Turns out all that’s needed to halt a property bubble is a constitutional crisis of epic proportions.
Spain’s breakaway region, Catalonia, is riven in two and as unruly as ever. Just about the only thing the latest round of elections accomplished was to confirm just how divided the region is.
Catalonia’s failed bid for independence has left behind a stinking economic hangover. None of the lofty promises made by the separatist forces have materialized. Four senior politicians and political activists remain in jail. The European Commission has roundly rejected any possibility of an independent Catalonia remaining in the EU. Yet enough people voted for pro-independence parties to grant them the slimmest of majorities in the region’s parliament. And that’s enough to ensure that nothing much changes.
But one thing has changed: The rampant political uncertainty has tempered global appetite for real estate assets in the region’s capital, Barcelona. Back in July, when we last reported on the housing bubble, it looked like this:
In June 2017, the median home price in Barcelona soared 21.7% year-over-year, to €3,094 per square meter (ca. $350 per square foot), with double-digit increases across all of the city’s districts. In the city’s old town — ground zero for the tourist industry — the median price skyrocketed 35%. Property speculators, domestic and foreign, were piling in too. And as landlords focused on meeting the much more profitable needs of short-term visitors, rents soared 50% between 2013 and mid-2017.
Then, on October 1, the referendum happened and all hell broke loose. Since then, demand for real estate in Barcelona has waned, with the result that property prices fell 1.7% in the fourth quarter from the third quarter, according to Tinsa, the biggest quarterly decline since Spain’s recession ended in 2013…