Brexit Property Worries in Spain

Could a fledgling recovery of Spain's real estate market come to a premature end in the light of Brexit? Given that Spain's younger generation is no longer considering buying a home, because of too much uncertainty in the country's job market, the fact that Brits are beginning to turn their backs on buying second homes in Spain is a worrying trend indeed. Traditionally, Brits have been the most enthusiastic buyers of Spanish real estate.

Now estate agents are reporting that home sales to British buyers have decreased by 16.3% in Q3 of 2016, according to the official register of the Spanish Association of Land Registrars. This is the first decline in years, and thus a worrying indication of what might happen, when British Prime Minister Theresa May triggers Article 50 next March to begin formal proceedings for Britain to leave the European Union.

Real estate expert Mark Stuecklin, writing for portal Spanish Property Insight, revealed findings for several of Spain's property hot spots that make for troubling reading indeed. Across the nation enquiries for residential properties have fallen by ca. 30% since Britain voted to leave the EU in June this year. The most recent official figures confirm a dramatic fall in home purchases by Brits, as does Mr Stuecklin's own survey conducted among estate agencies, lawyers, buying agents, surveyors and mortgage brokers dealing with property markets at the Costa Blanca and Costa del Sol, the two top destinations for British house buyers. 

Mark Stuecklin conducted his survey between July and October 2016. He asked specifically for property experts to report back on British buyer interest, budgets, concerns in the light of a falling Pound, vendor behaviour and concluded sales. His survey also covered the markets of the Costa Brava, Barcelona, Valencia and the Balearic Islands. Although there were variations between the price segments and regions, a clear overall picture emerged that shows British buyers were keen up to the date of the June referendum and then dropped off significantly just after.

Barcelona can still look to an overall increase of ca. 20%, but across the nation there has been a big decline in British buyer activity. At the Costa Brava the real estate market has been fairly stagnant, while Valencia and the Costa Blanca have seen declines of up to 80%. While Murcia had seen a slight recovery before June 2016, the market returned to stagnation after the British referendum. 

At the Costa del Sol there have been declines of up to 80% in some property market segments, but more typically the market has declined by around 20% to 30%. The Balearics have seen declines of up to 35% in British buyer activity.

If Spanish Property Insight's survey is anything to go by, British demand may well decline by as much as 50% across Spain, but this will largely depend on what will happen to the value of Pound Sterling, once Article 50 is triggered. 

Estate agents have reported a number of worrying trends though, for example sales falling through in all regions, as soon as the referendum result became public knowledge. In some regions this was not so dramatic, because buyers from other countries took the place of retreating British buyers, in Barcelona's property market for example. Brits who backed out of sales at the last moment cited the fall of Pound Sterling and the uncertainty created by Brexit as their main reasons for stepping away from the purchase. 

All agents reported that many British buyers have told them they are adopting a “wait and see” attitude, putting their plans on hold for the time being. Brits still going ahead with a purchase have had to lower their sights, now looking for less costly Euro purchases.

There are also signs that other foreign buyers are also putting plans to buy on hold. Many are making lower offers for second hand properties sold by British home owners, who have had to adopt a more flexible attitude to asking prices because of Brexit. Older British vendors in particular are desperate to return home because their pensions no longer cover their outgoings. British pensions are calculated in Pounds, then paid out in Euros. Many pensioners are struggling to make ends meet with an exchange rate that has reduced the Pound's value by 18% since June. 

What has also become apparent is that quite a few Spanish property companies are significantly cutting back their marketing budgets for the UK market, in some cases stopping to promote Spanish property completely because of Brexit. While tourism officials who exhibited at the World Travel Market in London this autumn put a brave face on the situation, all over Spain estate agents are quietly switching their promotional efforts to other markets, such as Germany and Scandinavia for example.

Many Brits who had planned to move to Spain are now having second thoughts. Will they still be welcome in Spain, given the British Government's negative attitude to foreigners coming to Britain? How far will the Pound fall? 

What is certain among all this uncertainty is that Brits love their Spanish holidays. Spain has been their preferred holiday destination for decades. A British Government intent on cutting all ties with Europe should remember that or it will be in trouble come the next General Election. Rejected visa applications for Brits trying to cross EU borders could well cause a massif voter backlash.