Trying to get some idea of the impact of the Catalan independence drive and constitutional crisis on the local housing market, I’ve been comparing the change in monthly sales between Barcelona and Madrid for the last year.

As you can see from the graph above, home sales increased in Madrid every month last year, and by more than Barcelona every month since June last year, whilst sales in Barcelona fell in December before returning to growth in January, albeit at half the level of Madrid. Up until May last year, sales had been growing at a much faster rate in Barcelona than Madrid.

In these figures there is clearly signs of something dampening demand for homes in Barcelona (it’s a similar story if you look at the whole of Catalonia), and the most plausible reason is the political uncertainty generated by the independence drive.

The constitutional crisis in Catalonia appears to be unsettling foreign investors, who are a big component of demand in central Barcelona.

According to local estate agents Amat, who have been in business since 1948, foreign buyers have made up 50% of demand in the city centre for the last seven years. Guifré Homedes, MD of Amat, told me yesterday at their press conference to present their 2017 property market report for Barcelona, Sant Cugat and Sant Just (request report below), that they have seen foreign demand decline significantly since the constitutional crisis exploded in October last year, though strong local demand helped lift their total sales by 23% in 2017.

So it seems that local demand is keeping the market growing, whilst foreign demand has gone soft in the face of political risks the outsiders find more unsettling and harder to judge. That said, I also hear from some agents that confidence has returned in 2017, presumably as some foreign investors start discounting the negative impact of the crisis, which appears to have little impact on daily life (so far).

The decline in foreign demand has the biggest implications for new developments in the city centre market, where foreign buyers have the most impact. New home prices were rising fast in the centre before the crisis started, and I hear that developers have yet to reduce their prices in response to the new situation. More attractive prices might attract foreign buyers back, and make new developments more accessible to local buyers.

Get the Barcelona property market report 2017 from Amat

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