A lot of British expats who are planning to sell overseas property online are worried about the post-Brexit world. They worry if Brexit will lead to a slackening of demand for properties in Europe. Here, we investigate if Britain leaving the European Union has really affected the overseas property market.
While there is no question that Brexit has affected sentiments across Europe, the situation is not as untenable as previously thought. There is no reason to have a knee-jerk reaction to Brexit. The markets have by and large returned to normalcy across Europe and several key decisions have been made to stabilise the economy, in Britain as well as in other countries.
Major changes have been made with Theresa May taking over as the Prime Minister of Britain. We expect Article 50 to be set in motion in due time and new trade deals will be put in place and the older ones will be sorted out to everybody’s satisfaction. In fact, there are now a number of opportunities available to homeowners and home seekers, which should be exploited.
In many of the countries that are popular with overseas investors, such as France, Spain, Portugal and the United States, the demand for properties is as high as ever. So if you’re looking to sell your overseas villa quickly we can tell you that there is no reason to be concerned as yet.
Interest rates in most of Europe have been at their lowest point in years. A number of people are now looking for fixed rates over a longer period, of 10 years or so, to hedge themselves against unforeseen events such as Brexit. There is every reason to believe that there could be a Brexit-like movement to get out of the European Union in other countries as well, although we don’t expect to see one in the near future.
For British buyers interested in overseas properties in countries such as Spain, France, Italy and Portugal, the prices will have increased by 10%, because of the fall of the sterling relative to the euro, but this is expected to be a temporary thing.
Indeed, there are many economists who say that the smartest thing anyone could do right now, would be to bet on the sterling, as the currency has bottomed out and will only appreciate over time as things get back to normal in Britain yet again.
So if you are planning to rent out your overseas property, you can benefit from higher euro or dollar rental payments right now because of the differential between the sterling and the euro/dollar at the moment. But this is expected to be a temporary phenomenon as the sterling will certainly recover the lost value in time.
Similarly, if you are planning to sell your overseas apartment online, you couldn’t have picked a better time to do it. You will benefit from the difference between the sterling and the euro/dollar when the proceeds of a the sale are transferred to your bank in the UK.
So what does Brexit really mean for British Expats?
This is a tough question to answer, but generally, we don’t expect to see any major changes for two years at least from the point at which the UK informs the EU about wanting to leave – at which point Article 50 of the European Union would be invoked. The EU cannot force the British government to trigger Article 50. Till the time Britain is officially out of the EU, we will remain a fully paid-up member of the European Union with all rights and privileges very much intact.
So if you are a resident of an EU nation or plan to become one in the near future, you can still retain the right to live in that country, even after Britain officially leaves the European Union. For sure, the host country won’t be obliged to provide free health services to as it would had Britain been a part of the EU, but it is likely there will be agreements between the UK and all EU nations based on a reciprocal arrangement.
It would be in the interest of the European Union to look after not just the 1.3 million British expats living in the European Union, but also the 3 million EU nationals who work in the UK. Ignore the scaremongers who say that Britain leaving the EU would mean that the UK would be treated as an outcast by the other countries in Europe.
That’s not going to happen as Britain is one of the richest and most powerful countries in Europe and British expats and tourists contribute heavily to the economies of Spain, France, Portugal, Greece, Cyprus, Malta and Italy, to name just a few countries.
Indeed, let’s look at the facts – Brits account for 20% of all overseas buyers in Spain – Brexit is not going to change that. British expats are valuable contributors to many towns in France. Business in rural and semi-urban France would be badly affected if there were no British expats living there.
Most countries in Europe are desperate for British investment. Britons are the biggest consumers of the tourism industry in most countries in Europe – so if anyone tells you that Brits will be made to feel unwelcome because of Brexit in Europe, that would be a ridiculous thing to say.
However, there will be changes. If you are planning to sell your overseas villa quickly you should keep a close watch on the exchange rate. Currently, this is at 1.2 Euros to the pound. The Sterling has certainly not collapsed as many said it would and has recovered lost ground substantially since June 24.
You should talk to a currency exchange broker and get the proceeds from the sale hedged at a favourable exchange rate. There is a concern that some countries in Europe would impose additional taxes on British homeowners.
For example, British expats in Spain may lose the right to the same tax treatment as Spanish nationals on a house sale and may have to pay the same capital gains tax on their Spanish property as, say, Chinese or Russian nationals.
What you don’t have to worry about is that some EU country would impose draconian restrictions on British buyers or sellers of property – that is not going to happen. The appetite for British buyers for overseas properties across Europe and the rest of the world will be as strong as ever.
Yes, it will certainly get more expensive for British buyers to buy overseas properties in the near-term future, but this is likely to be a temporary phenomenon. You can buy the Spanish villa of your dreams in Mallorca, Spain or the Algarve, Portugal without any fear whatsoever.
If you have a home abroad already, you can hold on to it or sell it, based on your personal circumstances – there is no reason to rush to a decision because of Britain leaving the European Union. We don’t expect a material change in the relationship between Britain and other countries in Europe, things will continue the same as they always have – but with a few changes.
Where are Britons Buying Overseas Property in the Post-Brexit World?
It has only been 4 weeks since the Brexit referendum and we have not witnessed any drop in the British interest in overseas property. As you can see from the graph below, Britons are among the biggest buyers of overseas property. They dominate the property market in Spain, France, Australia, New Zealand, South Africa and many other countries.
Spain is the number destination for British buyers. It is a hugely popular holiday destination and is home to over 320,000 British expats. Spain has an open and diverse culture, where Britons feel truly welcome.
France is a close second to Spain as far as popularity with British home seekers is concerned. The attraction of a cottage in a French village remains as strong as ever.
The United States is not a holiday or retirement destination for Britons – it is where many young Brits go in search of better career opportunities. Many end up living there permanently. Britons are among the biggest buyers of properties in the U.S.
Portugal, much like Spain, is a popular holiday destination. A number of Britons have bought holiday homes here and have fallen in love with the laid back lifestyle and the perfect Mediterranean climate, especially in regions such as the Algarve.
Italy remains as popular as ever because of its reputation for fast cars, great food, fine wine, quiet countryside, high fashion and beautiful people.
Malta and Cyprus have a large British expat population and being ex-British colonies they share many cultural similarities with Britain. They are also perfect holiday spots.
Greece remains a popular overseas property destination despite the seriousness of the economic crisis in that country. In fact, the Greek Islands continue to attract tourists in record numbers – last year, over 22 million tourists visited Greece. Crisis or no crisis, Greece is as hot as ever.
Australia and New Zealand have always attracted substantial interest from Britain and that is not going to change any time soon.
A lot of British nationals are of South African origin and have close ties to South Africa. Many buy properties in South Africa, especially in the upscale neighbourhoods of Cape Town, Pretoria and Johannesburg.
Turkey is one of the hottest overseas property destinations, but recent events in that country, such as the failed military coup, will make people think twice before investing there.