Chaos in Catalonia Hits Barcelona Housing Bubble

Turns out all that’s needed to halt a property bubble is a constitutional crisis of epic proportions.

By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

Spain’s breakaway region, Catalonia, is riven in two and as unruly as ever. Just about the only thing the latest round of elections accomplished was to confirm just how divided the region is.

Catalonia’s failed bid for independence has left behind a stinking economic hangover. None of the lofty promises made by the separatist forces have materialized. Four senior politicians and political activists remain in jail. The European Commission has roundly rejected any possibility of an independent Catalonia remaining in the EU. Yet enough people voted for pro-independence parties to grant them the slimmest of majorities in the region’s parliament. And that’s enough to ensure that nothing much changes.

But one thing has changed: The rampant political uncertainty has tempered global appetite for real estate assets in the region’s capital, Barcelona. Back in July, when we last reported on the housing bubble, it looked like this:

In June 2017, the median home price in Barcelona soared 21.7% year-over-year, to €3,094 per square meter (ca. $350 per square foot), with double-digit increases across all of the city’s districts. In the city’s old town — ground zero for the tourist industry — the median price skyrocketed 35%. Property speculators, domestic and foreign, were piling in too. And as landlords focused on meeting the much more profitable needs of short-term visitors, rents soared 50% between 2013 and mid-2017.

Then, on October 1, the referendum happened and all hell broke loose. Since then, demand for real estate in Barcelona has waned, with the result that property prices fell 1.7% in the fourth quarter from the third quarter, according to Tinsa, the biggest quarterly decline since Spain’s recession ended in 2013.

The irony is that Barcelona’s City Council tried just about everything it can to dampen international demand for local real estate, from fining sharing platforms like Airbnb for featuring unlisted tourist apartments on their platforms to sanctioning local banks for refusing to sell or rent out unoccupied bank-owned properties, but to little avail, largely because Spanish national courts keep annulling the legislation it passes.

Now, it turns out that all that was needed to halt the property bubble was a constitutional crisis of epic proportions. But even that has barely put a dent in the relentless surge in the price of rents in Barcelona.

The city is already the most expensive in Spain for renting with an average price of almost €19 per square meter, compared to a national average of €7.5. In 2013, when Spain’s economy began its recovery from the burst property bubble, just 8% of rental properties in Barcelona were priced above €1,500 a month, a sum that is prohibitively expensive for most locals; now over a third are.

This price boom is happening in a city where salaries have all but stagnated since the crisis. It is now virtually impossible to find an apartment for under €800 a month, even though a third of Barcelona’s local population earns less than that amount. In Spain ten years ago, “mileurista” — a term to denote someone earning €1,000 a month — was coined to highlight the plight of young workers with low-paid jobs that could never dream of owning their own flat. Today, with a youth unemployment rate of just under 40%, becoming a “milleurista” has become something to aspire to while renting a flat in Barcelona — or even a room in a flat — has become an impossible dream for many young workers.

To make matters worse, the steaming hot property markets in Barcelona and Madrid are now so stacked in the seller’s favor that tenants are increasingly been made to bear the full cost of agency fees, which can often run into four figures, despite the fact that it’s the landlords who hire the agency’s services in the first place and who ultimately benefit financially from the deal.

To discuss ways of protecting tenants from these kinds of abuses, housing representatives from Barcelona city council recently met up with representatives from the councils of Lisbon and New York, two cities that have also witnessed huge rental booms in recent years. The result was a joint manifesto calling on the cities’ respective national governments to grant them more power to control rents to put a stop to what they call “excessive” house prices.

Barcelona City Council also dispatched representatives to Paris and Berlin to study the impact of recent legislation aimed at curbing price rises in the rental markets. Berlin, for example, is one of a number of German cities to have applied new federal laws that forbid landlords from hiking rents by more than 10% of what they were in the previous contract. In Berlin, rental contracts are valid for ten years.

