di Paloma Taltavull de La Paz , Docente di economia, International Economy Institute and Dpt of Applied Economics , Università di Alicante ( Spagna)
Spanish elections’ results and the real estate market.
On Sunday 20th of December the Spanish society has decided that Spanish governance responsibility has to be shared among four parties for the next four years. Scrutiny results gave a collapse in the PP party votes making it unable to govern with absolute majority as during last four years. Final results distribute political power among four groups, two conservatives-right (PP and Ciudadanos) and two socialists-left (PSOE and Podemos) with quite similar weights in both groups, suggesting that, during next period, the decision will require continuous agreement among parties.
The real winner has been Podemos, a recently created new left party, with has been able to capitalize in votes the young disaffection generated after years applying budget trimmings within the Spanish Austerity Policy. Social negative impacts together with major corruption scandals associated to Popular Party as well as the poor policy results of PP policy (shown in larger debt than before, huge unemployment rates and reduction in social coverage, among others), convinced Spanish voters to look for a change. Podemos is the third elected party in Spain since yesterday.
Then, now the Spanish political performance is a matter of pacts.
Previous Region elections (Autonomous Communities) gave similar results in large regions and main cities, like Valencia Community, Andalucía or the city of Madrid, which have now new mix governments (with PSOE and Podemos or affiliated parties sharing the govern) working well. The near future will draw a bundle of political pacts to allow govern and more ‘different colour’s senators and parliamentarians as before.
The perspective for real estate depends on how speed the economy recovers and how quick the new governors have the ability to start with new regulations and measures. In the case of housing markets, the PP government derogated main rules supporting households for housing demand both for homeownership and rent (only a few categories still can have some financial help).
It is expected that a potential left coalitions recover Housing Policy possibly developing measures in twofold orientations: firstly, agreeing with banks empty houses (those coming from evictions) to be used as social houses, and secondly, starting to support social house construction. The process has already started in those regions governed by the left coalition which gained the regional elections one year ago.
From my opinion, it is quite likely to see new and refine housing tools to guarantee a house for young households, as well as a re-organization of the unsold stock in banks’ balance sheet for housing policy goals (in main cities, this type of pacts are already being applying transferring vacant flats to municipalities to cover basic needs of low-income or evicted families).
From real estate, a potential new left-party government will continuously promoting the entrance of real estate investment. Real estate investment has been strongly arriving to office, logistic and retail markets during the last two years showing a dynamic transaction activity and reaching historical maximum in some cases. Government and some agencies have been reducing the properties stock in financial system by releasing and selling large ‘property packages’ but without specific regulations to diminish the existing market distress in land or housing, for instance. The presence of new regulators will probably end the corruption scandals associated to those practices and make them more transparent, clarifying the rules. This will support the market rationality.
On the other hand, the new government probably release many barriers in some key sectors to increase jobs and reduce unemployment. Left parties have declared their support to new technologies, education and research activities as a priority what will possible serve as an incentive to IT firms location/renaissance which are able to recover the office demand.
Spanish current elections’ results have opened the need of a change in the policy type to take decisions (from one party deciding without consensus to a multiple-party system to take decision through agreements’ situation) which is seen like a complex framework. The larger the time needed to agree a coalition, the worst the message sent to the economy and citizens. So, the first success would be to have an agreement for a new coalition government soon.
The coalition largely welcomed by citizens (CIS) is PSOE-Podemos but also Ciudadanos and Podemos have declared their intention to be available to talk and agree. Since the regional elections, some large regions enjoy mix governs forms by a combination of those three parties (Andalusia, Madrid, Valencia, Castilla-La-Mancha, Extremadura..), as well as in main Spanish cities (Barcelona, Valencia, Madrid and others) where Podemos-Ciudadanos-PSOE and other parties are governing with consensus and with success.
There is no way for PP to continuous governing in Spain as it has been strongly beaten by corruption scandals at all levels. Any potential new government led by PP will send a message of corruption again which is negative for Spanish credibility affecting foreign investment, especially in real estate. They could make, of course, a coalition with the other right party (Ciudadanos) but the latter has been claiming against the corruption (and against any pact with PP) during the whole campaign and it is difficult to understand any potential agreement just immediate after the elections results.
Pictured : Paloma Taltavull de La Paz