Returning British expats face property black hole

British expatriates considering returning home in the face of uncertainty over their status as EU residents following Brexit could be in for a nasty shock. Research by Retirement Advantage Equity Release shows that since 2010, the combination of sustained price rises in the UK housing market and falls in many popular EU destinations could leave them facing a substantial shortfall if they come back to the UK.

The UK has seen average real house prices rise by 12 per cent since 2010, according to OECD data; in contrast, prices in France have fallen by 3.8 per cent on average, and in Portugal they’re down 6 per cent, while in Italy they have lost 20 per cent.

The biggest gap is between Britain and Spain, where house prices have fallen more than 26 per cent over the seven years since 2010. Spain is the most popular EU destination among British expatriates, with over 300,000 living there as of 2011, according to data compiled by the Office of National Statistics. A third of them are aged over 65.

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Alice Watson, head of marketing at Retirement Advantage Equity Release, gives the example of a 65 year old man who sold a UK property in 2010 and moved out to Spain, where he spent the proceeds on a house costing the same.

By the end of 2016, he is considering moving back to the UK as a result of the Brexit fallout. But in the interim property prices have risen in the UK and fallen in Spain.

‘This results in a significant price gap, on average £65,419, between the value of his Spanish property and the UK home he left. When applied to the thousands of homeowners over the age of 65 living in Spain, it adds up to billions of pounds,’ says Watson.

Similar gaps have opened up between property prices in the UK and other EU countries, though they affect fewer UK expatriates. In Italy (65,000 British expatriates as of 2011) the gap amounts to an average £55,000; in France (185,000 British expatriates) it’s £26,700.

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‘Whilst Brexit negotiations have put the future status of UK citizens living in the EU in limbo, many will be weighing up the option of moving home,’ adds Watson. 

‘This will be a rude awakening for many of those living in favoured locations such as Spain and France.  While UK property prices have risen, relative values in the EU have not kept pace.  Many people simply wouldn’t be able to afford to move back to their old homes.’

Brexit negotiations have so far brought very little clarity to what Brexit could mean for the estimated 1.2 million Britons living in the EU. Dr Michaela Benson, lead researcher at ESRC research body The UK in a Changing Europe, says there are many aspects to the issue.

These include voting rights and a possible end to the current reciprocal arrangement for UK expatriate  pensioners to receive pension increases in line with inflation. ‘This could result in the freezing of pensions and hence a real-term reduction in the incomes these pensioners receive,’ she says.

Benson adds: ‘The end of free movement will undoubtedly impact on who can migrate to, and who can continue to live and work in EU member states. It is possible that one response to Brexit might be repatriation, particularly of those populations made more vulnerable as a consequence.’

She makes the point that ‘proper planning’ in regard to health and social care will be needed if this happens. The differential in house prices highlighted by this research suggests housing could be another area of concern for many.

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