Applying similar such measures in Barcelona is going to be very hard, though, for the simple reason that Madrid is unlikely to permit them. Every time Barcelona City Council or Catalonia’s regional government has tried to introduce new laws to curtail speculation in the housing market and protect tenants from evictions, abuse, or excessive rent increases, the central government has appealed them and Spain’s Supreme Court has annulled them. At the end of the day, it all comes down to one thing, political autonomy, and right now Catalonia has a lot less of that than it has had for a long time. By Don Quijones.

Uncertainty, threats, and counter-threats. Read…  Catalonia’s Post-“Independence” Economic Hangover Sets In

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  28 comments for “Chaos in Catalonia Hits Barcelona Housing Bubble

  1. walter map says:

    “Turns out all that’s needed to halt a property bubble is a constitutional crisis of epic proportions.”

    The impending threat of national disaster may almost be sufficient to slow down a local real estate bubble, but it isn’t nearly enough to rein in the banksters or to replace a malevolent government with one that actually serves even the modest aspirations of the general population.

    For that you need a severe nationwide economic meltdown. That certainly worked in the US in the 1930s, if only for a little while.

    Drop by drop, wisdom is distilled from pain, and it takes a whole lot of agony to get the bucket even halfway full.

  2. looks like they have declared independence and been gentrified all at the same time

  3. robt says:

    What better way to keep rents and prices elevated than to put rent controls in place to ‘protect’ people? Thus in places like Sweden (where the official waiting list for rental housing of any kind is up to 40 years) and and other such places the key money under the table, often thousands.
    And little or no new construction.

    • walter map says:

      “And little or no new construction.”

      Just goes to show just how wrong you can be:

      Those socialist countries are obviously extremely desirable places to live, and have a very difficult time coping with the flood of refugees from capitalist countries. You know how it is.

      • Alistair McLaughlin says:

        Those aren’t rental units they’re constructing. Sweden’s rental market is every bit as impossible as robt says it is. And if you think Sweden’s housing boom is sustainable, have a look at the insane amortizations required to sustain it.

        Not to mention the subsidies paid by the government to cover peoples’ interest payments on their mortgages (more than $30 billion krona last year). In keeping with their social democrat ideals, most of those subsidies go to the richest Swedes: (Use Google translate to read the first paragraph).

        Here’s a how-to guide so you can create a Swedish style housing bubble in the country of your choice!

        As nutty as the US housing market was a decade ago, it can’t hold a candle to Sweden. Sweden’s housing market is the very definition of ‘debacle’, they just don’t know it yet. Neither do you apparently.

        • walter map says:

          “Sweden’s housing market is the very definition of ‘debacle’, they just don’t know it yet. Neither do you apparently.”

          Apparently neither do the thousands of people and hundreds of firms pouring into Sweden, but then, it’s typical for malignant capitalists to be chagrinned at the successes of Scandinavian socialism.

          Your pique is appreciated. Wanna talk about Barcelona, or would that be too humiliating?

        • Realist says:

          Swedes who buy their housing usually take lifetime mortages paying only interest and fees, not paying downnon the mortage itself. Add to this car etc on credit, the average Swede is indebted over his/her ears.

          Then the muninicipalites is forced by the state to find housing for the tsunami of migrants that Sweden has/does recieve, thus hughe tax hikes are about to be implemented. And integration of migrants has failed miserably. Welcome to Malmö and other multicultural hot spots in Sweden.

      • robt says:

        That link is for a government feelgood promo section of the paper.
        I do read the Local on a regular basis.
        There are 580,000 on the Stockholm Housing Agency waiting list for rental units in Stockholm alone, and the waiting list grows 8 to 9% a year. People survive by sublets and sharing, and in spite of strict rules about pricing sublet rents, the black market (i.e. the real market) thrives. Also, if you do sublet to someone you have to supply a valid and verified reason to Command Control.
        Last year, releases of apartments were running at the rate of some 14,000 a year. The current projection in the article is for 140,000 new homes by 2030; the proportion of these for sale or rent is not specified.
        But of course in any normal economic environment you can find accomodation without difficulty – any shortages are remedied by the market, with no bureaucratic allocation and micromanagement necessary.

  4. marco says:

    Right Thousands of people are flooding into Venezuela’s socialist paradise, for example.

