A month ago, against the advice of the of its political establishment, Britain voted narrowly to leave the European Union. The pound crashed, markets tanked and the country was effectively left without any form of leadership, opposition or direction.
While the UK now has a new prime minister and reshuffled cabinet, there is still a huge amount of uncertainty in the air. Key questions like how and when the Article 50 ‘divorce’ will happen, and what sort of deal the UK will make with remaining EU states seems anybody’s guess right now.
The general consensus of opinion is that this is not good news for the general market on the Costa del Sol, where the British are the biggest foreign spenders. Uncertainty means panic and that’s not good for business. Last year, British tourists spent more than 14 billion euros in Spain. Brits buy more property on the Costa del Sol than any other foreign buyer and many developments in the area are funded by UK investors with the intention of promoting to this market.
That being said, now that we’ve had some time to digest this news, I thought it a good idea to take a look at what Brexit is looking like from the Spanish coast from a real estate / investment perspective at the moment.
Demand for property and prices on the Costa del Sol
It’s too early to get any meaningful figures as to what the initial impact has been. While the property market has been gradually gaining ground over the past couple of years, many are expecting an adjustment – either in terms of reduced volume of sales and / or a slight reduction in pricing. Whether this is offset by new areas of growth, like the Scandinavian or newly buoyant Middle Eastern market will be interesting to find out in due course.
Winners and losers
As is normally the case after major political and economic events, we now have new opportunities as well as challenges to explore.
The plummeting value of the pound against the Euro (although now very slightly recovering) means buyers have to spend more of their hard earned Sterling to buy property in the Eurozone. Furthermore, we could see those with Euros or Euro assets attempting to ‘cash out’ while they the Euro is strong. It is also more expensive for British holidaymakers (and expats) which could have a knock on effect on property prices. So those that have their money in GBP are definitely not happy right now.
For some this does present somewhat of a silver lining – bargain hunters have had a difficult time finding investment grade property in key areas as the market has been propped up by a constant stream of good news. But with the temporary panic, we are seeing some new real estate come on the market at very good prices. Those spending in strong currencies and in a position to move quickly will likely find more opportunities than they have done in the last year – whether looking for single units, developments or land. As the market is likely to resume its upward trajectory in the medium to long term (even if there is a bit of a ‘wobble’ in the meantime) may see some great yields. So we’ll call this group the ‘winners’!
Interestingly, some Spanish based real estate agents like Lucas Fox are reporting an increase in enquiries from the UK, possibly from those looking to explore the idea of relocating to a country which (for the moment anyway) looks set to remain in the EU.
“We feared that the referendum result would impact immediately on pending deals, but this doesn’t seem to have been the case, and the increase in enquires from UK buyers and UK-based EU residents looks set to more than compensate sellers,” says Tom Maidment, the Lucas Fox partner in the Costa Brava.
That’s something we’ll be keeping an eye on when the figures are released.
Regarding the general state of the market, Maidment commented: “Additionally, we have been offered several interesting properties by British couples who now want to sell up and return to the UK to profit from the weak pound,”
He also added, “The high end Spanish property market relies far less on the British than it used to – our buyer profile is diverse and includes French, Dutch, German, Swiss, Swedish, Norwegian, US, Russian, Middle Eastern and Asian buyers to name a few nationalities and buyer groups.”
What do you think? If you have any views, we’d love to hear them. Please leave a comment or get in touch!