Financial Times

December 5, 2014 12:51 pm

Is Catalonia’s bid for independence affecting its housing market?

Ian Mount

Barcelona attracts foreign buyers despite fears of possible political and monetary instability in the Spanish region
Barcelona’s skyline from Park Güell©Ken Kaminesky/Corbis

Barcelona’s skyline from Park Güell, designed by Antoni Gaudi


hat stands out most about Barcelona’s skyline today is something that is largely absent: cranes. There are still some over Antoni Gaudí’s Sagrada Família basilica, but otherwise Spain’s second city is almost bereft of major construction projects.

The dearth of cranes is no surprise. Battered by the pop of the country’s real estate bubble, Spanish property prices have plunged more than 40 per cent from their 2007 peak, according to property website Fotocasa, and 1.5m construction jobs disappeared, according to Spain’s INE statistics bureau.

Yet over the past two years, the low prices and lack of new properties have led to a brisk trade in high-end Barcelona apartments, as foreigners with cash have pounced on apparent deals in the Mediterranean seafront city.

According to Spain’s ministry of public works and transport, 26,000 homes were sold in the region of Catalonia, where Barcelona is the capital, in the first half of 2014 — a rise of 26 per cent on the same period last year.

Luis Gualtieri, chief executive of the high-end estate agent Oi Real Estate, says prices have firmed up so much that, whereas buyers would have made offers up to 40 per cent below the asking price in the past, discounts are now in the 5 to 10 per cent range.

The market has been driven by wealthy buyers from western Europe, Russia, Asia and the Middle East. Some have taken advantage of Spain’s “golden visa” scheme, which offers residency to those investing at least €500,000 in the country, while others see it as a haven from high taxes or political conflict.

In Barcelona last year, more than 80 per cent of residential properties that were sold for more than €1m went to foreign buyers, says François Carrière, chief executive of agents Coldwell Banker España y Andorra. Oi’s Gualtieri adds that 25 to 30 per cent of his transactions involve French buyers, many looking to avoid high tax rates at home.

Western European buyers have been especially attracted to the ornamental century-old “modernista” buildings of Barcelona’s central Eixample neighbourhood, where Coldwell Banker is selling a recently remodelled, 158 sq metre, three-bedroom apartment for €775,000. Russian and Asian buyers have leaned more towards the contemporary seafront towers of areas such as Diagonal Mar, where the agency Bcn Advisors is marketing a glass-walled, three-bedroom apartment with a 60 sq metre terrace for €1.25m.

Map of Catalonia, Spain

Outside Barcelona, the Catalonian property market has been slower. While prices in the Catalan capital were up 3.3 per cent year on year in September, according to Fotocasa, many municipalities are still seeing double-digit annual price decreases. Still, Catalonia’s Costa Brava beaches have seen an influx of foreign buyers looking for discreet holiday getaways, such as the three-storey hillside house near Begur, with a pool and sea views, on sale with Oi for €2.1m.

However, with prices appearing to bottom out and deal volume growing, uncertainty caused by the independence movement in Catalonia threatens to undermine the incipient recovery.

The Catalan secession movement has been percolating for several years, but the issue came to the forefront on November 9, when 1.86m out of 6.2m eligible voters in Catalonia supported independence in an unofficial ballot.

While the central government of prime minister Mariano Rajoy has refused to consider an official vote on independence, the issue is present in buyers’ minds. Gualtieri, of Oi Real Estate, has seen deals collapse because of the concerns. Francisco Nathurmal, chief executive of Bcn Advisors, says he has lost no sales, but the issue is always present. “It’s something buyers, especially international ones, take into account,” he adds. The number of lost deals remains low because buyers see Barcelona as a kind of island, says Coldwell Banker’s Carrière.

Three-storey house near Begur on the Costa Brava

A three-storey house near Begur on the Costa Brava, €2.1m

Mid-sized investors looking to diversify their portfolio with Spanish rental properties are another story, however. They worry about what currency they would be collecting rent in if Catalonia did secede and fall outside the EU.

“Some investors wonder if their income won’t be paid in euros, above all investors from Latin American and Asia who are looking for high-end properties that are euro income producing,” says Patricio Palomar, director of research and investment strategy at CBRE Spain.

Barcelona-based investment consultant Dennis Ng, who advises Asian clients on real estate investments through his consultancy Epic Asset Management, says large institutional investors interested in commercial and logistics properties are unworried, but some wealthy family investors are concerned.

Real estate investors may be less unnerved by independence talk than by political instability. Corruption scandals have rocked the regional Catalan and national Spanish governments, spurring the rise of the leftwing Esquerra Republicana de Catalunya (ERC) and anti-establishment Podemos political parties nationally.

“Latin Americans are accustomed to political problems and are not disposed to get into more,” says Jordi Nieto, managing partner of Sabertia Capital Partners, a Barcelona advisory firm.

That holds true in Catalonia too. Lane Auten, formerly a managing director at Waypoint Real Estate Group, launched the ARC Barcelona fund to buy high-end real estate from local families and “rehab” it for foreign buyers.

His worry is not independence, but that the ERC will overtake the governing party, the centre-right CiU, in 2015 municipal elections. “On the developers’ side, the concern is a change of party,” he says. “The CiU represents local rich families. The [ERC] guys with ponytails are anti-business.”