    • walter map says:

      It’s common knowledge that Venezuela is a victim of foreign capitalists, and particularly of years of US economic warfare.

      If you’d like to talk about it you’ll need to find another site. Mind you I don’t talk to trolls on Breitbart.

      • Wolf Richter says:

        It’s common knowledge that Venezuela is victim of its own sordid corruption and political and economic mismanagement, including the total destruction of its currency.

        • walter map says:

          Things were so much better when the oil cartels ran Venezuela.

          And yet, even critics of Chavez concede that his reforms proved promising for the first few years. Abject poverty was much reduced, for example. But the oil cartels retaliated for their loss of control when the industry was nationalized, international banks shut them out and prevented them from hedging oil prices for refusing debt peonage, and the military went whole hog into racketeering commodities and other goods.

          Still, it’s always easiest to blame the victim, and hard to make a go of it when the oil cartels, international banks, and the military are undermining you, regardless of management technique. Certainly their resort to populist authoritarianism was a bad move, and they made other mistakes.

          It’s certainly fortunate that Venezuela is the only country in the world that has ever been susceptible to sordid corruption and economic mismanagement. Otherwise the world might be subject to periodic economic meltdowns and nasty wars.

        • Wolf Richter says:

          The successive Venezuelan governments — including those before Chavez — are not the victims. They’re the perpetrators.

        • d says:

          Venezuela should be one of the wealthiest countries in the World.

          Just like the Philippines it is a good study in corruption and economic mismanagement. Compounded in Venezuela by socialist idiots.

        • walter map says:

          My mistake. Forgive me for questioning the benevolence of the bank and oil cartels. After all, they were only trying to help, and those darn commies just ruin things for everybody.

        • Wolf Richter says:

          Don’t get me wrong. Perpetrators were not limited to the successive governments. The entities you mention played a role too. All I was saying is that these horribly corrupt and inept governments were not the victims, but perpetrators. The victims are the people of Venezuela.

  5. Maximus Minimus says:

    I wish, Catalonia was the main problem in Europe, but it is not. Just looked at some bank accounts in one Eurozone country. The only no-fee accounts are for children, students, and maybe seniors; the rest cost at least €3 per month. No surprise that the housing bubble is developing everywhere, and ZIRP is also at the root of the bubble in Barcelona, and the artificial tourist boom. Draghinomics will be the stuff of legends, like the Noah’s ark, once it pops.

  6. Qack says:

    Bofa just started charging $12 on my checking with more then a previously required minimum. Also f#%&ers now charge fees on savings accounts too. Fricking bustards are greedear then ever

    • Javert Chip says:


      So what? Go find another bank. Even for you, this is not difficult.

      PS how does this relate to Catalonia?

  7. Maximus Minimus says:

    Just to add something in the spirit of the title, the independence leader (or instigator), Puigdemont, does not strike me as the greatest strategist. Maybe it is my lack of knowledge of Spanish. While his opponent, Rajoy, comes across as the bona fide lord of Sherwood castle, Puigdemont fails to fulfil the role of Robin Hood. The key to success of events of historic proportions is right timing, and this is definitely not what stirs Europe today.

    • walter map says:

      “Puigdemont fails to fulfil the role of Robin Hood.”

      Robin Hood had the advantage of being a fictionalized character. Puigdemont faces complex adversities without benefit of favorable scripting.

      • Julian says:

        Why weren’t the Catalan police – there is a name for them I forget – united and ready to stand shoulder-to-shoulder to support the push for Catalan independence.

        They seem just as divided as the general population. It seems a basic part of Puigedemont’s strategy for independence would have been to have a military arm firmly in lockstep behind the decision.

        Why weren’t they purged of Spanish nationalists before any push for independence??

        Did Puigedemont learn nothing from the example of the former Yugoslavia? He certainly witnessed the rapid independence of Slovenia & Croatia for instance – and also the disaster that was Bosnia.

        It appears he learnt nothing from these examples.

        Surely Puigedemont knows that independence is never given – it must be taken – and usually backed by barrels of guns pointed at the oppressors.

        • Dario T says:

          Hello Julian,

          I guess, you aren´t from here in Europe.

