Catalonian Independence & Its Possible Impact on the RE Sector of Spain

16/10/2014 – El Economista

The threat of Catalonia going independent stirred the real estate market of Spain up. Sources from the banking and property management areas admit that the uncertainty invoked by the independence movement could result in a halt of the sector’s activity, as well as in price depression.

Experts indicate that the real impact would be seen in the first years of the hipothetical independence with recovery to be observed in mid-term.

If that followed by stagnation in the real estate market, the specialists advise further price slash of REO properties as an indispensable move for the Spanish entities to meet their annual targets.

Mortgages

Mortgages are the next issue which should be carefully approached in case of the region’s separation from the Kingdom of Spain. The odds for Catalonia of coming to an agreement with the European Union seem very low and for this reason the loans granted in Euro (€) might be affected.

The contracts shall be revised in terms of conditions permitting currency change. However, even if such exists therein, the mortgages still could be loss-generating due to possible currency rate fluctuations.

Furthermore, as Catalonia would not belong to the eurozone, the Euribor could no more serve as the benchmark of varaible interest loans. Nevertheless, bankers suppose that the contracts signed before the political border change and especially those sealed with the entities based outside of the region in question, will retain the indicator.

Artur Mas, the brain of the ‘operation independence’ and the president of the local government, foresees creation of a central bank to control monetary policy in the new country in imitation of the Bank of Spain.

Looking at what happened in Scotland, with a sudden August price fall after three years of increase on the forefront, the insecurity provoked by the referendum on independence pulled the housing values down 0.2% more.

 

Original article: El Economista

Translation: AURA REE

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