Whether you already live or are planning to live in Spain, you may be concerned about how Brexit affects the real estate market in Spain. This is normal. The United Kingdom’s departure from the European Union raises many questions. We help you understand what this might entail for English people who own a house in Spain.
Consequences of Brexit for the housing sector in Spain
The UK’s departure from the European Union has led British expatriates to worry about what Brexit will mean in terms of healthcare, pensions and a range of rights and obligations. Although a definitive answer to these questions cannot be given until the relevant agreements are drawn up, we can analyze the effect it has had on the market so far and the current status of British expatriates in Spain.
How Brexit affects the GBP/Euro exchange rate
For now, bartering is not allowed. So, the value of currency is a fundamental aspect when it comes to knowing how Brexit affects the real estate market in Spain. So far, the value of the pound against the euro has dropped. This means that the purchasing power of the British in Spain is lower, as they will have to spend more pounds to pay for the house.
However, as Antonio Berdonces from My Lawyer in Spain tells us, “in the short term, there are ways to mitigate the effect of a weaker sterling pound and, at the same time, other aspects such as an attractive price, the right location or the lifestyle of each person and their plans for the future are also very important factors to consider”.
It is obvious that currency exchange rates are a variable factor and this is something that non-EU buyers will always have to consider.
How Brexit affects the labour market
When it comes to employment rights, British nationals working permanently in Spain can continue to do so, although at some point they will be required to obtain a permanent residence permit. Similarly, British pensioners will be able to continue receiving their pensions, including increases and supplements, even if they continue to live in Spain after Brexit.
These government guarantees are an important insurance for British people thinking of buying a home in Spain.
Antonio Berdonces calls for calm. Even if the United Kingdom has left the EU, it can negotiate an ‘amicable divorce’ to maintain trade links with EU countries. It takes two to tango! In fact, the United Kingdom is (and will remain) a member of the European Economic Area (EEA), which means:
Equal access to the single market;
British people have the right to live, work and study in all 30 EEA states.
Like Norway, the UK would be exempt from EU regulations on agriculture, fisheries, justice and home affairs. Furthermore, remaining part of the European Environment Agency leaves options for negotiating a comprehensive Free Trade Agreement with the EU, allowing the UK not only more freedom to provide financial services, but also to have a greater say in how regulations are applied.
This exact position is held by Norway, which is neither a member of the euro area nor of the EU, but part of the EEA. We all know of many cases of Norwegian citizens buying property, enjoying holidays and retirement, paying taxes in sunny Spain.
We should not forget that there is also the case of Switzerland, a country that is not a member of the EU or the EEA, but is part of the single market by negotiating trade agreements sector by sector. Swiss citizens also have the right to live and work in the United Kingdom like other EEA nationals. Surprisingly, Switzerland is a member of the Schengen Treaty, although, as the country voted to restrict free entry for EU citizens in 2014, its role will probably be reviewed.
What about home buying?
The effects of Brexit on British home buying were felt immediately after the 2016 referendum. Then, the purchase of homes in Spain by the British suffered a sharp decline. The second half of 2016 saw a 23.6% drop and this continued into the first half of 2017, with another 16.1% drop.
But in the second half of 2017 the British gradually regained their interest in property in Spain. In 2018, British buyers bought 10,127 homes, 10.7% more than in 2017 and the best figure since the beginning of the Spanish economic crisis in 2009.
In 2019, British home purchases dropped in absolute terms, but the British continue to be the top foreign home buyers in Spain. Almost 14% of sales to foreigners are made by the British, with the Costa Blanca being their favourite destination, followed by the Costa del Sol.
This reflects the fact that even with reduced purchasing power, Spanish properties are still seen as a good asset in the eyes of UK buyers.
As the latest Real Estate Statistics Records drafted by the Official Association of Property Registrars states, “over the next few quarters we should be able to see the effects of Brexit, which will undoubtedly generate further decreases in British demand, and determine whether or not this decrease is offset by the increase in demand by foreigners from other countries.”
Spain’s image as a destination
Fortunately, the charms of Spain will remain intact. Good weather, a friendly and optimistic atmosphere, good communication and transport systems, gastronomy, multiple leisure options, sports, nature, culture… None of these assets are affected by the departure of the United Kingdom from the European Union.
In addition, the quality of the homes, the great locations and the underlying security at the time of purchase are still at top levels. Do you really want to miss it out?
How Brexit affects taxes
We would love to tell you that Brexit cancels all taxes on the planet, but we are afraid it does not work like that. The taxes that will affect you when you buy a home in Spain, whether you are a European citizen or not, will remain the same. However, it is advisable to check for variations that may occur especially with regard to the Non-Resident Income Tax.
