June 23, 2016 will be remembered as one of the most significant events in British history. A vote was held in which everyone of voting age in the UK could take part, to decide if the UK should leave or remain in the European Union. Well, you would know about the result, it is unlikely that anyone would be unaware of the outcome of the Brexit referendum.
Leave won by 52% to 48%. That was a massive victory indeed. In this article we discuss what this referendum means for British expats in the Eurozone and whether you should sell your overseas property in Europe.
First, let’s analyse the details of the voting in the referendum. The turnout was 71.8%, which was much higher than that seen in the general election of 2015. Over 30 million Britons voted. It was the highest turnout in a UK-wide vote since the general election of 1992.
The breakdown of the vote across the UK
England was very much in favour of Brexit, with 53.4% voting for Leave and only 46.6% for Remain. Wales was in favour of the Leave campaign as well. Leave got 52.5% of the vote in Wales and Remain just 47.5%.
The other regions of the UK, Scotland and Northern Ireland were strongly in favour of Remain. Scotland backed the Remain campaign by 62% to 38%. 55.8% in Northern Ireland favoured Remain and while only 44.2% voted Leave.
So, we have a Brexit. But what does Brexit really mean?
Brexit is a way of saying that the UK will leave the European Union, of which it has been a part of since 1973. The word “Brexit” literally means “British Exit”, so make no mistake, Britain has formally declared its intention to leave the European Union. Nobody can now have any doubt over that, whether one likes it or not.
What happens now that Brexit is done and dusted?
For the UK to leave the EU it has to first invoke an agreement known as the Article 50 of the Lisbon Treaty. The Article 50 will be invoked by outgoing Prime Minister David Cameron, who has indicated his desire to resign following the defeat of the Remain campaign which he led from the front, or by his successor.
Theresa May, the Home Secretary, is favoured by most supporters of the Conservative Party to be the next Prime Minister of the UK, even as Boris Johnson, the man who led the Leave campaign, has stepped aside from the prime ministerial race. Britain is most likely to have a new Prime Minister by October.
The Article 50 has never been tested as yet, so nobody really knows how the whole process of leaving the European Union would work. It is a long and elaborate process, one that would take up a lot of time.
Bureaucrats from both the UK and the European Union will need to get together and do a lot of work for the withdrawal agreement to be completed and to set up new terms of the relationship between Britain and the other member states of the European Union.
Until the UK leaves the EU, it will continue to abide my most European Union treaties and laws, but will not take part in any decision making process even as it negotiates its terms of withdrawal agreement and relationship with the organisation.
How will Brexit impact the lives of British Expats living in other European countries?
There are an estimated 2.2 million Britons living in EU member states, including 319,000 in Spain, 249,000 in Ireland, 171,000 in France, 99,600 in Germany, 66,000 in Italy and 73,000 in the Channel Islands. Refer to the pie chart given below for a complete breakdown of the British expat population in the European Union
Britain’s membership of the EU brings with it several benefits related to banking, tax, insurance, health care and travel. Rising income levels and cheap flight tickets have led to many Britons visiting Spain, Portugal, France, Greece and other countries in Europe, with many buying holiday homes in their favourite European destination.
Does the referendum of June 23 change all of that? How does it affect expats living in the European Union?
To be fair, none of the parties concerned really have a clue about what Brexit would really mean. Even those who spearheaded the Leave campaign really do not understand the true implications of Britain leaving the EU. Similarly, it is possible that those who campaigned for Remain have exaggerated the effects of the UK leaving the European Union.
So what does Brexit mean for expats, especially those with a property abroad? Here are some of the questions that Brexit raises for expats.
#1: Will it make travelling to my holiday home more difficult? Will expats be allowed to buy overseas properties like before?
No. You wouldn’t need a visa to visit France and other EU nations. It is very unlikely that Brexit would mean that British nationals will be made to feel less welcome in Spain, Portugal, France and Greece. Indeed, Britons should be able to move freely within popular destinations in the EU, just as always.
After all, Britons are the biggest spenders in these countries. There are more British tourists that visit these countries than those from any other country.
Britons are also the biggest buyers of overseas properties in these nations. So it is unlikely that any of the popular tourist destinations in Europe or overseas property hotspots would make it more difficult for Britons to travel to buy properties in their countries.
While it is true that a lot of countries such as France and Spain are angry with Britain for leaving the EU, putting any restrictions on British expats would be an example of cutting off your nose to spite your face.
After all, Britons are among the biggest buyers of property in Turkey and the United States which are not members of the EU and face no restrictions of any sort there. It is unlikely that British expats and owners of overseas property will suffer too much because of Brexit.
As Miranda John of mortgage brokers SPF Private Clients says, “There is a theoretical possibility that anyone with a second home in France could suddenly find themselves also needing a visa to use their property. But uncertainty over travel and other agreements would be resolved after an exit, if it happened – even if such agreements took time.”
Most British expats who own holiday homes in France, Spain and elsewhere in the EU are unfazed by Brexit and what it means. So if you are a British expat and worried about the consequences of Brexit for your holiday home abroad, our advice for you is, don’t be! There won’t really by any significant or material change in your condition because of Brexit.
#2: What if I want to sell my overseas property? Is this is good time to sell, especially with the pound falling?
The pound fell to a 31-year low following Brexit. It has recovered somewhat since then, but as of July 1, 2016, 1 British Pound equals 1.19 Euros.
So, if you want to buy a property in Europe, then this is probably not the right time to do so as the fall in the value of the sterling would make a property in Spain or France more expensive for you. However, we expect the pound to regain its value soon enough, so you should be able to buy your dream home in the Algarve, Mykonos or Costa Blanca soon enough.
Now, if you want to sell your overseas land for example in Europe, this is a good time to do so. The fall of the sterling means that the money (Euros) that you would get for selling your holiday property in Spain or Italy would be worth a lot more when you transfer it to your bank in the UK and convert to pounds.
The weakening of the sterling means you will now be able to earn more from the sale of your European property. But this is likely to be a temporary thing as the sterling is expected to regain its old advantage over the Euro in the long-term.
#3: Will Brexit affect my plans to retire to Europe?
The biggest consequence of Brexit is that you can no longer assume the right to live, work or own property in the EU as before. While it is true that nothing much will actually change, as explained before, but there will be some consequences.
British retirees choosing to spend the rest of their life in an EU state may find their pensions affected. So far, they benefited from the triple lock system which means that their pension rose in tune with price inflation in the UK as long as they retired in a European Economic Area.
That may change in the future, unless the British government negotiate individual reciprocal agreements with EU countries that guarantee that the annual state pension increases for expats will continue.
#4: What about my taxes?
Being a part of the EU had major tax advantages for British expats. That may change now that Britain will soon cease to be a member of the European Union. France, for example, has very high tax rates for non-EU citizens, such as a capital gains tax of 49 per cent over the sale of a property. This is something that nobody really wants.
Brexit is now a reality which cannot be wished away. As an expat, you should be prepared for the consequences of this momentous decision taken by the British electorate. However, it is also important not to get carried away by the negativity surrounding Brexit and imagining that it would mean the end of life, the way you knew it. Sure, there will be consequences, many of which are undesirable, but there’s no reason to worry too much about it. Life will go on, just as it always has.