As Barcelona burns, what might be the impact on the housing market?

Catalonia is in the grip of major political protests with nightly riots in Barcelona following the harsh sentencing of Catalan independence leaders for sedition and misuse of public funds after an illegal referendum and declaration of independence back in 2017. Shocking scenes of violence and destruction in the Catalan capital have flashed across the globe. What has life been like in Barcelona this last week, and what impact might the new situation have on the local housing market?

Living in the centre of Barcelona has not been easy for the last week. During the day it has been a struggle dealing with roadblocks and demonstrations interfering with the school run and getting my wife to hospital, plus a whole bunch of other related inconveniences.

At night the sounds and smells of rioting are all around: choppers overhead, police sirens screaming, riot-control weapons being fired, and the constant smell of burning trash as young rioters torch all the rubbish containers in the area.

On Friday night there was trouble on our street, with some neighbours watching from balconies screaming insults at the police, and some at the protestors. I’m glad I sent the kids to stay with family in a quiet part of town, but my wife is taking it very badly. I never imagined Barcelona could be like this.

barcelona riots impact on housing market 2019

As a result of just one week of nightly riots the city centre is looking beaten up and filthy. There’s political graffiti everywhere, the air is dirty and smelly, trash is building up where rubbish containers used to be, and you can see burnt trees and other scars of violence all around. The municipal cleaners are doing a heroic job of sorting out the mess each morning, but it’s going to take months for the scars of just one week’s rioting to disappear.

barcelona riots impact on housing market 2019
Political graffiti everywhere, especially ACAB (All Cops Are Bastards).
barcelona riots impact on housing market 2019
Trash building up where rubbish containers used to be.
barcelona riots impact on housing market 2019
The scars of violence

The leading Catalan newspaper La Vanguardia reports that the police expect the rioting and violence to get worse. They don’t understand what’s driving it, and say all they can do is hit back harder. That said, things were quieter on Saturday night, thought what will happen now is anyone’s guess.

It looks like the Catalan nationalist politicians  have lost control of the street. Their attempts on Twitter to distance themselves from the rioting are now met with a torrent of abuse and accusations of being traitors (botiflers, in Catalan). Here are extraordinary scenes on Saturday of Gabriel Rufian, a leading member of the Catalan Republican Left party (ERC) and one of the blowhards of the independence movement, being called a botifler, booed, and insulted when he tried to attend a protest in Barcelona. He had to leave. It shows how dramatically the situation has changed in just a week.

The only winners in this situation are a tribalist hard-left outfit called the CUP, who want to reunite the ‘Catalan Countries’ in Catalonia, Valencia, the Balearics, and the south of France, and have well organised groups of young militants stirring up trouble on the street. The CUP have played an outsized role in the Catalan independence drive from the start. They are the tail wagging the dog, and stand to gain electorally as the violence divides Catalans into more radical positions.

There’s hasn’t been any looting of shops, though some Spanish retail chains like Zara have been attacked, as have bank branches that are obvious symbols of the ‘capitalist patriarchy’. When there are riots in the US and the UK, one of the first things the rioters do is help themselves to a new flat screen TV, but not here.

Banks in the centre are now having to protect their facades with steel cladding.

barcelona riots impact on housing market 2019

On Friday afternoon, hundreds of thousands of protesters from all over Catalonia descended on Barcelona. The procession of protestors from all age groups wrapped in Catalan nationalist flags seemed to go on forever. It brought home to me once again how deep-rooted the independence drive has become in Catalan society. Millions of Catalans want to break away from Spain, and have been led to believe it can be achieved. At the same time millions of Catalans want nothing to do with independence. From what I can tell the region is somewhat evenly split. In this respect, it’s all a bit like the UK and Brexit.

barcelona riots impact on housing market 2019

barcelona riots impact on housing market 2019

I’ve described what it’s been like living here this week to show how real the problems have been, at least in the city centre where all the trouble has taken place in the 1.5 km2 area between Airbau, Diagonal, Passeig de Sant Joan, and Gran Via, plus Via Laietana. Anyone visiting or living in the area would have been affected.

