Since the referendum deciding the UK’s future in the EU was announced in February 2016, much has been conjected and forecast regarding Brexit and British buyers in Spain. Well over four years later and with the UK formally outside the EU, many aspects are now clear. There are others, however, that the Spanish and British authorities have yet to agree on. In this article, we look at all aspects of Brexit affecting British nationals buying property in Spain.
The current status of the UK and Spain
When the UK formally left the EU on 1 February this year, a transition period started and the Withdrawal Agreement came into play.
What is the transition period?
The transition period lasts until 31 December 2020. During this time, British citizens have broadly the same rights in the EU as they did before 1 February. In a nutshell, nothing changes until 1 January 2021.
What is the Withdrawal Agreement?
This is a special type of agreement regarding British citizens in Spain. Under it, if they register as resident in Spain before 31 December, they may continue to live, work (or study) in Spain with the same rights as EU citizen from 1 January 2021 onwards.
Buying property in Spain post-Brexit
Spanish property law does not distinguish between nationalities of foreign buyers, so in this respect Brexit changes nothing for British buyers in Spain.
Does Brexit mean the British can’t buy property in Spain?
No, not at all. All foreigners are allowed to buy property in Spain regardless of their nationality. In fact, the property market in some parts of Spain, e.g. the Costa del Sol and Costa Blanca, relies heavily on foreign buyers. Non-Spanish buyers represent around 12% of the market in Spain every year, but this percentage rises to 27.76% in Malaga province (figures for Q1 2020 from the Property Registry). It is even higher in Alicante province.
Bottom line? In terms of Spanish law regarding your purchase, it makes no difference whether you’re British, American, French or Swiss.
Has Brexit impacted the property market?
Since the UK announced its decision to leave the EU, there has been a slight drop in the number of British buyers as can be seen in the graphic below. However, the same graph shows that purchases by most other nationalities has remained steady over the last four years.
Covid-19 has had a more widespread effect on the Spanish property market than Brexit, although its impact has generally been far less than expected. This is the case on the Costa del Sol where sales of property in May were over half those registered a year earlier.
Has Brexit affected property prices?
According to the Association of Property Registrars, Spanish property prices went up by 4% in Q1 this year compared to the previous quarter and by 6.96% in the year. Since they bottomed out in Q4 2014 (prior to Brexit), they have gone up by 40.85%. These figures suggest that Brexit has had no effect on prices at all.
Has Brexit made it more expensive to buy property in Spain?
Exchange rates are notoriously volatile and susceptible to changes in politics and uncertainty. While it is true that the pound sterling has been weaker since the Brexit referendum result, the future performance of its rate against the euro is unknown (as is always the case with currency). Some analysts argue that since the outcome is already known (i.e. Britain has left the EU), exchange rates will fluctuate very little.
However, regardless of future variations, buying a property in a different currency entails careful planning to ensure you get the best exchange rate available whether you are buying in Spain, the US or Switzerland, for example.
Will I be able to get a mortgage post-Brexit?
As a non-resident and provided that you can provide proof of a sound credit record, you may take out a mortgage in Spain, usually for up to 70% of the loan-to-value (LTV). There is the possibility that from 2021, British buyers may only be eligible for a lower LTV (60-65%) on a par with other non-EU applicants. However, Spanish banks regularly approve 70% LTV for Swiss nationals so a lower LTV for the British seems unlikely.
What about property purchase taxes?
Everyone (Spanish or foreign) who buys a property in Spain is liable for the same taxes, which amount to between 10% and 12% of the purchase price. This has not changed because of Brexit (and there are no plans to change it).
Will I be able to let my Spanish property after 31 December this year?
As is the case with purchases, foreigners are freely permitted to let their properties in Spain for holidays and long-term rentals. This has not changed since Brexit and is not set to change.
What about rental income tax?
Once the transition period ends on 31 December 2020, British property owners in Spain will probably pay slightly higher tax on rental income. EU citizens (including the Spanish themselves) pay 19% while non-EU pay 24%. Non-EU owners cannot deduct expenses from their tax bill either. However, this aspect of Spanish law is currently being contested in the European courts as unfair discrimination.
Staying and living in Spain
At the time of writing (early July 2020), the British and Spanish governments had come to no firm decision regarding visas for British nationals travelling to Spain. It is generally believed that the two countries will work towards an agreement that favours both. Spain is particularly keen to attract British tourists and property buyers – some 17 million Britons visit Spain every year and between 800,000 and 1 million own a home there.
Will I be able to come and go to Spain freely?
There are no plans to curb movement on British nationals to Spain. In fact, that would go against Spanish interests particularly at a time like this when Spain needs tourists more than ever. From 1 January 2021, however, there may be limitations on how long you can stay in Spain at a time.
Will I need a visa to come to Spain?
Analysts generally agree that Spain (and probably most other EU countries) will not require visas for British nationals. It seems likely that the UK will join the group of countries (such as the US and Canada) whose nationals don’t need a visa to enter Spain.
Will I be able to stay as long as I like in Spain?
Non-EU visitors to Spain may currently stay for up to 90 days within 6 months without the need for a visa. This scenario appears likely for British visitors too. If you wish to stay for longer, you will probably have to apply for a residence visa.
Can I get a residence visa if I buy property?
Non-EU property buyers have the chance to apply for a non-lucrative visa (often known as the Golden Visa) that includes residence permits for the buyer and their dependents in exchange for making an investment of at least €500,000 in property. One of the big advantages of this residence permit is that you do not actually have to live in Spain or pay tax there, although you do need to visit at least once a year if you want to renew it.
Can I get a residence visa if I buy property before the end of the year?
Under the Withdrawal Agreement, all British citizens who register as resident in Spain before 31 December has the right to live in the country with the same rights as EU citizens. If you’re planning to move to Spain, now would be a good time to do it!
The process is straightforward, but you should act quickly since you only have until the end of the year. Once you are in Spain full time, you need to apply for a residency card (known as the Tarjeta de Identidad de Extranjero (TIE)) from the Spanish authorities in Malaga city. If you get your TIE before 31 December, you will have the same rights in Spain as other EU citizens.
What else has not changed about buying in Spain since Brexit?
As we have seen, Brexit has changed very little for British nationals when it comes to buying property in Spain and we fully expect this to continue. Furthermore, Spain offers some compelling reasons to buy property, steady constants that are completely unaffected by Brexit. They include:
Great weather – Spain generally offers year-round sunshine and warm temperatures. In some locations such as the Costa del Sol, you can expect 320 guaranteed days of sunshine a year, Brexit or no Brexit!
Welcoming people – the Spaniards are generally warm and friendly, and on the Costas and islands, happy to speak English to communicate.
Healthcare – Spain offers premium healthcare services, both in the public and private sectors.
Communications – Spanish airports offer an excellent network of flights connecting key holiday home and relocation destinations to dozens of European capitals and cities.
High-tech – internet speed and availability are world-class in Spain and many areas offer fibre-optic connection, an important consideration for staying in touch with family and friends and if you need to work from home.
Exemplary behaviour – during one of the toughest lockdowns in the world and the consequent easing out process, the Spanish has shown themselves to be aware and attentive when it comes to COVID-19 regulations. The entire country has taken health and hygiene measures fully on board and we think currently offers one of the safest experiences anywhere. And talking of Covid-19, you might also be interested in my recent article ‘How has COVID-19 impacted the Costa del Sol property market so far?‘