The pound has taken a beating in the foreign exchange markets, and the outlook for poor old Sterling doesn’t look great for the rest of this year. This might stop the growth in British demand for Spanish property in it’s tracks.
As you can see from the chart above, the strength of the pound against the euro is one of the principal drivers of British demand for homes in Spain. When the pound goes up, British demand follows with a lag of about one or two quarters before it shows up in the property registry’s figures.
You can see how British demand peaked in Q3 last year, one quarter after the pound peaked against the euro. It then fell slightly on a quarterly basis as the pound started to slide, though year-on-year sales figures were still up dramatically. Since then the pound has dived on Brexit fears, and now slumped further after the vote confirmed the UK was leaving the EU, stunning pretty much everyone.
So what happens next to British demand? We will have to wait until the Registrars publish their Q2 figures in August, but I expect a big reversal of the growth trend we have seen since the start of 2013. If the vote had gone the other way, the pound would have surged, and there would have been a fresh stampede of British buyers into Spain. C’est la vie.
How far will demand fall? The Q2 figures might still be above 2,000 sales, but I won’t be surprise if the Q3 figures come in below 2,000, though anything above 1,000 sales/quarter would still leave the British in the lead as the biggest group of buyers (the French are the next biggest group with around 1,000 purchases per quarter). The toxic mix of a weak pound and Brexit uncertainty just can’t be good for British demand.
But if the pound recovers quickly as investors start to see a bright side for the UK outside the EU, which is always possible, then British second-home buyers will be back, Brexit or not. Spanish property prices are just too low to resist if the pound is strong, as you can see from this comment in the forum: Corvera golf prices down from €220,000 to €44,000.