What will happen to the Spanish property market and expats after Brexit?

OK, I can be wrong … just ask my wife.

The vote for a Bremain result was fully expected to win the day but after all was said and done “team Brexit” was declared the winner.

If you’ve been watching the British news and are keeping tabs on the Internet, you’ll be well aware of what’s happened and, in many people’s eyes…well 48% of the UK, the massive mistake that has been made.

I for one, and I’m on record as having said it, did not think that the UK would break away from the EU. I was confident that it would be too much of an upheaval for the British public especially when it seems to me that the 2 most important points for those voting in favour of a Brexit were 1, strict rulings against immigration and 2, wanting to have a dig at the current government and their team of “Bremainers” … now we’ll get to see if the voters that have got their way have in fact voted well … my own opinion is that I’m concerned about their reasons for voting for a Brexit and think that they haven’t voted sensibly.

It’s clearly no surprise that the shock result has had the money markets in turmoil and is affecting the Sterling/Euro rate, but let’s be honest, currency rates are always up and down, although maybe for the time being there’s going to be a bit more action on that side of things.

This immediate reaction by the money markets will likely have an effect on Brits buying abroad in the shorter term until some sort of order can be achieved, but what about the future for expats living in Spain?

There’s lots of uncertainty as to how it can affect everyone whether in the UK or here in Spain but one thing is for certain we are in for a heck of a roller-coaster ride over the coming weeks and months.

As we already know, David Cameron has said that he’ll be stepping down as Prime Minister and in October a new leader will be chosen – good luck with that then. Also, by the time you read this, we’ll more than likely know how the EU itself has reacted to the UK withdrawal. On the day of the result, members of the EU were arranging a meeting of EU members for the middle of the following week but had decided not to include the UK. The EU have basically said that ‘if you’re leaving, then make it quick so that we can get on with settling things down again’ and they’ve also said that the UK must sign Article 50 of the Lisbon Treaty which will give the UK and the EU two years to discuss and negotiate in an attempt to work things out as best as possible. Once Article 50 has been signed, there is supposedly no turning back.

So it’s during the following two years, after the signing of Article 50, that we are going to find out how Spain will react to UK property owners and how it will differ as to whether they’re resident or not.

Reading some reports, some people say that various member states may have been angered by Britain’s exit and could possibly put pressure on British expats as a revenge. For example, if the Spanish felt like it, the authorities could ask British retirees to pay for their own medical and healthcare or possibly even ask them to move out of Spain, but what you need to remember is that there are over 300.000 British living in Spanish territories and there are 3 million EU nationals, 200.000 of which are Spanish living in the UK, and I can’t believe that there is going to be any tit-for-tat arguments between Spain & Britain. In my opinion, there will almost certainly be some sort of agreement drawn up between the 2 countries, even if it’s nothing to do with the EU directly.

I’ve seen reports saying that lawyers are arguing that British expats living in the EU at the actual time of the Brexit would have individual rights under international law as well, because they chose to live there before the referendum result was passed so, once again, I think that’s a massive positive to consider.

So what is going to happen to the Spanish property market?

I don’t think it’ll be a death knell for the Spanish property market but I’ve been pondering what might happen in the future.

Apart from the obvious movements in Sterling/Euro exchange rate I don’t really think that there’s going to be massive sell-off of Spanish property. I imagine that there are going to be a number of British sellers who are going to take advantage of the weak Sterling. This is going to give them an advantage when they sell and take their money back to the UK. That in turn could make for some good prices here in Spain for the Spanish property buyer, of any nationality, as the British seller will be a little more open to a lower sales price because they’re going to be considering their exchange rate when taking the money back to the UK.

In the future, once all of this initial excitement settles down, and we’re going into the 2 years of discussions and agreements after the Article 50 signing, you might find that there’ll be an adjustment in inheritance laws and taxes for UK owners and maybe Brits will need to fill out some extra paperwork or obtain Visas to come here to buy property or maybe even for a holiday but it’s highly unlikely that the people already living and working here will be sent back to the UK. I’m sure as time goes on it’ll be more difficult for people that want the expat life sometime in the future, especially in comparison with today’s rules and regulations, but never-the-less, I still think that it’ll be achievable.

Pensioners and their pensions.

Of course with a weaker pound, as it is at the time of writing, it makes British pensioner’s pensions worth less and will then make it seem that the cost of living has increased in Spain…but the €1 pint is still €1, OK, it might not work out to be just 79 pence a pint anymore but it’s still going to be less than 1 pound sterling…assuming that Sterling doesn’t spiral out of control.

I read on the BBC website that another factor to consider, on the subject of pensions, is that the UK Government may not update pensions annually as they do at the moment for pensioners living in EU countries. At the moment UK citizens who live in the European Economic Area and Switzerland have their state pensions protected and they’re increased by inflation annually but after the vote to leave, the UK Government will have to decide whether they continue to do that. If, at the moment, you’re a pensioner in Canada for example, you’ll still be able to draw on your pension but the fund is frozen and doesn’t increase annually with UK inflation.

What’s the worst case scenario for UK expats living in Spain?

The worst case scenario could be that there would be no agreement between the UK and EU which would probably mean that expats have to apply for visas or maybe even seek asylum in the EU, but as I say that is the worst case scenario and it’s a highly unlikely end result.

A better solution would be that there be an agreement written between the UK and the EU member states to allow the free movement of UK citizens throughout Europe but that would depend on the next two years of negotiations between the UK and the EU states.

The best case scenario would be that UK retained its membership in the European Economic Area, which could mean that most of the existing rules on free movement throughout Europe continue to apply.

As I said earlier and in a previous article about the Brexit, if there is no agreement between the UK and the EU, I really think that Spain will take a tolerant view of British property owners, both residents and non-residents alike, because the British element in Spain is quite large and there’s definitely going to be some economic advantage to keeping the status quo.

Conclusion…

Uncertainty about the Spanish property market is clearly going a make demand for Spanish property from British buyers less for the shorter term which is a shame as demand from British buyers has been growing strongly 2013 but I imagine that the Canaries will fare much better than the peninsular.

Brits who have exercised their right to live in an EU state such as Spain can probably expect to keep that right but as I mentioned earlier, that will probably only apply to people who started to live their life in Spain before the Brexit result but as I was discussing with a client of mine who is a current property owner who is considering moving here permanently, I imagine that it’ll be highly likely that people who were property owners before the Brexit will also be considered part of the fixtures and fittings, especially if you’ve got your own personal income and not going to be living off the state.

It’s not the end of the world. Don’t make any rash decisions about selling up and moving back to the UK, you really need to wait for things to calm down. I’m sure the future will more than likely not be as bad as you’re thinking now.

I’m wondering if those that voted to leave will regret their decision in the long run? It’s a bit like splitting up from a long term boyfriend or girlfriend. As soon as you split you think thank goodness that’s over, but once you’re on your own, you start to realise that in fact they used to do quite a bit around the house, they used to walk the dog or make dinner or do the washing then you realise that maybe it wasn’t such a bad thing to be a part of after all.

So until we know more about how Spanish authorities, the EU or the UK will treat us Brits in Spain, and this could take quite a while, we’ll have to keep on enjoying the sun, sea and sangria.