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.
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.
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.
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.
‘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.