As I predicted, Brexit is turning out to be bad news for the property market on the Costa del Sol, where the British have been the biggest group of buyers for many years.
I was in Marbella on Wednesday speaking at a conference on the property market organised by Tinsa (Spain’s leading appraisal company), HolaBank (part of CaixaBank, specialising in banking services for foreigners in Spain), and the Observatorio Inmobiliaria trade magazine, in collaboration with the Malaga Lawyer’s Association.
I gave a presentation on trends in foreign demand before and after Brexit, and had the chance to speak with a good number of lawyers and agents who work with foreign clients. Most told me that Brexit has had a significant negative impact on their business, which I already knew from a survey I have carried out in the last couple of weeks (more on that another day).
As you can see from the chart below, British demand is dominant in Malaga province (home to the Costa del Sol) as it has been for many years. Buyers from the UK were 36% of the the foreign market in Malaga province last year, more than double the next biggest group (Sweden), and 50% of the top six markets combined.
Since Brexit, and even in the months leading up to Brexit, British buyer interest (enquiries, visits, sales) has taken a dive. Most of the professionals I spoke to at the conference, and those I have surveyed by email, report that British demand has suffered a “moderate” or “big decline”, and I think when reliable figures are finally available we will see a big decline in British purchases, perhaps 50% or more, at least in the six months after Brexit. “You can forget the British market for the next year,” one agent told me. The general mood was sombre.
What’s driving the decline? A few people report client concerns about the status of Brits in Europe after EU exit, but more than anything it’s the fall in the pound that’s taking potential buyers out of the market. The next chart shows British purchases (all Spain) and the EURGBP exchange rate in recent quarters. I think we will soon see reported sales following the exchange rate down.
Some professionals I have spoken to say that Brexit has influenced clients from other countries, some of whom are also deciding to wait and see. Buyers will often jump on any excuse to avoid having to make a big decision, and uncertainty is nearly always bad for confidence in any market.
Looking on the bright side some agents report that British buyer interest stabilised in September after plunging in July and August in response to the original Brexit shock. “We have noticed an impact from the Brexit, not only on British demand but across other EU nationalities as well as the shockwaves of uncertainty touched other countries, however that now seems to be righting itself and figures are working steadily back up,” says Catriona Hogan, Marketing Director of Your Viva, one of the leading agents on the coast. “We are still getting a good level of interest but there is a certain reticence when it comes to closing the deal – with some people presumably holding off until they know what is going to happen and also holding to see if Sterling recuperates further.”
Unfortunately, the pound has lurched down again in October, so I wouldn’t be surprised if British interest is back on the slide. If you want to know where British buyer interest is heading, just look at the direction of the pound. And when I say interest I’m not talking about people dreaming of buying in Spain and making enquiries online, I’m talking about people who are serious about buying.
BRITISH VENDORS MORE FLEXIBLE
Most professionals I have surveyed around the country report more flexibility from British vendors, though perhaps not in the Balearics, where vendors tend to have more bargaining power than in other regions. With the pound now so weak, British vendors can afford to accept lower offers that don’t look so bad when changed into pounds.
There’s no escaping the fact that Brexit has been a negative shock for the property market in Malaga (Costa del Sol) and Alicante (Costa Blanca), where the British are by far the biggest group of buyers. No other nationality is big enough to compensate for a big drop in British buyers in those areas, if that is what has happened. Agents and developers on these coasts will have to refocus their strategies on winning market share through brand building, as rising with the tide is no longer an option until the pound stages a recovery. And I suspect a lot of small players might be put out of business.
The day after the referendum I wrote in my article Brexit implications for Spanish property market that “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.” I’m sad to say I was right.
MARBELLA TV REPORT ON THE CONFERENCE (IN SPANISH)