British market shows strain of ‘real Brexit’

British demand for property in Spain

The British market has been losing ground fast in 2021, partly due to ‘real Brexit’ that kicked in at the start of the year.

The British have long been the biggest group of foreign buyers of property in Spain. Back in 2007 they were 43% of the foreign market, and as recently as 2015 they had a market share of close to 25%, according to figures from the Association of Spanish Land Registrars. But in the second quarter of this year that market share dropped to 9.5% (see chart above), just a nose ahead of the Germans on 9.04%. This year the British market share has dropped to its lowest level since records began.

There were 1,296 Spanish home sales involving a British buyer inscribed in the land registry in Q2, just ahead of the Germans on 1,234 acquisitions (see next chart). So British buyers are still the biggest group, but only just. Not long ago they were twice as big as the next biggest group, which at that time was the French.

British demand for property in Spain

The next chart shows quarterly UK demand going back to 2014, with the blue columns representing sales (left axis), and the annualised percentage change in red (right axis). You can clearly see the downward trend since 2016 just before the referendum, and the impact of the pandemic since Q2 last year. Annualised sales increased in Q2 this year, but only in comparison to sales during the lockdown period last year.

British demand for property in Spain

If you compare the year-on-year change in Q2 with other countries, you can see in the next chart that British demand increased less than all other countries with the exception of China, which was held back by its own unique headwinds. 

British demand for property in Spain

Foreign demand from all markets has been impaired by the pandemic, but why is the British market recovering so feebly compared to other countries like France and Germany? 

In the past, the strength of the pound against the euro has influenced demand, with sales rising and falling with the pound and British purchasing power, as you can see from the next chart. Sales lag the exchange rate by a quarter or two, but there is no reason to think the pound, which has been appreciating against the euro in the last year, is to blame for the comparative weakness of British demand this year.

British demand for property in Spain

‘Real Brexit’, which kicked in at the start of this year, and limits British freedom of life in the EU, is the obvious explanation. British buyers now face more obstacles than buyers from other European markets like France, Germany, Sweden, Ireland and Belgium. I assume the UK will continue to lose market share in the face of the Brexit headwind for the rest of the year at least.

But Brexit isn’t the only factor. After decades of buying much more property in Spain than any other nationality, perhaps the British have come to the conclusion it just isn’t worth it given the high taxes and transaction costs involved. There are also demographics to consider, and a new tax on second-home owners the UK government introduced a few years back (if I am not wrong about that). The British love affair with Spanish property couldn’t go on forever. It was always bound to sour at some point. 

But despite everything, the British are still the biggest group of foreign buyers, for now. I also bet they are by far the biggest group of sellers, but there is no data on that.

SPI Member Comments

Thoughts on “British market shows strain of ‘real Brexit’

  • Re: “ There are also demographics to consider, and a new tax on second-home owners the UK government introduced a few years back (if I am not wrong about that).”

    A new tax on second-homes only applies to second properties bought in the UK.

  • In years past it was said many Brits buying in Spain left their common sense behind in the UK. Buying motives often driven by heart not head, and endorsed by Homes in the Sun type TV programmes.
    Maybe the pandemic has given an enforced time to think about our priorities. Also maybe buyers are now using their common sense more. Property buying in Spain is a means to lose money, it is far from being a lucrative investment. Even allowing for the second home tax in UK, buying a second property in UK makes far more sense, from a investment view.
    £100,000 invested in UK 10 years ago, would now be worthy at least £150,000. That same £100,000 invested in Spain 10 years ago, would now be worth – actually anyone’s guess due to lack of transparency in Spain but in my opinion it would be a loss.
    Apart from anything else ITP at 10% on all property purchases, estate agent fees when selling of about 5%, legal fees etc then property price needs to increase by almost 20%, just to break even.
    Must admit to some bias. I purchased a property in 2003 for €380,000 and sold it in 2020 for €265,000. And I had to pay all the selling costs out of the sale price as well. I was on the market for quite some time, and eventual buyers were Dutch. Very little British interest.
    So yes I think the British love affair with second homes in Spain is on the wane.
    The general economic situation in Spain is not good. Unemployent at 18%, so hardly any domestic market, heavy taxation on properties, with no sign of property price increases even on the far horizon.
    Buy at your own peril.

    • My situation is very similar and although I’ve not put the property on the market I would also expect to sell for less than I paid in 2003. In case you’re wondering I’m on a golf course less than 3 minutes by car from the center of Marbella so not exactly in the worst part of the property market.

