Catalan independence drive punishes Spanish property funds

The effects of the unconstitutional referendum organised by the regional government of Catalonia on the 1st of October proposing a unilateral separation from Spain are starting to weigh on the Spanish property sector, not just the housing market in Catalonia.

Translation and adaptation of an article published in the Spanish financial daily Expansión.

Real Estate Investment Trusts (known as SOCIMIs in Spain) have been hit particularly hard, and the impact is easy to measure as they are publicly traded. Merlin Properties, with 14% of its property portfolio located in Catalonia, had €720 million of its market value wiped off in the days after the referendum, whilst property companies Colonial and Hispania lost €827 million and €255 million respectively. Colonial is based in Barcelona, but since the referendum has announced it is moving its registered office to Madrid.

Rising employment and a growing economy have made Madrid and Barcelona favourite destinations for international  investors in the last few years. But the political storm unleashed in Catalonia by the regional government’s drive to break away from Spain has lead to the departure of emblematic companies like CaixaBank and Banco Sabadell, and cooled the property market by causing foreign investors to wait and see what happens. Capital is always hugely sensitive to political and economic uncertainties.

Since the referendum on the 1st of October, the main SOCIMIs have been falling on the stock exchange, Merlin by 5.8% in the first week, and Inmobiliaria Colonial by 7.67%. Analysts say the political situation in Spain is the principal risk for both companies since they both own property in Catalonia. Investors are worried that asset prices will fall if demand shrinks as a consequence of the confrontation in Catalonia.