For instance, some tax exemptions may no longer apply, such as the exemption on interest and capital gains derived from real estate or the exemption for reinvestment in a habitual residence.
The agreements to be negotiated by the EU and the UK in the coming months will be crucial for the healthcare status of the British in Spain and for the maintenance of their pensions. The general recommendation is that the British in Spain, most of whom are retired, should register and apply for residence in order to maintain their rights.
As you can see, it is not all as bad as it seemed! There is a lot of confidence that the EU and the United Kingdom will establish favourable conditions for both European and British citizens. Moreover, it is not until the 31st of December, 2020, that the transition period begins, so you still have time to make sure that this change affects you as little as possible.
Besides, the good life in Spain remains the same as always. You don’t want to miss it, do you? AtSonneilwe help you find your place in the best areas of the Spanish coast.
Because the Mediterranean does not know about frontiers.
If you are thinking of buying a home in Spain, you’ve probably started to do some research on the Internet. You will have seen websites, real estate agency pages and even big real estate portals like Idealista, Fotocasa and Rightmove Overseas. So, why bother going to a property exhibition?
Here are five good reasons why going to a property exhibition will help you to find the home you are looking for, even though you might enjoy searching online.
If you have ever considered buying a 2 nd home in a relaxing place blessed with over 300 days of sunshine a year and a pleasant climate. If you want to live close to sea and get away from the hustle and bustle of everyday life. A getaway where you can enjoy the simple pleasures of life and do whatever pleases you the most: enjoy the outdoors and beautiful landscapes away from the asphalt jungle.
Sometimes, we may need a jump-start to make the decision and make our dream come true. Well, the time for that has come. If you have always wanted to own a house on the Mediterranean coast, now is the perfect time. Both, the strength of the pound sterling against the euro reaching record highs and the upward trend in prices make it the perfect time to buy your home in Spain before the prices continue rising.
According to Tinsa’s report on property on the coast 2018, the price of the properties on the Spanish coast is rising, although they are still below pre-crisis levels. There is a widespread feeling of economic rebound and growth in the main towns and cities on Costa Blanca, Costa del Sol and Balearic Islands. Most notably Torrevieja, Orihuela Costa and Pilar de la Horadada on Costa Blanca and Marbella, Nerja and Estepona on Costa del Sol.
35 out of thE 140 coastal towns contained in the report show price increases in the first quarter of 2018
The large number of foreclosures left by the economic recession resulted in property prices dropping significantly and a freeze on the building of new property developments.
But this is now changing. The beauty of the area and the moderate prices have boosted the demand, especially on the part of foreign buyers. New developments are being built to meet the foreign client requirements who looks for newly-built luxury units in an excellent location.
Sonneil offers a reliable, transparent and efficient advisory service as well as over 3,000 properties.
What about you? Do not think it twice and take advantage of this opportunity!
One of the conclusions drawn from the presentation on international marketing challenges given by Alfredo Millá, Sonneil’s CEO (www.sonneil.com) at the last Barcelona Meeting Point in Barcelona, is that buyers coming from the major countries purchasing second homes in Spain are buying more than in the pre-recession period. Especially Northern countries, which have increased their volume of purchases by 450%, compared to the year 2006, followed by Belgians, 240% and French, 54%. All that according to the data provided by the Land and Mercantile Registrars Association of Spain’s Statistics Reports.
However, the main market, UK, has remained slack in the last few years. After the market “collapse” during the period from 2007 to 2009, UK market is picking up again now in 2014, although it is still far from reaching the pre-recession figures.
It is shown in greater detail in the chart below:
Source: own formulation on data from Land and Mercantile Registrars Association of Spain’s Statistics Yearbooks
British clients achieved 38% share of the foreign market in Spain. They stand for 15% now.
Source: own formulation on data from Land and Mercantile Registrars Association of Spain’s Statistics Yearbooks
Nevertheless, according to the research carried out by Sonneil, there are some hopeful signs. British market begins to rebound in 2014. Its weight on the total amount of foreign purchases is growing back again and the macro-economic indicators are positive after some years of decrease and stagnation.
These are the main aspects pointed out by Sonneil:
According to UK’s ONS (Office of National Statistics) The percentage of unemployed people in the UK has fallen from 2.7 million in 2011 to be slightly less than 1.9 million today, close to reaching 1.7 million as in the period from 2006 to 2007.
The current Exchange Rate is around 1.27, far from the parity achieved in 2008, the collapse date.
According to ONS UK’s GDP should grow by 2.8% and will approach the pre-recession period. In fact, the growth rate in the first three quarters of 2014 reaches 2.5%. The following chart shows the development.
Source: Sonneil’s formulation on data from Office of National Statistics UK
To sum it up, the second home market in Spain greatly depends on UK’s clients, in fact, due to its great weight on the market, it will mean a true path out of the coastal properties crisis in Spain. The amount of sales stills remains below the ones of the days of wine and roses, but it seems that the recovery from the crisis is clearly coming.
