The events that occurred in October 2017 in Cataluña, with the holding of a referendum classified as illegal and the subsequent unilateral declaration of independence by the Government of the Generalitat, marked a turning point for house prices in Barcelona, the market that had led growth at the national level.
The uncertainty generated during that time caused new owners wanting to sell their properties to drop their prices by 10% versus those owners who already had their properties on the market, according to data collected by the Brainsre real estate platform.
You can see how on that date, in particular, there was a change in the trend of publication prices in the Catalan capital, which was observed later in transaction prices. In this way, the price of housing in Barcelona in Q4 2017 was €4,707 per square metre in the old adverts -those that had been on the market for more than three months, based on their publication date -, whilst, the average closing price of new transactions after the declaration of independence was €3,753 per square metre.
Although the data for the autonomous region as a whole is diluted, the impact on the market was very significant due to the high percentage of expats and of residential investments by foreigners. The average value of houses in the city of Barcelona reached its historical maximum in the third quarter of 2007. Since then, prices have undergone a cumulative adjustment of 24.5%, according to the firm Tinsa.
If we analyse the city by districts, then only Nou Barris, Horta & Guinardó and San Andrés are exempt from this drop in prices at the end of 2019. By contrast, San Martín and Corts are the most affected, as can be seen in the graph.
In Cataluña as a whole, the impact is less noticeable. In terms of published prices, there was also a change in the trend, however closing prices have not picked up this correction yet.
House sales
Despite the decreases in prices, the impact on the buying and selling of homes in the Autonomous Region as a whole suffered less than expected, which contributed to the perception that the impact was smaller. If we rely on data provided by the College of Registrars for the whole of Cataluña, during the period November 2017 to October 2018, 81,138 transactions were completed. Meanwhile, between November 2018 and October 2019, 80,712 house sales were signed.
And with respect to previous periods, between November 2016 and October 2017, 76,949 units were sold, and between November 2015 and October 2016, 65,650 house sales were registered. This clearly shows that the number of sales was increasing over time, and indeed that was reflected in the fact that the region was leading the growth in house prices at the national level.
“The declaration of independence caused more concern in the city of Barcelona, where there are more professionals who are not from the area and where more international money moves,” explains Anna Puigdevall, Manager of the Association of Real Estate Agents of Cataluña. She is convinced that the decisions taken before the pandemic by both the Catalan and national governments, regarding rent restrictions and eviction moratoriums, will have a much greater impact on the residential market in the autonomous region in the medium- and long-term.
But in the provinces, which have the highest percentage of pro-independence forces, such as Tarragona and, most notably, Lleida, the feeling of euphoria actually increased the purchase of ‘Catalan’ properties, according to one local consultant. “This explains why the global transaction count was not affected, although in Barcelona it was reflected by the drop in prices,” he explains.
Anna Puigdevall insists that some of the proposed measures, such as the setting of maximum rental prices and the lengthening of contract terms, “are contrary to the protection that private property explicitly receives under Article 33 of the Constitution.”
“The public sector is transferring responsibility to the private sector for responding to the social housing shortage,” she said.
International buyers
The independence twist also had its effect on the decrease in international buyers and investors. Constanza Maya, Director of Operations and Expansion at Engel & Völkers for Spain, Portugal and Andorra, points out that “regardless of the news, whether it’s Catalan independence, coronavirus or any other type of uncertainty, it inevitably has an effect. Above all, at the international level. Because when one is away from home, one prefers to invest in the places that offer less risk, even if that’s only on a superficial level. Since then, the firm has detected a shift in the type of buyers: “We went from having a majority of foreign buyer clients to having a greater number of local clients.”
Regarding prices, “we cannot say that they have fallen, but we do know that those owners who were most reluctant to lowering the valuations of their properties have been willing to negotiate. This situation has benefited the market by helping the balance between supply and demand to be found more easily. It is true that sometimes they need external factors to realise that there has been a change that forces them to adapt to the reality, “explains the Director of Operations and Expansion of the consultancy firm.
However, the progressive tightening of Catalan politics has not represented an obstacle for the continuation of sales, according to Constanza Maya. And she gives an example. Engel & Völkers Barcelona sold a whole development in the Vallcarca area, in record time; 9 units were sold within less than 5 months. “2019 was a great year, especially the first and third quarters, with a slowdown in the fourth. January and February 2020 were even better, and we were performing ahead of forecasts. However, we must now be aware that the pandemic will have consequences”.
Rubén Cozar, Director of Residential at Foro Consultores, believes that after an initial impact on buyers’ intentions following the referendum (no reservations were made during that month of October), activity recovered in November and December 2017. “Nevertheless, it has been more contained since then and always in the shadow of political uncertainty; where it has had an impact is on the demand for housing as an investment”.
Cozar appeals to buyer sentiment, which sometimes has nothing to do with the political turmoil that it transcends. The Catalan market, and in particular the market in Barcelona, faces more ‘price tensions’ due to the shortage of land, given the geography of the area. Moreover, there have always been disagreements with Madrid about the options for building new homes. But, the director is concerned about the effects of the coronavirus: “future demand will depend on the effects that this crisis has on buyers’ employment situations and purchasing power,” he says.