      The deal breaker for me is the 90 days in 180 which applies not just to Spain but the entire Shengen area so the days of over wintering (October to March) in Spain are no longer available to me. So unless you want to obtain Residencia, which I don’t, and nothing changes in the next couple of years then I also will be selling up.

      Bottom line, unless you’re intending to retire and gain residency then the attraction of Spain or other European destinations for property purchase is greatly diminished in my view.

  • The British are very restricted now they have lost EU freedom of movement. Obtaining residency in an EU state is horrendously complicated now compared to how it was before with good old freedom of movement and of course the British are restricted to the 90/180 day Schengen rules which are very strictly enforced – I noticed they were having their passports stamped at Malaga, it was like something from a bygone era!

    But this is not a problem for the Spanish property market because other nationalities have taken their place. In my area, as the British sold up and left, Dutch, Belgian, French nationals bought their properties and quite quickly.

    I’m noticing a lot more Polish nationals are heading to Spain too.

  • Needing a new Visa to cope with the 3-6 month issue. D type visa are allowable in EU . Portugal has one and France issuing one where you can use your UK travel insurance if longer than th 90 days with an EHIC. Czech Republic issuing one. A lot of lobbying neede both in UK to get justice for 2nd home owners left out in the WA and in Spain by owners and property agents and lawyers actin for them to get a new visa in Spain that is. Readily accessible!

    • I disagree. It is arrogant and entitled to expect the EU to change their rules because you (the British) decided to leave the EU.

      Your government negotiated a lousy deal but that’s not our problem is it. You had years to lobby your dangerously useless government in the lead up to the withdrawal agreement and get concessions but from what I can see, you all just sat back and let your government opt for the hardest possible Brexit and then you voted them back into power.

      I don’t think there is any appetite to change anything on our side.

        • I do have sympathy for the 48% Remain voters, it must be dreadful to have part of your citizenship removed against your will. Based on the narrow result, the UK government should have stayed in the single market or opted for a softer Brexit but instead they went for a hard Brexit which is one step away from no deal, hence your loss of freedom of movement.

          You can’t expect us to change anything to accommodate you after five years of bitter negotiations and who would pay for implementing these changes?

          I think Remainers should have shouted much louder and protested far more about their lost citizenship/opportunities. You have left it too late.

          • JM G It’s not a matter in the hands of the British Government. It’s down to Madrid . The Spanish alone can change this if they want to allow us to stay longer than 90 days with a visa in the Schengen D category that has been done by other EU countries . You spurt out the same things without reading anything or getting your facts right. I have opinions why the Spanish are slow to do the same but whilst it arises because we now do not have free movement in the EU and not in the Schengen area. we cannot change this ourselves outside EU EEA and Schengen nor can the EU.

            • It’s in the hands of the UK government to level the playing field and change the your rules to 90/180.

              Why should the Spanish allow you to stay for more than 90 days? What makes you think you are entitled to be an exception to that rule? You sound pretty desperate to be honest.

              Like I said, you chose to put yourselves in this situation by voting to leave the EU and hey, I’m an EU national with freedom of movement so it doesn’t affect me.

  • I am not sure if you are an owner in Spain. True that we are as visitors allowed 90 days in Spain and 90 in 180 on a rolling basis in Schengen Area. But. Individual EU countries can issue D category visas where you can exceed 90 days and these are available to Britons. As have so far Portugal France and Czech Republic in the process of doing. There has been a rumour Spain Spain considering one too as yet unconfirmed. But as you know Non Resident owners whilst in the past have been required to register after 90 days frequently didn’t but also were allowed to stay up to 182 days in the tax year not fiscally resident and annually filed Modelo210 so were legally registered there. So JMC you don’t have it quite right there is not a problem with the EU or Brexit in solving this. It simply needs the Spanish Government to decide whether they want us and will help. A visa would be popular and would also rekindle interest from Britons who buy often apartments for personal use part of the year whilst preferring to spend the greater part of the year in their home country particularly in case they may need care in later years that Is not so readily available or suitable for them in Spain

  • Indeed as we ourselves allow People from Spain to stay here an uninterrupted 6 months without any visa so when it is likely they will issue one it will be charged for no doubt. So we are not asking for much are we and it looks as if they would be the main beneficiaries because not so many Brits will be wanting Residence under the new rules as it can require a lot of capital that would be at risk from Inheritance tax on their family beneficiaries in the event they die in Spain resident.

