How is the coronavirus crisis affecting the real estate market in Spain? How was the sector before the crisis? What will happen when it is all over? Can we be optimistic?

In the next article, Joaquim Zamacois, entrepreneur and adventurer, partner of the Summit Capital fund and founder of the first cooperative real estate agency in Spain, talks about this issues:

During the first fortnight of March, some areas of China that have been reopened after the worst of the coronavirus crisis have increased their real estate activity by 8.5%* compared to the same fortnight in 2019. During the stop, activity had shrunk by 99.5%, as in Barcelona today.

Is there room to be optimistic in this week of infernal data and worse family dramas? Obviously, we entrepreneurs have the obligation to keep on, otherwise we would jump out the window as Lorca told in his Poet in New York about the free flight trend among bankers during the crack of ’29. The real estate market in Barcelona reached saturation point in October 2017, coinciding with 1-O. From then until three weeks ago, intramural prices had seen a sustained decline – to 20% in some areas of the Eixample – due, paradoxically, to the city’s attractiveness to foreign investors: it was these who brought the market to a boil from 2013, when prices were at low, and pushed promoters, owners, neighbours and intermediaries of all kind into a price escalation that had nothing to do with the country’s economic growth. As always happens to us, we thought we were London or Paris. So at the end of 2017, with prices at historic highs, the smartest ones withdrew, the rational buyers stopped preferring Barcelona – from 12,000 euros /m one can take refuge in some side street of the Marais-, and we are left with a wonderful stock of luxury promotions and an increasingly local demand and with less purchasing power.

Since then, the residential market has been deflating enough to fuel local demand. Although it still doesn’t pay the prices of “luxury”, the second hand does work. We already know that owners do not lower prices at the first exchange: in Spain it takes years, storms and pandemics for a seller to understand that he has to lower the price if he wants to sell, because culturally we continue to regard the brick as a sentimental asset, rather than a pure and hard asset. It costs, but we get it and the prices are adjusting. To this market situation, we must add the decree of 30% that approved by the City Council in mid-2018 and that requires large renovations and new constructions to cede 30% of its roof to social housing. This law, instead of increasing the social living ceiling, leaded to the disinterest of the capital by residential construction, and a very healthy side effect, which was the decline in the prices of vertical properties for sale. No fund, no matter how suicidal this is – what there are, damn managers’ fees – will buy at a price of 100 receiving 70, and less in a bear market.

And with this comes confinement and the market ceases to exist. There’s no market anymore. Zero new transactions, which are the ones that count. There are no visitors, no demand, no need in at least a month and a half, and the whole sector wonders what will happen.

If you look at China, the rebound was perfect, and the contained demand has skyrocketed when they open the door. And the Chinese buy all over the world – blessed Golden Visa, may the Lord keep your health – so that the dead man is not completely cold. There’s a pulse. In addition, the ghost of John Maynard Keynes has appeared to each of the Heads of State of the Union – and America – and they are going to irrigate the markets with liquidity. Hundreds of billions in Europe, trillions in America – election year and Trump wants to keep going. We don’t know if families will see a euro in the coming weeks, but liquidity will hit the markets. There’ll be money. And the money must be moved because the interest rate is 0%. Three factors converge to consider that we are not so bad: prices in Barcelona have been falling for almost three years and are at attractive levels at European level, states will inject a massive amount of liquidity to keep the economy alive, and the expected rebound effect when this drama is over. I think a good time to buy if you’re from Barcelona will be the day you go out without being fined. There are other ways to look at it, but I prefer this one. It helps to spend in a better way these days of cocooning.