We are still in the midst of the uncertainty about Brexit and what the UK’s independence from the European Union will entail. In this post, we look at how Brexit could affect the Spanish real estate market and annuity investment.
On 23 June 2016, the United Kingdom voted, with a margin of 1.9%, to end its membership in the European Union. In effect, 17.4 million Britons voted for the exit.
As a result, significant changes are coming within the European economy – so how will it affect the housing market?
The expected fall in the pound, which will affect the British economy, will, in rebound, also affect Spain. Spain is currently one of the most popular countries for UK citizens looking for second home purchases or as a permanent retirement location.
This, and the end of the free movement of the British in the EU will highly likely reduce the demand for real estate in Spain.
However, having said that, after the 2016 vote, there was a notable increase in British tourists; and the purchase of second residences in Spain also increased.
Presumably, Brexit will mainly affect coastal areas where British investment is highest. The most requested places are typically the Costa Blanca, Balearic Islands, Canary Islands, and the Costa del Sol.
The British lead the buying of housing in Spain with 21% of last year’s acquisitions, well above other countries including France with 8%, and Germany with 7% According to data from the land registry.
When the UK leaves the EU, the British will find it more challenging to settle in other EU countries as they will have to apply for a residency permit, permission to work, and take out private health insurance.
Nonetheless, this is unlikely to put all buyers off, as the EU offers some excellent benefits for investment.
There are many reasons Spain is attractive to the British, including the lower price of housing in Spain, the Spanish gastronomy, and of course, the excellent climate.
In recent years, the real estate sector in Spain has recovered from the disastrous economic crash of 2008, and numerous UK residents have taken advantage of this situation to invest in the country. Many British investors see the market growth as a business opportunity, and the cities most requested by these wanting to make real estate investments are Madrid and Barcelona.
On the other hand, there are also British individuals and families who choose to apply for a mortgage to gain access to a home. When Brexit is applied, it is important to know that the conditions of a mortgage acquired in Spain will not be changed in any way.
Although there are still many details that need to be decided in this matter, the points mentioned above are those that will most affect the Spanish real estate market.
But according to Fotocasa’s head of studies, “The Brexit effect in Spain will be limited.”
With potentially less UK home buyers in Spain, other foreign buyers and tourists may take their place. Brexit will, therefore, possibly help to further diversify tourism in Spain attracted by the benefits of the country. However, if other nationalities spend as much when abroad as the party-loving Brits, remains to be seen.