The British have voted to leave the European Union. How does this affect the Spanish property market and British owners of property in Spain?
I never expected the UK to vote out of Europe. In reality it was an English and Welsh decision, as the Scots and Northern Irish voted to remain. It was also a senior decision, as the young voted overwhelmingly to stay (and they have to live longer with the consequences). I suspect this is the beginning of the end of the United Kingdom as a union.
Despite claims from Brexiteers of “taking back control” much now depends on the line the EU takes. If they take a hard line with the UK “pour encourager les autres” and head off a domino effect that brings down the EU, then the English are in for a nasty shock. The early signs are not good.
The President of the EU Parliament, Martin Schulz, said today “The chain reaction being celebrated everywhere now by Eurosceptics won’t happen,” adding that the EU was the world’s biggest single market and “Britain has just cut its ties with that market. That’ll have consequences, and I don’t believe other countries will be encouraged to follow that dangerous path.” Other big fish in the EU have made similar noises. The EU has good reason to take a hard line.
The pound is getting hammered, as is the stock market. Political instability is a certainty, a British recession is now more likely, UK house prices may well fall, but beyond that nobody knows where this leads. All I know for sure is that we are looking at years of uncertainty until the new order is established.
A weak pound, plus the uncertainty about what comes next, will undermine British demand for property in Spain, for the reasons I explained in this article: UK EU-referendum implications for Spanish property market
British demand has been growing strongly since 2013, but I expect we will now see a big reversal in that trend. This will have a negative impact on the markets where British demand is dominant, namely Alicante (Costa Blanca) and Malaga (Costa del Sol), and to a lesser extent the Balearics, The Canaries, and Murcia. Thanks to this Brexit vote, there will just be fewer British buyers about.
The following chart makes clear how British demand is driven by the strength of the pound. When the pound goes up against the euro, British acquisitions inscribed in the property registry rise with a delay of around two quarters. Now we have a weak pound plus the dramatic situation of a Brexit, so falling sales in coming quarters are almost a given.
It won’t be good for British vendors either. They now have a smaller pool in which to find a buyer. Price expectations may have to adjust even further down.
British expats in Spain will now be in limbo until the new order is established. That could take years, and in that period I expect to see more British expats leaving than arriving.
British owners of holiday-homes in Spain with no plans to sell won’t be affected much for now. A much bigger worry for them is what will happen to the UK, or whatever is left of it when the dust settles.
The coming years will be a good time for lawyers, as there will no be plenty of legal wrangling on many fronts.
I can’t help thinking this is also a good time to buy property in Dublin, as many international companies will now have good reason to make Ireland their European base.
It’s a historic day, and only time will tell if it was a good day for the UK. I fear not. But the world keeps turning, it’s a bank holiday here in Catalonia (where they are itching for their own referendum on staying in Spain), the sun is shining without a cloud in the sky, so I’m taking the family to the beach.
Wishing you all a great weekend.