No-one knows if – or to what extent – Brexit would affect the rights and overall experience of British homeowners in an EU Member State. For now, though, nothing has changed since before the Referendum. Until the UK Government officially triggers Brexit and negotiates new terms with the EU as a non-Member, it's business as usual.
Richard Way, editor of PropertyGuides.com and a homeowner in Spain, offers his thoughts, alongside five important considerations for anyone weighing up an EU property purchase right now.
1. How much can really change?
“From my own perspective,” comments Richard Way, “the prospect of Brexit is an empty threat to a happy future as a second homeowner in Spain to both existing and future property owners. In the small resort where I enjoy time at my Spanish property, which lies in the just beside the picturesque Bay of Roses, people from all walks of life and of all nationalities – many of them non-EU citizens – have been enjoying life there for many years, moving freely to and fro.
Brexit or no Brexit, British people will continue to be able to buy property in European countries and live in them, just like nationals from non-EU European and non-European countries have done for decades, even centuries.
In my mind, I believe sufficient mutual appreciation exists between Spain and its significant number of British homeowners to minimise the potential disruption of Brexit to British homebuyers there, now and in the future – not forgetting the millions of euros that British tourists and homeowners bring into the Spanish economy every year! The same is also likely to be the case for other popular destinations with Britons, like Portugal, France and even Italy.”
At worst, British expats may lose reciprocal rights to healthcare and other benefits. In the event of the UK leaving the EU, possible scenarios include:
i) The UK remains in the single market, meaning Britons maintain their rights to live and work in the EU, similar to citizens from Switzerland, Iceland, Norway and Liechtenstein.
ii) The UK stays outside the single market, but the UK negotiates terms with individual EU countries, such as Spain, leading to legislation giving Britons similar rights to those they currently have as EU citizens.
iii) The UK stays outside the single market, and Britons acquire similar rights to non-European nationals buying or moving there, such as Australians or Americans.
So, in the event of Brexit, we'd essentially be treated like any other non-EU, non-European Economic Area (EEA) citizens, Americans and Australians, for example. The worst case scenario is that this may mean additional paperwork for securing your residency, potentially needing more paperwork in order to get visas, and this may mean a few more forms to fill in to own a property. Pensioners will also need to look in to healthcare contingency plans as an alternative to any reciprocal agreements that aren't continued,” continues Way.
The best case scenario is that Spain introduces new rules providing British property buyers and expats with similar rights to those that we enjoy currently as EU citizens, so, in this instance, nothing really changes.
The other more unlikely scenario would be for the UK to adopt a similar stance to Norway and join the EEA, providing what are essentially the same automatic rights to buy a home, work and reside within EU countries that exist now. Swiss citizens already have this status in the EU, for example. So in this case, again, nothing would really change.
What comes to mind looking at these potential scenarios is the fact that British homebuyers have not been deterred from buying in popular non-EU member destinations – such as Turkey, Florida, Dubai, or Cape Verde – and these destinations' growing popularity is also reassuring.”
Valued customers
Overseas property owners make a significant contribution to the local economy, and indeed, the social fabric of the area. Throughout the Spanish Costas, there are whole communities made up almost completely of Britons. I can't see this all coming to an end, needlessly,” continues Richard Way.
UK buyers account for a large percentage of property sales in key EU markets, particularly Spain, Portugal and France. In Spain, banks remain under pressure to sell repossessed property, with some leading institutions reporting that 50 percent of their sales are to Britons. Meanwhile, British homeowners contribute huge amounts to local economies across the EU, in particular in those areas with a high concentration of expats. It is unlikely Spain and other countries will want to lose this stream of revenue.
Cheap mortgages
With European Central Bank interest rates at historic lows, European banks continue to offer very cheap mortgages, including to non-resident buyers. For example, fixed rates of 2-3 percent for a repayment mortgage are not uncommon in France and Spain, depending on the term. Banks expect to be able to offer these deals to UK buyers for the time being. And after Brexit, while the loan to value available might fall, the deals will remain very competitive.
“I'm also hearing positive comments from experts within the overseas property industry,” Way notes.
Spanish banks are still under pressure to dispense with repossessed properties 'as speedily as possible to balance their books,' as one experienced estate agent who sells these kinds of properties for one of the largest banks in Spain commented to me. His contact at the bank said the long term outlook for Brits buying Spanish property is likely to remain similar, however, short-term, the mortgage LTV available to British buyers could see a reduction of as much as 50 percent for new-builds or resales, but rates are likely to remain high for bank repossessions, which he believes are likely to stay at around the 100 percent mark.”
Value for money
Property prices in European destinations popular with British buyers have taken longer to recover from the 2007-08 crash than prices in the UK. And there are fears that the prospect of Brexit could impede any growth, not just in the UK, but in European economies and markets, the result being that property in hotspots in France, Spain and Portugal are likely to be good value for money for the foreseeable future. For British people wishing to move to one of these destinations, selling a UK home to purchase their new home remains an attractive option.
Spain's property market has showed signs of recovery this past year, especially in the popular areas of the Costas. Frightening British owners or causing difficulties for them to buy or live in Spain would risk putting a stop to this recovery. If existing British owners rushed to sell, accepting prices under market value just to get out, this would have a negative impact on the market. As a trusted property lawyer contact said to me, it would not be logical for these [EU] countries to kill the 'golden goose' that has traditionally brought them such great numbers of buyers and wealth…”
Interest in EU property remains strong
The latest Quarterly Index statistics from the Overseas Guides Company (OGC) show a rise in interest in property abroad. OGC recorded a 26 percent rise in enquiries during Q1 2016 compared to the same period in 2015, achieving a total of 20,667 enquiries (downloads of its Buying Guides) during the first three months of 2016. The most popular destination, Spain, attracted 61 percent more enquiries in the first quarter of 2016 compared with the same period last year. Other leading estate agents have reported continued interest, some indicating instances where British clients are keen to complete a sale before Brexit occurs.
