The policies of the next Spanish Government will help or hinder the housing market, and the British are the biggest source of foreign demand for homes in Spain. So, what impact might these elections have on the Spanish housing market, especially in areas that attract British investors?
Mark Stücklin, founder of Spanish Property Insight, explores the possibilities.
Spanish General Election 10th November 2019
Before the current election was called the Spanish housing market had already been dealing with the headwinds of political uncertainty for a year or more after Marian Rajoy’s right-wing PP government was removed by a censure motion, and the Socialists led by Pedro Sanchez were unable to form a government after the last election in April.
With a rogue regional administration in Catalonia adding to the sense of political chaos, Spain is heading towards the polls with the economy slowing down, and home sales and mortgage lending on the slide, according to the latest figures.
The best electoral outcome for the housing market would be a majority government of either the Socialists or the PP, though neither is likely, especially not a PP victory.
Most likely based on the latest polls is the Socialists winning the largest number of seats and having to consider a coalition government with either the PP or Ciudadanos (Citizens) party on the right, or the Podemos party on the left.
A coalition on the right would probably refresh economic confidence and the housing market, whilst a coalition on the left would probably turn the economic headwind into a stiff breeze, with Podemos agitating for intervention in the housing market to control rents and curtail property rights.
There’s also a chance that the election won’t solve anything, and no party will be able to form a government, leading to what? Another round of inconclusive elections ad infinitum? I guess the most likely outcome is a Socialist (PSOE)-led government with support from the right, because the factions on the left, as usual, can’t stand each other, though it’s not what their voters want and I certainly wouldn’t want to bet on it. Whatever happens, the uncertainty is not helping, so the sooner we have some clarity, the better.
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The leaders of Spain's PSOE, PP, Ciudadanos, Podemos and Vox. Photo: AFP
United Kingdom General Election December 12th 2019
British demand is very important to the Spanish housing market on the coast and in both archipelagos. For many years the British have been the biggest group of foreign investors by far in aggregate, and number one or two in Andalusia (Malaga / Costa del Sol), the Valencian region (Alicante / Costa Blanca), Murcia (Costa Calida), the Balearics and the Canaries.
Any change in UK demand will be felt immediately in these areas, as it was after the Brexit referendum, when UK demand slumped for two quarters before recovering some lost ground. British buyers have been falling in numbers in the last two quarters for which figures are available, so confidence was already declining before the UK election was called.
British buyers head for Spain thanks to economic confidence and a sense of wealth to afford a retirement or second home in Spain, with buyer numbers generally rising and falling with the strength of the Pound.
Any election result that reduces British wealth and weakens the Pound will curtail British demand, though a hard Brexit, or any Brexit deal that limits British access to Europe (think 90 day limits) will also crimp demand. However, I guess it’s also possible that a government that proves to be a disaster for the British economy could stimulate demand for property in Spain as Brits try to get their wealth out of the UK.
The first consequence of the December election is likely to be British demand put on hold as people wait and see what happens on election day in the UK. Luckily for the market in Spain, there are never many buyers around at this time of the year anyway.
I’m a bystander because I failed to register in time, so I’ve lost the right to vote in UK elections (you have to register for overseas voting within 10 years of emigrating) but in a way it’s a relief as I wouldn’t know who to vote for in this election.
I guess a Conservative overall majority would mean the implementation of a deal already agreed with the EU, which should reduce uncertainty, lift the Pound, guarantee British access to Europe, and keep alive British demand for property in Spain. I think that an overall Conservative majority is the best scenario for maintaining British demand for property in Spain.
As I understand it, an overall majority for Labour is a long shot, which is extraordinary considering the current state of the Tories, and shows how unattractive Labour are under Corbyn. But in the unlikely event of a Labour overall majority, I would expect serious economic turbulence with the hard left in power, for a slump in the Pound, perhaps capital controls, and bond market mayhem. This would hammer UK wealth and demand for property abroad, though, on the other hand, it could trigger wealth flight from the UK looking for safer assets abroad, including property in Spain.
From what I can tell a hung parliament and Lib-Lab-SNP coalition is a likely scenario, perhaps without Corbyn as PM. But that would just extend uncertainty into the future, with new referendums on Scotland and the EU back on the table. More of the same I guess, just worse.
The betting odds from William Hill are currently around 1/7 for a Conservative victory, and Labour 5/1, with a hung parliament on 6/5. The forex market – another way of betting on the UK – has gone from around 1.10 to 1.15 EURGBP in the last month with the Boris deal and elections on the table with the Conservatives leading in the polls. The latest opinion poll of polls have Conservative on 37 percent, Labour 24 percent, and Lib Dems 18 percent.
So, on balance it currently looks like the most probable outcome is a Conservative victory with a Boris-EU deal that avoids the major economic disruption of no deal, and probably maintain the rights of Brits to travel in the EU. It makes sense for people who are looking to buy in Spain in no hurry to wait and see what happens in both Spanish and UK general elections in the next two months. If the results are good then go ahead, if not, put those plans on hold.
For vendors it’s a difficult time to find a buyer, given the time of the year and political uncertainty in Spain and the UK. What often interests British vendors is selling whilst the Pound is weak, which boosts the value of the capital they repatriate. The Pound has been climbing recently with confidence in a deal and Conservative victory, but that could all change in a heartbeat. There’s not much vendors can do other than wait and see. Slashing asking prices probably wouldn’t help much now either.
All we can do is wait for the elections to pass, and hope they delivery positive results for the Spanish housing market. At least we don’t have long to wait.
Mark Stücklin is a Barcelona-based Spanish property market analyst, who runs Spanish Property Insight, an independent website for buyers, owners, and sellers of property in Spain, offering reliable information and resources on the real estate market and trends.
A version of this article first appeared on Spanish Property Insight