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Catalan Nationalism And The Spanish Property Market


BARCELONA: A big demonstration today in support of a November referendum on Catalan independence makes me wonder what impact this political problem could have on the housing market.

Steering clear of the arguments for and against Catalan independence, and Catalonia’s right to unilaterally secede from Spain, I’ll hazard a guess on what it might mean for housing demand and house prices.

Catalan separatists want the right to hold a referendum on whether or not to stay in Spain. The Generalitat (regional government) led by Artur Mas, plans to hold this referendum on the 9th of November, but Mariano Rajoy’s Government in Madrid says it would be unconstitutional and won’t allow it. Both sides claim to be open to dialogue whilst accusing the other of not listening, pretty much on a daily basis.

What would happen if Catalonia left Spain? The exit would be ugly, and the Basques would be right behind them, leaving Madrid to support the poorest parts of Spain on its own. So a Catalan departure would push the Spanish economy into a tailspin, taking the Catalan economy with it. It would spark off a massive hike in Spanish bond yields, a mayor European crisis, and spell big trouble for the Euro. Spanish house prices would tank as foreign demand evaporated for at least the duration of the crisis. Demand for housing in Catalonia would be hit hard, prices would fall further. All inhabitants of the Iberian peninsula would end up poorer, with house prices reflecting their diminished wealth.

Which is why none of this will happen because Madrid will never give permission for a Catalan referendum, much less a unilateral declaration of independence. It seems obvious to me that Madrid would take over the Generalitat before allowing Catalonia to break away from Spain. So there will be no binding referendum, and no independence for Catalonia.

The question then becomes how much trouble will frustrated nationalists cause? Will there be civil disobedience, as some are advocating?

If there was serious civil strife as a consequence of all this, that would unnerve investors and put off foreign buyers whilst undermining the local economy. None of that would be good for the local housing market.

But my guess is things won’t come to that, and judging by the Spanish stock market and bond yields, financial markets also assume that Spain will muddle through this crisis without too much strife. There is no culture of civil disobedience or violence in Catalonia, at least not to date.

The referendum won’t be allowed so regional elections will be held instead, which will polarise voters along nationalist lines, none of which is good. A left-wing nationalist Government will then take power, but won’t be able to organise a referendum or secede. So the problem will just keep festering, as it has for hundreds of years. Nothing new about this story then.

The 11th of September is a special day for Catalonia. Called La Diada, it commemorates Catalonia’s defeat in 1714 at the hands of the Bourbon army in the War of the Spanish Succession. For Catalan nationalists, it’s their national day.

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3 thoughts on “Catalan Nationalism And The Spanish Property Market

  • I think your assessment of the situation is rather glib and rather smacks of the Conservative publicity which is being pumped out at the moment suggesting doom and gloom should there be independence for Scotland. The number of people out to support the march for the vote yesterday was estimated to be 1.8 million by the police, not known for their exaggeration and sensationalism! It was orderly and good natured and in no way suggested that a continuously disappointing response from Madrid would lead to violence. It highlighted that the business & organisational acumen of the Catalan people could be rallied to organise a new country given the opportunity. I realise that you have a vested interest in suggesting that there will be no changes over the next few months, but I think that investors should be open to the idea of new government. Any suggestion that “Madrid” would walk in to the Catalan parliament and close it down as was attempted by the army in the 80s is ridiculous. Barcelona is a thriving, vibrant city and my home town of Girona and the Costa Brava has seen a huge surge in tourism in the last year due to unrest in other parts of the world. I see a great future for Catalonia in tourism and am considering investing in another property for that reason.

    • Catalans have much better reasons for wanting independence than the Scots, but like I said Madrid will never allow them to vote for it. I’m glad you mentioned Scotland. I’m sure the Scots are enjoying the attention but when it comes down to it they will vote to stay, having extracted even better conditions from the UK. I assume they are too smart to vote for an ego trip for fish-face, and a one way ticket to trouble for the rest of them. No doubt your analysis is much more profound, but this is what Deutsche Bank have to say about the Scottish referendum, as quoted in the DT:

      “Everyone has the right to self determination and to exercise his or her democratic rights. But there are times when fundamental political decisions have negative consequences far beyond what voters and politicians could have imagined. We feel that we are the threshold of one such moment. A “Yes” vote for Scottish independence on Thursday would go down in history as a political and economic mistake as large as Winston Churchill’s decision in 1925 to return the pound to the Gold Standard or the failure of the Federal Reserve to provide sufficient liquidity to the US banking system, which we now know brought on the Great Depression in the US. These decisions – well-intentioned as they were – contributed to years of depression and suffering and could have been avoided had alternative decisions been taken.

      Chief economist David Folkerts-Landau warns of euro-zone style recessions, tax hikes and interest rates increases; loss of foreign investment; mass asset flight; austerity; and loss of the defence and security provided by the Atlantic Aliance.
      He concludes: “Most importantly, the world as it is evolving in the 21st century is a highly uncertain place with unstable geopolitics and a stressed economic and financial outlook. Why anyone would want to exit a successful economic and political union with a G-5 country – a union which another part of Europe so desperately seeks to emulate – to go it alone for the benefit of… what, exactly, is incomprehensible to this author.”

  • I think the dire predictions of economic doom and gloom are greatly overstated. I know I am being glib when I write this: As with the Scottish vote, if banks are against independence, I think that independence is probably a good idea.

    But it isn’t my place to take sides in this issue – I am not Catalan.

    Getting to what you wrote Mark, many problems in real estate sales are due to ridiculous bureaucracy combined with no regulations of banks regarding mortgages. It all seems like a gamble until the sale is complete, and then it is still a gamble – the ayuntamiento may declare that your property is worth more than you paid and you owe taxes.

    If a new Catalan state could streamline some of this process, I think that would give them an advantage in real estate sales, especially to foreigners. A nimble government would know that the falling euro is a real estate marketing opportunity for people with other currencies. Spain will never be nimble. But Catalunya? Maybe.

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