How will Brexit affect buying European properties?
Is our relationship with property in Europe to change further?
Current figures estimate approximately 1.2 million British citizens reside in the European Union’s 27 other member states. Yet as the UK prepares to leave the EU, how might this number change?
Changes to Britain’s purchasing power
Since 1973, when Britain joined the European Union, the free movement of people, goods and services across the continent have enabled Britons to purchase a holiday home at a reasonable price. And the number of ex-pats and second home owners has kept rising.
This could be put down to higher disposable incomes or cheaper flights. But at a European level, the successful agreement of banking, tax, insurance, healthcare and travel issues by Britain’s MEP’s have ensured that the procurement of overseas properties is a somewhat easy one.
Yet, as the British public voted to leave the EU, the significant drop in the value of the pound and the insecurity of Britain’s ‘place’ in the world has led to doubts about Britain’s purchasing power abroad.
Increasing cost of mortgages
There tends to be a link between the stability of a country’s economy and the amount of money their citizens can borrow for a mortgage as well as affecting the mortgage rates.
Any economic and political turbulence, and uncertainty following the vote to leave may see borrowers required to pay higher rates to get a mortgage for their holiday home.
As well as – understandably – being adverse to unstable economies, the banks appear to favour lending more money to EU members; even Americans are typically unable to borrow as much as Europeans.
For example, the minimum deposit to get a mortgage in France increases rapidly from 20% for EU citizens to as much as 50% for non-EU citizens.
So, after voting for our European independence in June, will the loss of the cheap mortgage incentive see less Brits travelling abroad, or is the pull of some extra sunshine just too much to ignore?
We are, of course, already seeing the stabilisation of our economy as the dust begins to settle but we may just have to see what affect this will have on mortgages.
Visas – will we need them?
It may be costly not only to acquire a home but also to get there.
Miranda John of mortgage brokers SPF Private Clients, a company specialising in property purchases abroad, has stated, “there is a theoretical possibility that anyone with a second home in France could suddenly find themselves also needing a visa to use their property.”
Yet a number of property and travel experts insist this would be “highly unlikely.”
Anyway, it’s never stopped us before! Many of us own second homes in countries such as Turkey and the United States where visas are the norm and we remain undeterred.
Pension – will I still be entitled to one?
At present, British citizens are permitted to retire in an EU state and under the “triple-lock” system their pensions rise every year by the higher of wage or price inflation (subject to a minimum of 2.5%).
The need to negotiate individual reciprocal agreements with EU countries may become a necessity, if annual state pension increases for expats were to continue.
If negotiations guaranteeing state pension uprating failed, over the next 20 years retired Britons living abroad may see a reduction in their income.
Buying abroad will not be impossible
Although there remains great uncertainty of the full effects of Brexit, realistically there will be little direct impact on property rights.
One of the risks of leaving the EU is the need to renegotiate the right to live, work and own property in member countries.
However, the property markets of countries such as Spain, Portugal and France are heavily reliant on British buyers and it will not be in their interest to completely sever the ability to buy abroad – but it may become increasingly expensive.