          The catalan police, called “Mossos”, have and had only limited possibilities to encounter amd reject a possible take-over of control of the regional parliament. There were a lot of Mossos which stand along the people shoulder by shoulder with the voters and pro-independence persons. However, the arm of the state is much stronger and longer – always and everywhere.
          About just the half of the people are por-independence and this is already a huge increase comparing the numbers some years ago. It is goes through the middle of the society – in every family, office, house etc. you can find persons with pro-independence and anti-independence mind. Long and hefty discussions are a daily phenemon – at least what I can observe. However, a lot of people speak only in small groups after they saw that the state can bring you into jail for “rebellion” while speaking loudly for the independence in public.

          “Spanish nationalism” is something quite new, at least at this proportions. If you´d have driven in the coutry 2 years ago, hardly you could see the Spanish flag banner in the gardens or hanging from the balconies. Now this has become something which attracts your eyes wile driving through the country.

          Surely, everybody over 30 years knows what has happened in Yugoslavia. These people lived it and saw the desaster. Spain is a time bomb like Yugoslavia before and only a wise politic of the central state can dim this down. The economic crisis opened a lot of old wounds again and only a wealthy, good working state could heal these wounds again. But unfortunately, this won´t happen with the actual government. They are looking more back than into the future.

          And yes, you are right – the independe you don´t get for free. You need to fight for it. There was only a very few “paceful” seperations of regions or states in the history. The vast majority was a civil war with deads, heroes and a lot of people who lost nearly everything before they were in the new state. The question is, how far Catalonoans would go for their independence. According to my feeling (living here for 15 years now), they won´t go that far.
          So, the conclusion is, there won´t be an independence on short term and it reduces now to the question how they (Puigdemont & company) can come out of this trouble without losing everything.

  8. Dario T says:

    “Today, with a youth unemployment rate of just under 40%, becoming a “milleurista” has become something to aspire to while renting a flat in Barcelona — or even a room in a flat — has become an impossible dream for many young workers.”

    And all these people are pushed out of Barcelona into the subburbs. There is a ring of cities and towns around Barcelona where the rent is lower, but also increasing. The problem is that all these people has to drive in and out of Barcelona every working day and the cues in the morning are getting longer and longer. Some of my colleagues already started to shift their habbits of working (coming earlier or staying longer) to avoid the peak of the traffice jam.

    Barcelona isn´t prepared for this traffic jam. In the past 20 years only few investments were made into the infrastructure. You would be astonished to compare a map of Barcelona of 1997 with a map of 2017. Nearly no changes, but the habitants (including sorroundings) increased as well as their demands.

    The independence movement has its roots in a feeling that the Catalans are “forgotten” by the rest of Spain, though they have to pay the bill for taht party. It comes down to a simply economic question: Will Madrid spend more money in Catalonia to extinguish the independence movement or won´t it ….

    • d says:

      “It comes down to a simply economic question: Will Madrid spend more money in Catalonia to extinguish the independence movement or won´t it ….”

      The answer is no. Madrid intends to keep Catalonia’s money, then suppress Catalonia with violence.

      If you look at what triggered this round of independence demand’s.

      Catalonia was given more control of it finances and more of its tax take. In a set of constitutional amendments.

      The new party of Franco headed by Rajoy. Watered those amendments down afterwards, to make them meaningless (Indian Giving).

      Ultimately Madrid has huge Fiscal problems. Which become MASSIVE. With out all of the money. Madrid can milk from Catalonia.

      Interestingly the EU has a similar problem with Brexit. That little strip of water is all that saves London from massive EU aggression to keep it in the EU. IMHO.

      If Brexit is completed, the EU is going to have HUGE budgetary constraints. The pain will not be felt in Germany (As they will be the only major Budget contributor left) or by the Totalitarian Socialist administrators in Brussels.

      ‘Which is what the Eastern nations in particular are privately very worried about. They see a “Two Speed” EU coming, with them in the “no money, slow lane”.

  9. Steve clayton says:

    Back to Catalonia DQ, it’s all very quiet on this story, physically what’s happening? Are companies laying off staff due to this issue?

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