For millions of Britons, buying property overseas, typically in warmer parts of Europe, has been a longstanding dream. Many have been able to achieve their ambition, snapping up holiday homes or properties for retirement – Britons have for some years headed the list of overseas buyers in France, Spain and Portugal.
Now, however, the prospect of Brexit is a dark cloud over such dreams, with sales to UK buyers in many countries falling sharply since Britain voted to leave the European Union in June 2016. In Spain, for example, Britons accounted for 14.5 per cent of purchases of Spanish homes by overseas buyers in the first quarter of this year, according to Spain’s property registry – the lowest proportion since the registry began compiling data in 2006.
In 2016 as a whole, UK buyers accounted for 19 per cent of home purchases by non-Spaniards. That’s down from 38 per cent in 2008, when British appetite for buying Spanish holiday homes was at its peak. ‘The Brexit effect is clearly having a notable impact on the buying behaviour of UK buyers in Spain,’ a spokesman for the registry says. ‘Demand is clearly trending downwards.’
Don't let Brexit dash hopes
Still, while the uncertainties of the ongoing Brexit negotiations, in the headlines almost every day, are undoubtedly unsettling, does the UK’s withdrawal from the EU really have to dash your hopes of buying a place in the sun in an easily accessible (and often very affordable) destination across the English Channel?
The short answer is no, argues Miranda John, international manager at the mortgage broker SPF Private Clients. ‘The sales figures for many of the preferred holiday-home destinations in Europe actually rose significantly last year, and have continued to do so this year,’ she says. ‘This is not only driven by British buyers – but they are very much in evidence in spite of Brexit.’
The first question for most buyers is likely to be whether they can afford the property they want. At first sight, the sharp sell-off of the pound since the Brexit vote has substantially increased the cost of buying property in Europe. With sterling down around 15 per cent since the referendum, a €150,000 (£131,000) home in France, Spain or Portugal – or anywhere else in the eurozone – that would have cost £115,000 in June 2016 will today set you back £133,000. And over the long term the pound is down even further – sterling is worth 21 per cent less in euro terms today than a decade ago.
However, such comparisons don’t take account of what’s happened with European property prices in the years since the global financial crisis. In some countries, prices have fallen even faster than sterling, which means property is actually more affordable now than in the past.
In Spain, for example, property prices today are 38 per cent lower, on average, compared to a decade ago, according to the Global Property Guide – so for British buyers, that’s a 17 per cent saving even after accounting for the effect of the lower pound. Greek house prices are 43 per cent lower than 10 years ago. Italian house prices are down 11 per cent – not quite enough to compensate for the fall in sterling over the same period, but still some compensation. Only in France, amongst the countries that are especially popular with British buyers, have prices risen, with the average property up 3 per cent.
However, even if you can afford the purchase, you’ll need to consider some practical questions in the context of Brexit. The biggest question is whether there will be restrictions on your travel to and from other European Union nations following Brexit. Right now, we just don’t know the answer.
Most lawyers assume short-term trips such as holidays are likely to continue to be easy enough for British citizens, but longer stays – indefinite periods in another EU country, or making a new home there – may be more difficult. Several EU countries currently won’t allow non-EU residents indefinite right to remain in the country unless they can show they have a minimum income – some €800 a month for couples moving to Spain, for example. There are also widespread restrictions on people with certain health conditions or criminal records.
Jill Rutter, Brexit programme director at the Institute for Government, warns that the UK and EU are running out of time to do a deal on immigration, which could leave people in limbo. ‘The political imperative for change in immigration is significant, but so is the administrative challenge,’ she says. ‘The scale of the task of creating a new immigration system is huge.’
Assuming the freedom of movement question is resolved, the good news is that there is unlikely to be any legal impediment to British citizens buying property in another EU country. All the major European countries currently allow overseas investors, wherever they come from, to buy residential property with the same rights as local citizens.
Nor is the EU likely to be able to impose punitive tax charges on UK property buyers. In almost all cases, the UK has double taxation treaties with other European nations that date from before the UK joined the EU, so income tax, inheritance tax and capital gains tax will continue to be taxable in the country where the liabilities arise. Specialist property taxes could be a potential issue, though none of the popular destinations for Britons currently levy such duties on buyers from outside the EU.
Less happily, the position on healthcare is not clearcut, which may cause real problems for some – especially those looking to retire to the EU. Right now, UK citizens are entitled to free healthcare in any other EU country – whether they’re on holiday or living there in retirement – just as EU citizens get free healthcare here. However, there is no guarantee this arrangement will remain in place following Brexit, in which case British property owners may need to take out health insurance, which is likely to be expensive for older people.
Will Brits have a right to work?
Similarly, huge question marks remain over whether Britons will continue to have a right to work in the European Union (and vice versa) after Brexit. If you were thinking of living an expatriate lifestyle in another EU nation, don’t count on being allowed to earn a living.
Pensioners, by contrast, have already won an important concession in the Brexit talks, with the government promising that those living in other EU countries will continue to receive the same annual state pension increases as their counterparts back home. This is potentially valuable, particularly over the longer term as inflation erodes the purchasing power of a fixed income; not all UK pensioners living overseas get this deal.
It’s a mixed bag, in other words. Property in many EU countries remains affordable, but until the Brexit uncertainties are resolved, many people will want to tread cautiously. As the influential migration expert John Springford, director of research at the Centre for European Reform, said recently: ‘The golden age of British retirees heading to the Costas is probably over.’
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