The result of Thursday's election in Catalonia could affect the economy and will drag down the region's housing market whilst increasing the risk premium investors will use to value assets in the region.
After two months in the middle of a constitutional crisis, Catalonia went to the polls on Thursday to elect a new regional government which the government hoped to abandon the independence drive and unblock the political situation.
The Catalan nationalist block pursuing independence lost the popular vote (48%) but won the possibility of an overall majority of seats in the regional parliament if the separatist's parties can agree to form a coalition. That is highly likely, but not guaranteed, as the separatists are not a happy family. In coalition, the separatists can reach a two-seat overall majority in the Catalan regional parliament, down from four seats in the last parliament.
So, we are looking at an open-ended period of conflict, instability and political uncertainty in Catalonia, all of which is bad news for the economy.
The rating agency Moody’s has warned that the election result will weigh down on economic growth and “undermine further the already weak finances of the region” if the new government continues to pursue independence at all costs. 3,100 companies have already pulled out of the region, and more will follow. The economic cost of the independence drive is already clear to see. “The departure of companies and the fall in consumption and investment has caused a fall in economic activity in the last part of the year,” says Joan Rosell, President of the CEOE Catalan business association, quoted in the Spanish press. “Only a new government that acts legally and respects the constitution can repair the damage done and return Catalonia to the path of prosperity that we all desire.”
Purchase and rental expectations
In Barcelona, the volume of contracting foreseen in the market of offices for rent at the end of the year was 350,000 square meters, a figure that the consultant Knight Frank has also corrected up to 300,000 square meters. The forecast was gross rental of 100,000 square meters in the last quarter of 2017, but 50,000 square meters between October and December, 50% below expectations.
The other side of the coin is represented by Madrid, which is receiving investors who discard the capital city as a destination, whose benefits could be extended in the short and medium term, according to the consultant's analysis.
Credit: spanishpropertyinsight.com, elmundo.es