    • I own property in Spain but I am not affected by your problem because I am an EU national.

      You didn’t have this problem before you Brexited did you?

      You best solution would be to lobby your government to change your rules to 90/180 and then you will have a level playing field, job done.

      The UK is responsible for the mess you are in, not EU or Spain.

  • reesj665@gmail.com says:

    What are the taxes and costs for a UK resident buying a holiday home in Spain (Cantabria) and have these changed since Brexit? I see someone mentions ITP – is this new and if not has it increased since Brexit?

    • I don’t think any Spanish taxes have changed as a result of Brexit.
      ITP is the property transfer tax; vaguely similar to Stamp Duty in UK. This is not new, and has not changed due to Brexit. Personally it is my belief that the rate has increased to offset lower proper prices. The rate is set by the regional governments not central government, but a quick Google shows the rate in Cantabria is 10% of the whole purchase price, paid by the buyer.

  • JMG – what mess is the UK in exactly.
    Last I knew we had almost full employment, over 1 million job vacancies, house prices rising, and a full COVID vaccine rollout, with boosters now being given.
    This topic is about why Brits no longer buy property in Spain. My original post stated my opinion was due to the stagnant, indeed ever deteriorating Spanish property market. Between 2003 and 2020 i LOST 30% on the value of a house I owned in Spain. During that same period, in my region of England prices ROSE by 74%. To give that more recent perspective, between 2010 and 2015 almost every country in the OECD saw residential property prices rise, in the case of the UK by 30%. Except for Spain where they fell by 10%. If it gives you any comfort, Romania was nearly as bad as Spain.
    I repeat my previous stated opinion. Why would Brits, or Germans, or Swedes, or whoever I buy Spanish property knowing it will reduce in value.
    I think you need to look close to home for the causes. It most certainly is not Brexit,

  • Politics in Spain not helping. They have ruined their property market with taxes and. corrupt practices in the past has left scars! Some Spanish in work buy property renting out to pay the mortgage so in 20 years it’s debt free and hopefully continuing rents top up their pensions even if it’s not ever worth any more!

  • JMG
    No, I am just waiting a factual response from you, not diatribe.
    And before you, like the vast majority of people, start saying the UK shortage of HGV drivers is a direct effect of Brexit, you might want to remove your blinkers and read following . Daily Mail might not be to your liking, but facts are facts

    https://www.bloomberg.com/news/articles/2021-08-02/a-trucking-crisis-has-the-u-s-looking-for-more-drivers-abroad
    https://www.dailymail.co.uk/news/article-9946817/Now-lorry-driver-shortage-hits-Europe-Germany-France-Spain-suffer-shortfall-400-000.html

    And none of this changes the fact that Spain has 18% unemployment, a totally stagnant domestic property market and is now of no interest at all to foreign buyers

  • We used to have Britons on Spanish Property Insight who liked to have a little pied a terre in Spain and we struggled sometimes getting one. When you get complete cynics like JMG who are so so selfish in their smug complacency it s very disheartening.. The majority of British owners did not vote for Brexit in any case when other European countries are bringing out new visas to get things going again all we need is co-operation not the sickening trash from JMG

    • I’m not British but I do pity people in your situation if they voted Remain. However, I am not responsible for your lost freedoms and opportunities, your government and your Leave voting compatriots are.

      I think you should manage your expectations regarding any immediate changes because your government are not trusted and are still threatening to renege on the NI protocol. The would make any changes very difficult politically.

      I have not found any information re individual EU states offering visas to the British allowing them to stay in Schengen for more than 90 days but I did find this:

      https://www.schengenvisainfo.com/news/brits-overstaying-eus-90-180-days-rule-to-face-penalties/

      I would not recommend overstaying in the Schengen area, the penalties are severe.

  • Crocodile tears from JMG. Since Brexit UK owners and visitors subject to rules as 3rd country but it’s up to each EU country to decide its own border measures. Really helpful information on : smart traveller.gov.au in the matter of EU bilateral wavers for 3rd countries. Also for France. France-visas.gov.fr This gives information about visa de longue sejour. 90 -365 days. For Portugal. Immigrant e.self.pt. This is a new extension visa that kicks in at 90 days. Spain has not offered one yet – this would be very welcome This information just to show that visas are available within the EU but it’s down to the member country as I explained to JMG who hopefully please posting something positive would be more welcome.!

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