1 July 2016
For generations it has been the Bristish ideal as well as other europeans: quit the day job, sell up and move to the sunny climes of the Costas to see out your days at a slower pace of life. The UK's decision to leave the European Union raises some important questions. Here's how it will affect British buyers in Spain.
After the shock result from last week, when Britain voted to leave the EU, thousands of people considering buying a property in Spain after the Brexit have been left with many questions. In this post we will try to answer the main ones.
Yes. Britain is still a member of the EU and British citizens enjoy the same rights today that they did last week.
For the next two years or so, while Britain negotiates the terms of its exit under article 50, nothing will change for British expats abroad because the UK will remain part of the EU during this period. British buyers are unlikely to feel the impact for some years.
A weakened Pound is the most immediate effect of Britain's referendum. In effect, Spanish property has just become more expensive for UK buyers.
The exchange rate is expected to be volatile over the coming months, but buyers can take steps to insulate themselves from currency risk.
It is also worth setting this in a wider context: While Spanish house prices have been steadily recovering over the past 2 years, they remain 32% cheaper than their peak in 2007.
Spanish property remains excellent value.
Spain has a long history of welcoming buyers from overseas, who now account for 1 in 5 house sales. Non-EU buyers are extremely active in the market and enjoy very similar rights to EU nationals.
Leaving the EU/EEA is highly unlikely to impact the rights of British citizens to buy property in Spain. Overseas investment is too important to the economy.
Yes. Spanish banks typically ask foreign buyers for a deposit of up to 40%. While there is scope for this to rise, it is already at a level that provides banks considerable protection and is unlikely to see much adjustment.
Meanwhile, the economic climate in Europe is wedded to low interest rates. Borrowing costs remain good value.
British buyers are important to the Spanish market and they are the largest single nationality among overseas investors. However to put this in context, Brits form 4% of the market.
There are two reasons Brexit is highly unlikely to trigger a crash. Firstly, foreign buyers are a diverse group: German, French, Belgian, Italian and Swedish (among many others) are all an extremely active, growing part of the market.
There may be some localised pain, but even a complete collapse in UK demand (again, totally unlikely) would only put a small dent in the market.
Secondly, the market has nowhere to go. Spanish property has been recovering steadily since 2014, but remains a very long way off its peak. The worst we expect from Brexit is restrained growth.
Yes. The European Health Insurance Card provides reciprocal health cover for travellers in the EEA. It will remain in place for at least two years while Brexit negotiations are in motion.
European countries are keen to ensure that their citizens enjoy healthcare while travelling, so it's entirely possible an EHIC agreement (or something similar) will remain in place even after Brexit. For instance, Switzerland are neither EU nor EEA members, but accept the EHIC as part of the single market. The UK could follow the Swiss model.
For now, yes. As long as Britain remains in the European Union, reciprocal healthcare arrangements continue as before. Expats who live in Spain and contribute to the social security system already receive full healthcare, and will continue to do so regardless of Brexit.
After last week's vote, Spain's Prime Minister Mariano Rajoy said nothing would change for Britons in Spain while an exit was being negotiated - they would have the same rights they have enjoyed until now as EU citizens.
The situation for British pensioners is less clear. The current cost of their healthcare is met by a per capita payment from the UK to Spain for every pensioner who has completed the S1 form and is in receipt of a UK pension.
Nobody knows if this arrangement will continue, though many commentators predict British pensioners will require some form of health insurance post-Brexit.
Under single market rules, UK citizens living in Spain (and indeed the whole EEA) have their pensions and social security payments automatically uprated each year in line with local inflation. This system is a mutual EU arrangement and is likely to become a negotiating point in Brexit talks.
In the worst case, British pensioners in Spain could get similar treatment to those in Canada and lose their automatic right to pension increases.
British citizens (and indeed all EEA residents) currently get very good tax treatment in Spain, paying the same inheritance tax as locals.
Crucially, the double-taxation treaties that enable these are NOT made in the EU. Therefore Brexit has no effect on the existing tax agreements between the UK and Spain.
In short, nothing for quite some time.
Exchange rate fluctuations will be the only visible effect of Brexit in the short term.
The two year process of leaving the EU will not begin until Article 50 is triggered and this is currently scheduled to happen in October 2016. (Despite protestations, Europe cannot force a faster pace until Britain formally takes this step.)
It is also important to note that this referendum is non-binding, and British politicians will now enter a protracted period of horse trading over what to do next – or even who's in charge.
With Brexit leaders already dialling back their rhetoric and promises, it is not a foregone conclusion that Britain will completely leave. Huge debating points now remain over whether Brexit means a total withdrawal from the single market (EEA).
Time will tell, and it all serves to slow the process.
The net effect is Britons will continue to enjoy the benefits of European citizenship for some years, and can expect a broadly similar deal once Brexit is complete.
The British love affair with Spain continues.
In Brilliant Real Estate you'll find enthusiastic estate agents who provide the expert advice you are looking for when buying the property of your dreams in Spain. As a Spanish-Dutch Real Estate we provide all the support and information that any foreigner needs to accomplish the process of living in Spain.
Our team of experienced agents can help with whatever you need, providing you a tailored and unique attention in English, Dutch, Russian, Spanish, French and German. Whether you are buying or selling a property through Brilliant Real Estate you may rest assured that the operation will run smoothly.
Finestrat (Finestrat · Alicante)
Villotel (Moraira · Alicante)
Alcasar (Moraira · Alicante)
Benimeit (Moraira · Alicante)
Calpe (Calpe · Alicante)
Cumbre Del Sol (Benitachell · Alicante)
Benimeit (Moraira · Alicante)
Cuesta de San Antonio (Jávea · Alicante)
Arnella (Moraira · Alicante)
New Mortgage Law A significant number of buyers who purchase a new development villa on the Costa Blanca need financing to carry out the transaction. This is even true in the case of foreign buyers, a sector that tends to resort to Spanish banks to arrange their loans. The New... Read more +
What Are Energy Performance Certificates and Who Needs Them? In line with other European countries, Spain has introduced a law obliging property owners to get energy efficiency certificates (EPC) before they can sell or rent their homes. According to the Real Decreto 235-2013 this... Read more +