Spanish Real Estate – Promotors of the crisis

IE Focus | By Barbara Huerta, Professor at IE Business School

Real estate promoters have been largely responsible for the crisis that has affected their sector so badly, and now they are finding out exactly where their business plans went wrong.´Own less to owe less´. With these words, Rafael Santamaria, CEO of Reyal Urbis, summed up his new business strategy at the end of 2008. The liquidity shortage and extremely high debt payment commitments meant that all real estate companies in the country had to let go of their assets. But how did this change in fortune come about in a sector that was heavily in debt only two years before taking on ambitious corporate projects? With a view to answering this question, I did a research project that led to my writing the book Promotores de la Crisis (Promoters of the Crisis) (Lid). In the book, I analyse the impact of the international financial crisis on the financial system and real Spanish economy and its impact on leading Spanish real estate businesses. 

When did they start to blow air into the real estate bubble and why? Everything began with a positive macroeconomic environment, low interest rates and consumers who wanted to consume. But could such an illusion ever have been maintained indefinitely? We would soon see that it couldn´t. Those responsible for the monetary policy, albeit somewhat late, took measures to prevent overinflation by upping the interest rates. What would happen when the higher rates translated into an increase in the financial burden on homes and enterprise? The highest rates reduced the amount of income available to families. In addition, from mid-2007, families that were overwhelmed by the credit crisis started to encounter difficulties in obtaining mortgage loans and consumer credit. Liquidity was short, prices were still high, there was a general lack of confidence and the outlook for the deceleration of the construction and real estate sector was less than optimistic. 2008 confirmed expectations: the situation was getting worse.

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IE launches a Master in Architectural Management

Throughout architecture´s history, there has been the perception that the best designs were created by artists whose works remained untouched by the financial constraints of business. However, contemporary architecture has proven that excellence in design, although very necessary, is not quite enough to reach success. The majority of architects are, in fact, entrepreneurs and vocational…

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Imperfect markets

IE Focus | By Enrique Dans, Professor at IE Business School

The barriers to entry that have plagued the music industry for decades have made it the perfect example of an imperfect market. The internet can put an end to this situation, but there are plenty of people who don’t want it to happen.An imperfect market is when the supply and demand are conditioned or altered so as to prevent normal development. Imperfect markets are often the result of monopolies, exclusivity, obstacles, blocks, etc. caused by many situations that usually lead to inefficiency.

One typical example is the music market. For many years the supply was conditioned by the “selection” process that a small number of leading record companies applied to talent. You could be a genius, propose something that was original and interesting or sound incredibly good, but if you did not pass through the record company´s filter, it was more or less impossible to access the market. The filter could depend on the mood of the person listening to your demo, your sponsors, all kinds of commercial criteria or even what you were willing to do to pass the first stage of the selection process, but if you did not pass it, your possibilities were very low indeed. The capacity for self-production was minimal, the capacity for distribution was almost zero and for promotion it was just pie in the sky: demand was also controlled and manipulated through access to the media.

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IE Business School: Master in Management students win 2nd prize in Novartis Masterminds Challenge

“Does Marketing Run through your veins?” This was the slogan for this year’s Novartis Masterminds Challenge, a marketing competition sponsored by the leading farmaceutical company with the objective to search for professionals with management skills and passion to demonstrate their talent, lead and execute a marketing plan in the healthcare sector. Our Master in Management…

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A… telephone?

By Enrique Dans, Professor at IE Business School Many people use their mobile phone for much more than speaking, with the result that mobiles are now designed to fit well in your hands rather than against your ear. They’re no longer phones. They’re computers.I have always been particularly interested in adaptation processes where technology is…

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