Three and a half years ago, nearly 16 million Britons voted to remain in the European Union. However, on February 1, 2020, the United Kingdom ceased to be a member of the European Union.
In June 2016 at mundopisos.com we published an article with this information:
Brexit will hit the Spanish real estate sector
The current topic this June is the success of Brexit in the United Kingdom. This change, which will greatly affect the European Union, how will it be reflected in the real estate sector in Spain? The fall in the pound will affect the British economy, which is currently one of the countries that invests in the purchase of homes in Spain.
The devaluation of the pound and the farewell to the free movement of the British will reduce what is the main foreign demand for real estate in Spain. But how will this big change really affect real estate?
The ‘Brexit’ will impact in Spain on the sale of houses, especially on the coast
An exact effect of what the United Kingdom’s exit from the European Union will cause cannot yet be established, but in the short term this action will affect the real estate sector and specifically in coastal areas where British investment was higher. According to data from the College of Registrars, the British lead the purchase of foreign homes in Spain with 21% of acquisitions last year, well above other countries such as France (8%) and Germany (7%).
On the one hand, at a bureaucratic level, transactions can slow down and as Santiago Sánchez, managing partner of Engel & Völkers, explained, “If the United Kingdom leaves the EU, it will be much more difficult for the British to settle in Spain. They will have to request a residence and work permit, take out private health insurance, they will not know how the issue of inheritance and donations is left, etc. ”.
Although all the forecasts are negative, hope is not lost since for the British, Spain is an ideal country as a second home.
However, after almost 4 years, things have changed and the departure from the United Kingdom has occurred without even having all the ends tied and well tied.
From now on, the two parties must negotiate the terms of their future relationship as a result of their exit from the European single market. In the meantime, and until December 31st, the UK will continue to be bound by community structures and EU rules.
This geopolitical situation has created a context of maximum expectation in different fields of the economy, also in the Spanish real estate market and especially in the real estate of Mallorca
The British make up the most important foreign group in Spain in the real estate market, ahead of the Belgians, Germans and French.
However, British citizens are being forced to delay any decision to purchase real estate (especially second homes) until they know the real scope and economic effects of leaving the EU.
So much so, that since 2016 there has been a 20% drop in the number of British people who visit real estate fairs that take place in Spain.
It must be borne in mind that Spain has always been, due to its cost and quality of life, one of the favorite destinations for British migration, and for many of these UK subjects, the acquisition of a residence has been the option that have chosen to have a permanent foothold in Spain, thanks to the still competitive prices compared to other European countries.
Consequences of a Brexit without real estate agreements
A hard and no-deal Brexit would generate a depreciation of the pound against the euro and, consequently, the increase in the price of the residence for the British buyer.
This would translate into greater insecurity on the part of the future British residence buyer, which would lead to a drop in demand for this buyer profile.
When we talk about this profile, we are referring, above all, to people who come to Spain to retire, and who decide to buy a second home motivated by the Spanish dream of sun, beach and good gastronomy.
On the other hand, according to Alex Radford, founder of MyLawyerInSpain, if a British exit from the EU is generated without an agreement, certain segments of the residence market in Spain would experience a drop in the prices of their properties. This is the case of the Costa del Sol, the Levante and the two archipelagos.
Regarding the type of residence most affected, from Fiabci Spain they point out that it would be flats and single-family residences in urbanizations located near a beach. According to Ramón Riese, its president, these are residences valued, in most cases, at less than 300,000 euros.
If the British stop being Europeans, they could put their residences up for sale on the coast of Spain, increasing the stock of real estate. A hard Brexit and the fact of losing their European status and becoming non-EU citizens can lead them to sell their properties due to the improbability of obtaining a residence permit.
Another limitation that a hard Brexit could generate is linked to the future British financial and banking system, whose operation outside the European Union would cause problems in the granting of mortgages for the acquisition of real estate in Spain. Specifically, it would affect the granting of loans for mortgage purposes since English banks would not have authorization to work in European territory.
But even with a hard Brexit materializing, both Spain and the UK have strong trade and population relations. More than enough reasons for the two countries to sign bilateral pacts that reduce the consequences of the British exit from the European Union, including the effects in the real estate sector.