Impact of riots on Barcelona’s housing market

What does this all mean for the housing market in Barcelona? I don’t see everything in life through the lens of the housing market, but that’s what this blog’s about.

First, let me say I don’t expect a solution to the problem anytime soon. Catalan independence is an existential threat for Spain, so no Spanish Government will ever allow Catalonia to break away, or even hold a referendum (that would implicitly recognise the possibility of breaking up Spain), but millions of Catalans will never give up trying. The violence of the last week has brought the problem out in the open, but the underlying pressures have been there for a long time. Catalan nationalism was one of the forces that helped trigger the civil war back in the 1930s.

So the problem is here to stay, and Catalan’s who’ve been led to believe that independence is around the corner are going to be bitterly disappointed.

Now the violence genie is out of the bottle, I guess the trouble will continue until exhaustion sets in on the Catalan nationalist side, and turns into sullen anger that explodes intermittently. Given the current state of Spanish politics, I don’t see any chance of a deal for Catalonia that will satisfy the independistas. In Madrid, Pedro Sánchez, the caretaker Socialist President, is the only adult in the room, and he’s under a lot of pressure to crack down on Catalonia in the run up to a General Election in November.

So let’s assume the conflict will continue, with rioting in Barcelona a regular feature, a bit like the Gilet Jaune riots in Paris, just worse. The problem with violence is it takes on a dynamic of its own, and nobody knows where it will lead.

On the one had this is going to harm the local economy, consumer confidence, wealth and purchasing power, which at some point will trickle down to the housing market and reduce capable demand for both rent and purchase.

And on the other hand, I can’t see how the images of violence, and the new reality of life in Barcelona centre, don’t deter foreign investors, who, I presume, have no interest in this kind of Barcelona. I could be wrong, but I suspect that this will quickly and sharply reduce foreign demand for property in the centre, which is where most foreigners like to buy. There are several housing developments on the market with at least half an eye on foreign demand. They might now struggle to attract foreign buyers, like they did in the aftermath to the disputed referendum in 2017. Those projects now might take longer to sell.

At least the rioting makes clearer the political risk of Catalan assets, which implies a higher discount rate and lower present values. I would expect anyone investing in Catalonia today to apply a higher discount rate than a week ago.

Looking on the bright side, this might help to address the problem of housing affordability in Barcelona, another political hot potato.

barcelona riots impact on housing market 2019
A lone wolf Spanish loyalist protesting against the independence drive in front of the Spanish Government Delegation in Barcelona

SPI Member Comments (2)

Thoughts on “As Barcelona burns, what might be the impact on the housing market?

  • A Spanish friend sent me a vid of a lad with the Spanish flag over his shoulders, riding a scooter round in circles surrounded by a crowd of similar youngsters [20’s] all draped with the Catalan flag. He made 5-6 circuits and was still going round when the vid ended. The comment I made to my pal was that in UK he wouldn’t have made it round once. He’d be in shreds.

    It seems the violence is not directed at people. This is some small consolation. The anti-indy population looks to be sitting it out.

    My understanding is that if the unauthorised referendum that precipitated the latest phase of this movement had been sanctioned by Madrid, the independence movement would have lost. Is that still the case?

    As in UK and Brexit, the oppostion is conspicuous by its absence.

    • Mark Stücklin says:

      The same lad wouldn’t have survived more than a lap in the Basque Country. I had lunch today with a Basque friend living in Barcelona. He grew up in Bilbao, and remembers the Kale Borroka in the 80s and 90s – a far more violent affair that the Spanish state took in its stride. He’s pretty sanguine about the current unrest in Barcelona. He says it’s all pretty tame in comparison to what he saw back home, and will blow over because the Catalans, God bless them, aren’t up for the hard stuff. Another big difference is that, back then, there was no social media and smart phones to broadcast everything in real time.

      In response to your question, maybe not. The harsh sentencing has enraged a lot of people, understandably.

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