have a high absolute price value, but a lower impact than a flat. This 2022 has been more balanced in this sense, which partly explains the growth from one year to the next. On average we have placed ourselves above €3,700/m² built, but in a very broad fork, which reaches more than €6,100/m² in the Golf area.

Sant Just Desvern

The average impact has grown by 7% compared to 2021, in 2022 has reached €3,700/m² built. The range of repercussions has been lower than in other years, we have been between €2,800 and €5,100/m². In the immediate environment, all the repercussions have also been on average between €3,200 and €3,600/ m² built. Specifically, we are talking about Sant Feliu de Llobregat, Sant Joan Despí, Esplugues de Llobregat and Cornellà de Llobregat. All these locations have been positioned at the same or a higher level of impact compared to 2021.

According to the type of properties sold, It should be said that this 2022 we have rebalanced ourselves in characteristics. Since Covid, the percentage of large properties had grown, especially single-family houses, this 2022 has meant normalization and in some areas the percentage of flats has grown compared to the total marketed.

Regarding surfaces and number of rooms, the properties of less than 120m² and with 2-3 rooms once again dominate clearly, how it looks in the infographic. While in 2021 the average number of properties sold with more than 180 m² and 4 or more rooms was much higher.

Regarding the GreenDex, we can also see that the G1 value, corresponding to houses in residential environments, this 2022, has lost a percentage compared to 2021 and has

moved to the G4 value, corresponding to more urban environments, of flats.

After one year of validity of the Next Generation funds focused on the rehabilitation of the energy nature of buildings, we can say that for the moment as a sector and society we are failing. Its level of application has been minimal.

We repeat that sooner or rather have a good energy certification of a property or a building will be a key issue, both for the market and for those who live. Rehabilitation should not be confused with putting photovoltaic panels in the building, first you have to correctly insulate the buildings and properties, and then, or in parallel, generate energy in the same building.

And as an example of where we are in terms of energy efficiency of properties sold in 2022, 73% have an E rating or worse.

Finally, we analyse who the buyers have been based on

2ND HAND SOLD PROPERTY TYPE 2022

the markets in which we work. What we consider most outstanding is the following:

Practical disappearance of the small investor, which, as we have said before, has important effects on the lack of rental supply. In previous years, 20% of sales were made to investors who later put the property on the long-term rental market.

Significant drop in buyers under 40 years of age. As we have said, we are basically in a replacement market.

Fewer operations have been financed.

Slight increase in the percentage of foreign buyers. We can conclude that 2022 has been a very good year for the second-hand sales market, where more mature markets such as the city of Barcelona, despite the increase in sales, have stabilized prices.

2nd hand type buyer 2022

SALE - BRAD-NEW Amat Immobiliaris Data

As we have already said in the introduction, the behaviour we have had in the new-build market, in our case, has been the opposite of second-hand.

Despite a start to the year with very good sales rates, 7-8 properties per month in all the projects we marketed, some of which promoters chose to stop dead or freeze sales due to the more than significant increase in those of the costs of construction and outbreak of the war. The commercial rhythm did not thaw until well into the autumn, that is, more than half a year with hardly any commercial activity.

At the end of 2022, the perception of the potential buyer is different from that of the beginning of the year and the sales rates have been at a much lower level, between 1–2 properties sold per month.

The affectation of the increase in costs has had very different effects depending on the phase in which each project was. In very incipient projects, some developers have chosen to reject the project definitively, while those that were finalizing have ended without any type of affectation or modification for buyers who were waiting for the delivery of the property during 2022.

The buyer typology has remained more stable than on the second hand market. The buyer under 40 years old, bearing significant weight. In many cases, the new construction is clearly the first access to a homeownership. Future financing needs are also higher here in new construction, than in second-hand construction and is related to the lower percentage of replacement buyers.

The percentage of investors has remained low compared to previous years, as has happened in the second hand.

BRAND-NEW PROPERTY TYPE SOLD 2022

BRAND-NEW PROPERTY BUYER TYPE

The type of property sold of new construction it can be seen that it is very standard, 3 rooms and a surface of 90-120 m².

It is also noted that we have sold 4% of one-room properties, a model that had almost completely disappeared since 2008, and which correspond specifically to a project stopped that year and which has been resumed in 2022.

The energy rating of new construction properties is entirely between A and B.

As for repercussions, it can be seen in the infographics where we have located ourselves in each area. In locations such as Sant Just Desvern, Cornellà and Sant Cugat del Vallès we are talking about the final phases of projects in which the impact on recent sales has increased slightly. In the other places, we are talking about the start of a project or projects with a run and where the evolution of the impact between 2021 and 2022 has been practically stable and without any change.

In the city of Barcelona we have very few new construction projects and they are very focused on the Sant Martí district. In this case, the impact of 2022 has been below that of 2021.

BRAND-NEW REPERCUSSION PRICE 2022

LUXURY MARKET

The high-end market, like the standard second-hand sales market, has had remarkable activity in 2022.

The finished houses and the plots to build single-family houses have been han sido the operations that we have done the most in the last year. The areas of Sant Just Desvern, Ciudad Diagonal in Esplugues de Llobregat and Sant Cugat del Vallès have maintained the interest of high-level local buyers who seek to improve their surroundings or leave the city of Barcelona with a property and conditions that are practically non-existent in the city.

The single-family houses of more than 300 m², most of them partially or completely renovated when entering the house, are the most sold type of houses in these locations.

The international buyer has focused more on the city of Barcelona. However, the international market has been very low until the end of the year, partially recovering the pre-COVID level. The first months of 2022 have been marked by war, which has greatly conditioned potential investors who could come to the city.

WHAT DO WE EXPECT FOR 2023?

If we usually say predictions are difficult to make, this year it is even more. Several contradictory aspects coexist at the same time and makes it especially difficult to see what the sales market evolution will be.

The increase in interest rates, the rise in mortgage prices and inflation are some of the influencing factors in the demand but concurrently, obtaining offer is our main problem today. Given this situation, we believe that the number of sales in 2023 will be lower, but we

do not expect any price correction.

The rental market it’s clearer for us, although possible regulatory changes may affect the forecasts. The level of supply will remain really low in 2023, generating few opportunities for tenants and preventing those who are already in a property from changing it for another. We foresee a market paralysis, with the social consequences that this implies.