Buying property in Spain is always a good investment, especially now. The favourable currency exchange rate and the fact that prices have hit rock-bottom make this moment the perfect opportunity to make that idea prowling around your mind come true. Now it is a great time to benefit from the exchange rate. If you buy in UK Pounds, you will get best value for money.
However, it is important to bear in mind that buying a home where the sun always shines involves certain expenses which are listed below:
VAT: only for newly-built Properties. 10% out of the value of the property
ITP: Payment of property transfer tax, for 2nd hand Properties. This percentage varies from community to community ranging from 6% to 10%
Notary fees (ca. 1% out of the value of the property)
Registration in the Real Estate Register (ca. 1% out of the value of the property)
Stamp Duty (it varies from community to community ranging from 0.5% to 1.5%)
Also, financing is now much more attractive and advantageous. If you are thinking about taking out a mortgage, Sonneil recommends hiring the services of a broker. He will do the hard work for you. He will consider all the possibilities offered by the Spanish banks and will look for the best conditions and the maximum possible funding. He will also help you with the paperwork, all that at a small price. Nowadays, non-resident citizens can get up to 80% of the property price. Signing a mortgage implies some extra expenses including valuation of the property (ca. €500, though variable), mortgage deeds (ca. 1%) and notary fees (ca. 1%).
All in all, you will need ca. 15% in addition to the price of the property in order to buy your home in Spain. You need to take into account that you can also:
Benefit from the currency exchange rate: there are agencies which are responsible for ensuring the value for money by purchasing foreign currency to take advantage of the currency rate and not to miss the opportunity whenever you buy. Sonneil works with reputable professionals. Ask us 🙂
Apply for a mortgage loan of up to 80%: this means that you will need ca. 35% of your budget cash.
See the best investment opportunities in Spain at Sonneil.com
Antonio Verdonces Vivancos from My Lawyer in Spain has collaborated with us and written this clear article about the UK referendum and the possible Brexit consequences. As this might be an issue you could be worried about regarding your buying plans in Spain. This article can surely dispel some of the fears and questions you might have.
Should you be worried about Brexit consequences?
Some prospective investors may have concerns about how and when the result of a Brexit could affect them or their investment. Along past years, buyers of many other nationalities have bought properties in Spain as holiday homes or for their retirement. It should be noted that buyers from countries such as Germany, Sweden, Denmark, Belgium, Netherlands, France, Russia and others have made the market much more stable and wider.
Realistically would a positive vote to exit the EU affect a homeowner or a prospective buyer?
Exchange Rate between GBP and Euro
Pound Sterling exchange rate decreased after Scotland was given a referendum on whether it would remain within the United Kingdom, as the stability of the UK looked uncertain. This is what we are likely to see transpire now. As uncertainty unfolds on Britain’s decision whether they should remain in the EU the Pound is likely to decrease as markets react negatively to uncertainty.
The most realistic scenario reported by Open Europe tells us that a Brexit is a more finely balanced calculation. If economic growth were to continue after the exit, the Pound and Euro exchange rates could regain strength.
If Britain left the EU they could potentially negotiate what has been described as an “amicable divorce”. They could retain strong trading links with the remaining EU nations. In fact, the UK is (and will continue being) a member of the European Economic Area, and this gives the UK: • Equal access to the single market; • Leaves Briton’s free to live, work and study in the 30 EEA states. • Like Norway, the UK would be free from EU rules on Agriculture, Fisheries, Justice and Home Affairs.
Furthermore, remaining a part of the EEA leaves options to negotiate a comprehensive Free Trade Agreement with the EU. That would allow the UK not only more freedom to provide financial services but also to have more say over how rules and standards are implemented.
This exact position is held by Norway; not belonging to Euro zone or the EU, but being part of EEA. We all know many cases of Norwegian citizens buying properties, enjoying holidays and retirement, and paying taxes in sunny Spain.
We should not forget that there is also the example of Switzerland; a country whom is not a member of the EU nor the EEA, but is a part of the single market by negotiating trade treaties on a sector by sector basis. Swiss nationals also have the right to live and work in the UK as other EEA nationals. Surprisingly, Switzerland is a member of the Schengen Treaty. Nonetheless, as the country voted to restrict free entrance for EU citizens in 2014, its role will probably be revised.
In summary, I believe the current exchange rate volatility is more of a concern when buying a property in Spain rather than the future status of Britons living in Spain or the EU. In short term, there are means to mitigate the effect of a weaker Sterling and, at the same time, other aspects such as an attractive price, right location or each one´s own lifestyle and plans are also very important factors to be considered.