Brexit implications for Spanish property market

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.

Brexit the pound, and british demand for property in spain

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.

SPI Member Comments

Thoughts on “Brexit implications for Spanish property market

  • everything will be fine in six months time; just not the time to be a small agent whose sole focus is the Uk market !! cash flow will be under pressure !!!

    Tomorrows vote in SPAIN could put us all in a ditch though !! at least the sun shines and life’s good !!

    • Mark, I don’t say you are wrong and I voted to stay in but let’s see some evidence for your doomsday scenario before you spread it.

      The FTSE100 actually closed on Friday 2% up on the week. Yes it’s a volatile market and the more representative FTSE250 was down but its hardly a crash compared to many we have seen. (And it was localised – banks, builders) Also, markets don’t like uncertainty, and that’s what we have. Uncertainty is different to demise.

      The UK is fifth largest economy in the world and this is not an entirely one sided negotiation (check out who buys huge numbers of German cars and the UK is France’s biggest export market for Champagne)

      The ‘world’s single biggest market’, I hear that a lot but its actually around 15% of the world market (half what is was when we joined) – there’s no reasons to presume we will lose all EU sales and there’s a lot of market elsewhere.

      Political comment from Brussels and member states – well let’s not forget this body is fighting for it’s life and the UK has never been very popular. Expect plenty of tough talking (and possible an EU determination to punish us as a warning to counter huge and growing anti-EU sentiment in other EU states is probably the biggest risk)

      But expect a lot of tough talk and a slightly different reality behind closed doors as deals are struck that domestic politicians can sell to voters.

      End of UK – you mean a Scottish exit. I don’t want to be trite but ‘so what’. A leaner fitter UK would be a good thing, and Scotland standing on it’s own two feet without the constant subsidy of the Barnet formula would also be a good thing. In the same way that the UK has never been fully aligned with the EU, for a long time Scotland has been distant from us.

      For sure there could be bumpy times ahead, and as London and Brighton (including a house rented out to young Polish people) property investor I can expect to be hit hard but we as a country are a long way from disaster.


      • I could not agree more,,
        The whole of European /British financiers have been painting a picture of doom and gloom, if they were so good at predictions, why didn’t they predict this and make billions? The global market is predictably unpredictable,,, let’s just wait and see what happens when the dust settles,,
        For too long too many professional politicians have been on the Brussels gravy train, perhaps now they will have to work for there money,,

      • Mark Stücklin says:

        Hi Nick, it’s not a doomsday scenario, in my opinion. I have to tell it as I see it, and I’m sad to say none of this looks like good news for my little corner of expertise, which is property in Spain. I really hope I’m wrong about everything, and will be the first to celebrate if I am.

        I don’t have the time and resources to do in-depth economic analysis of the big picture (nor the brain power, truth be told). I relly on the FT, Economist, Bloomberg et al for that picture. What I’ve read in the last few days in the media is far more worrying than my brief comments on the subject here. A lot of people and families are going to suffer as a consequence of all this, which is very sad. I don’t think Cameron or the Leave camp paused to wonder about the forces this might unleash, especially the unknown unknowns, of which there will be some big ones. Right now, a few days latter, I don’t know whether to laugh or cry about the whole thing. Will it all be okay in 6 months? I hope so. But the muppets leading the UK have been playing with fire, and there is no doubt that England’s reputation has been damaged by this. Let’s all hope for the best as it’s too late to do anything else.

    • Chris Nation says:

      I am very pleased to hear from rojoybago that ‘everything will be fine in six months time’. Will he please tell me the winner of the 3 o’clock at Newmarket this afternoon?

      This petition is a sad business. Certainly there are groups of people who feel that the result is unacceptable: Scots, N. Irelanders, Londoners, 18-25/30 year olds, graduates, Gibralterians – all these voted to remain by a significant margin.

      But a win is a win.

      But that’s the problem with a referendum. A friend reported that all of Wiltshire and Somerset voted Leave except the Mendip ward. Mendip includes the town of Frome, which is a sort of country outpost of arty and cosmopolitan Bath, and Glastonbury, which would like to be not only a member of the EU but of Cloud Cookoo Land, Atlantis and Camelot.

      Winner takes all.

      • FYI, There is no 3 o’clock @ Newmarket today , but could I suggest the appropriately titled Dubai Duty Free Finest Surprise European Breeders Fund Maiden – 3pm @ Curragh?

  • Chris Nation says:

    Mark has it right. Go to the beach.

    The wisacreing will go on and on and on but the result will not change, though I have to admit I feel I am in a bad dream and when I wake up I will find ‘Remain’ has won.

    The big shots at the top of the EU machine are bound to come out with hard-nosed comments. It’s their way of trying to head off the continental eurosceptics at the pass.

    This vote will take at least a generation to work through.

    Once upon a time there was a political benefit to the United Kingdom. There isn’t now. It’s more a cultural/emotional thing. Scotland will split. From Kirkwall to Coldstream they voted to ‘Remain’. It’s only a matter of time. Unlike the EU vote, it won’t make any material difference to England.

    In my days as a tour guide in UK I always made the point to my clients that UK was 5 countries, not 4. The vote by London to Remain confirms that.

    If your property (for sale) has ‘holiday’ somewhere in its reason for being, it is unlikely to sell to a Brit any time soon. There are other buyers, though I imagine everybody will be sitting on their hands for a bit.

    Yesterday the world was changed. Tomorrow’s Spanish election will change nothing, not even in Spain.

    • I would just like to echo the eloquent comments of both Chris and Anthony Coles. Interesting times ahead and already the EU overlords are shooting from the hip with their true feelings about the UK which were previously just thinly disguised. Something had to give and anyone thinking the EU had any hope of self-reform was deluding themselves. It was / is a lumbering behemoth which has changed beyond all recognition from it’s inception. Until the initial panic subsides, my intended purchase will be delayed, not least of all because my available fund are worth significantly less today! To sum up the feelings I hear on the Clapham Omnibus “Europe YES but EU NO!”

  • Chris Nation says:

    Quite right jonsey. UK could start another club with all the bits we like about Europe but non of M. C-J Junker’s U.S. of E. fixation. Not the E.E.A. which has the worst of both worlds, as I understand it (all the EU regs but no votes)

    EU countries could join as long as they played by the club’s rules….

    What shall we call it? The European Enterprise Consortium. And its theme song to be “You’ll Never Walk Alone.”

    OK. I’ll stop now because, as Cameron is reputed to have said, “Why should I do the hard stuff?”. Prince William (Seems a sensible fellow – needs a proper job while he’s in the queue to be King), Branson, Fergie (Sir A, not Prince Andrew’s ex) – there’s plenty of talent to do this with minimum input from politicians.

    • Mark Stücklin says:

      I’m relieved to say I didn’t see this picked up in the Spanish media. Did you? Maybe I just didn’t look hard enough, but there’s a lot of competition out there for the front page. We live in interesting times….

  • The big question is whether the EU will budge on Freedom Of Movement of PEOPLE. Juncker and Tusk are taking a hard line but it was immigration that caused the BREXIT vot to Leave and the truth of the matter people who come to Spain to live are immigrants too.Can we have our cake and eat it. Absolutely essential that Freedom of movement of LABOUR and Change of Domicile are separated. If it’s to work they can but return to the countrty of domicile when their contract comes to an end .If a UK person has the money to buy a home and a State Pension pension maybe a private one and /or adequate savings to not become dependent on the Spanish state that person should satisfy sensible criteria to be able to change their Domicile and something the Spanish should welcome as it helps their economy. A constructive dialogue can solve these issues.

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