What impact has Brexit had on British demand for property in Spain in the five months since the referendum? The latest official figures show a substantial fall in British purchases, and a survey I recently carried out suggests a big overall drop in British buyer activity, especially in the top two destinations of the Costa del Sol and Costa Blanca.
The latest official figures from the Spanish Association of Land Registrars shows that British home purchases inscribed in the Land Registry fell by 16% (yoy) in the third quarter, the first decline in years (see chart below). The Brexit effect is clear, and I expect the Q4 figures to be even worse.
To get a better idea of the impact in the five months since the British voted to leave the EU I’ve carried out a survey of property professionals in different parts of Spain including estate agents, buying agents, lawyers, mortgage brokers and surveyors, working in Barcelona, the Costa Brava, Costa Blanca, Valencia, Costa del Sol, and the Balearics, answering questions about the market between July and October. I got 22 responses back in October and November answering questions on British buyer interest, sales, budgets, concerns, and vendor behaviour.
Despite variations between regions and price segments, the overall picture was one of a big decline in British buyer interest in the months leading up to, and just after the referendum. However, there are also some signs that British buyer interest might now have stabilised at a lower level, helped by a bit of a recovery in the pound, though it is still too early to tell.
The following table summarise the impact of Brexit on British demand in the first few months after the referendum in most of the foreign buyer destinations in Spain, based on the experience of the professionals surveyed. The results are subject to individual bias but the overall picture is clear.
|AREA||BRITISH MARKET INITIAL REACTION||OVERALL IMPACT|
|All Spain||Initial spike in enquiries then 30% fall||Big decline|
|Costa Brava||Initial spike then big fall in some cases||No change to big decline|
|Barcelona||20% increase||Moderate increase|
|Costa Blanca / Valencian||Declines of up to 80%, typically 50% to 60% down||Big decline|
|Murcia||Slight increase in enquiries||No change|
|Costa del Sol||Declines of up to 80%, but typically 20% to 30% down||Moderate to big decline|
|Balearics||Declines of up to 35%||Moderate to big decline|
Other market observations that came out of the survey were as follows:
- Agents reported agreed sales falling through in every region as a result of Brexit, but in areas like Barcelona buyers from other nationalities stepped in quickly to take the place of British clients who backed out of sales.
- In almost all cases the main reasons given for the decline in British buyers were 1) the decline in the pound and 2) the uncertainty generated by Brexit. That said, the weaker pound was the main reason. Had the pound gone up after Brexit, is it is likely that British demand would also have gone up.
- Many Britons have put their plans to buy a home on Spain on hold for the time being, but those who have not are now looking with lower budgets in Euro. It seems budgets have been hit hardest in the middle market, whilst some professionals working in upper market segments of the of the Costa del Sol, Balearics, and Catalonia, reported no change or even a slight increase in the Euro budgets of British clients. This could be because wealthy clients have more diversified sources of finance available to them.
- In most areas the Brexit effect was limited to the British market, but some professionals also reported noticing a spill over into other markets, as buyers from other nationalities decided to adopt a wait and see approach, or try and take advantage of the situation to make lower offers.
- British vendors are now more flexible on price in most areas, so buyers have an opportunity to negotiate a better price with British vendors, all thanks to Brexit.
I have also noticed that some Spanish property companies have decided to drastically scale back or even stop marketing in the UK, which is just another reflection of the Brexit impact.
How much will British demand shrink? It all depends on where the pound goes from here, but I’m bracing myself for a 50% decline or more if the pound doesn’t recover. How do I get that figure? Look at where sales were the last time the pound was this weak, as illustrated by the following chart.
Even if British demand falls 50% it would still be the biggest national segment in the foreign market. But a decline of that magnitude would certainly be felt by the rest of the market, putting pressure on vendors and prices in middle market areas of the Costa Blanca and Costa del Sol.
Will British demand ever return to the level it reached at the end of 2015, when it was still a long way below the boom-time level? I imagine so because Brexit has not changed fundamental preferences, just circumstances. But who know how long it will take. As one agent on the Costa del Sol said to me “you can forget about the British market for at least a year.”
Thanks to the following professionals for their help with this survey:
|Kevin Monger||Mortgages Direct|
|Karen Storms||Lucas Fox|
|Tom Maidment||Lucas Fox|
|Louisa Grundon||PCI Pals|
|Eloi Ruart||HFP Management|
|Gordon Turnbull||Blue Med|
|Pia Arrieta||Diana Morales|
|Adam Neale||Terra Meridiana|
|Barbara Wood||The Property Finders|
|Catriona Hogan||Your Viva|
|Oscar Ernstsen||Villas & Fincas|
|Ailse MacFarlane||Land Corp International|
|Campbell Ferguson||Survey Spain|
|Alex Reyners||Neverland Properties|
|Alastair Kinloch||Property Works|
|Pedro Pons||Pons Anglada|
|Conor Wilde||Found Valencia|
|Daniel Talavera||The Spanish Brick|
|Martin Rowen||Marow Chartered Surveyors|