British demand for property in Spain is on the slide again despite recovering in 2018 from a post Brexit vote slump in 2017. 

The chart above illustrates the slump in demand around the Brexit referendum in late 2016 and the first three quarters of 2017, after years of strong growth. But surprisingly, British demand bounced back in 2018 with no other explanation other than Brexit fatigue. People may just have had enough of waiting for Brexit and got on with their lives and plans. Why the decline in 2019?  There’s nothing particularly British about it – most foreign markets show the same trend (next chart), suggesting that Spanish property is getting less attractive to foreign investors, perhaps because prices are higher and Spanish property is no longer the obvious bargain that it was.

As a result of the 17% decline in Q2, British demand has fallen to 13% of the foreign market (next chart), the lowest level since the registrars starting publishing figures for foreign demand broken down by nationality.

 

One factor that obviously influence British demand is the Pound-Euro exchange rate. The chart below shows a rough correlation between the two, with British demand rising with a strong Pound, and falling with a weak one, with a lag of one or two quarters. The Pound was trading as low as 1.08 in August, and was near or below 1.1 for most of Q3 to date, notwithstanding a recent rise to around 1.13 on hopes of an exit deal. If a weak Pound is a leading indicator of declining British demand for Spanish property, then we can expect the numbers to go down even more in Q3.

Though less dominant than they were, the British are still by far the biggest group of foreign nationals buying property in Spain, with 2,159 purchases recorded in Q2, a full 74% higher than the next biggest group – the French – as you can see from the following chart. So British demand might be falling, but it is still big compared to other countries.

Interestingly, according to Conor Wilde, boss of Found Valencia, an estate agency based in Valencia City, the number of British buyers looking for Spanish Golden Visa investments surged in Q2. “We’ve seen an increase in enquiries from the UK looking for country houses from €500,000 to €600,000 with a Golden Visa in mind,” explains Wilde. “We’ve also seen quite a lift in Golden Visa enquiries for city apartments,” so it looks like Brexit is creating a new segment of British clients who will join the Chinese, Russians, and buyers from the Gulf looking for an EU Golden Visa to allow them to move around freely in Europe. Note that the Spanish Golden Visa scheme is retroactive, so anyone who has spent €500,000 or more of their own funds on Spanish property can apply for a Golden Visa after Brexit if it becomes necessary, which I don’t think it will.

But Brexit is not only creating a new segment of British buyers interested in the Spanish Golden Visa scheme, it’s also encouraging an increasing number of British owners to bring forward their decision to sell up and leave Spain. “The big trend I see is a lot of UK people living here are selling,” says Wilde. “People are scared, they are worried, and they are just fed up with the Brexit nonsense at this stage.” Brexit, and a good exchange rate with the Pound near historical lows, mean that British vendors are probably quite motivated right now, and more likely than other vendors to give ground to do a deal.