The Conservative party under Boris Johnson won a thumping parliamentary majority in yesterday’s General Election, which is probably good news for the British segment of the Spanish property market.
As regular readers will know, the British are by far the biggest group of foreign buyers of property in Spain, as illustrated by this chart.
British demand for property in Spain tends to rise and fall with our national fortunes, and the government obviously plays a big role in how well things go. So how might this election result affect British demand in Spain? My view is that a big Conservative majority in the UK will be a tailwind for British demand and the holiday-home market on the Spanish coast for the following reasons:
- Whatever is good for the British economy tends to be good for the kind of people who can afford to buy a home in Spain.
- All the financial markets (stocks, bonds, forex) have welcomed the news, which means they think the result will be good for the British economy.
- A stable Conservative government for the next five years removes some of the uncertainty that has been undermining the British economy since the Brexit referendum.
- Boris Johnson’s majority is big enough for him to ignore the hard-core brexiteers, in his party and go for a softer Brexit if he chooses – an option that one would expect to avoid significant economic damage in the short-term.
- By the same token, though this result means that Brexit is guaranteed, Johnson’s strong position means he can be more generous on questions like freedom of movement and expat rights, which have been worrying people since the referendum.
- The uncertainty surrounding Brexit has put a lot of plans on hold, and this result at least makes Brexit a certainty, which might be enough for the more intrepid to dust off their plans and get on with their projects in Spain.
- The Pound has jumped back up to around 1.20 GBPEUR on the election result, the highest level since late 2016, giving British buyers and owners bigger budgets in Spain. It might be a good time to buy Euro.
What are the potential headwinds resulting from the election result? It’s possible that an emboldened Johnson miscalculates on Europe and ends up blundering into a no-deal hard Brexit that would be traumatic for the British economy, at least in the short to medium term, and restrict British freedom of movement in Europe. That would all be very bad for British demand and some segments of the Spanish property market.
But as I argue above, I think a soft Brexit is more likely in the light of the election because Johnson now has a stronger hand in his own party, and more room to maneuver. Johnson may have manipulated people over Brexit to get into power, but now he’s got what he wants, and is no longer a prisoner of the ERG, I doubt he will risk the economy and his political future on a hard Brexit. I half expect Brexit in name only (BRINO), which is of course utter folly and worse then staying in, and though nobody ever talks about it, bad for the EU, because the British were a powerful force for good in the EU blocking French statist plans to dominate everything. Who will save the EU from the French now?
Whatever happens, let’s hope we can now find out what Brexit actually means before we get much older.