27 June 2016 – El Mundo
The tremors of the international earthquake caused by Brexit, i.e. the victory of the “Yes” campaign in the United Kingdom’s referendum to leave the European Union (EU), will also be felt in the Spanish housing market. Especially in coastal areas, which are so dependent on British demand. The effects are yet to be measured, but all signs are that the UK Goodbye will overshadow the domestic property sector, at least in the short term.
Until now, the consequences of the possible Brexit, now a harsh reality, had been limited to a slowdown in the number of transactions and the signing of SPA contracts with annulment clauses to be invoked in the event that the United Kingdom left the EU, according to Santiago Sánchez, managing Partner at Engel & Völkers (E&V) in Torrevieja and Orihuela. (…).
“In addition, the new international environment may cause Brits to sell the homes that they already own in exchange for euros. And as we know: more supply and the same or less demand, decreases prices”, warns Sánchez, who acknowledges that the market had assumed the opposite outcome from the vote. “We were expecting a boost in activity following a “No” Brexit vote and for all of the built-up demand to be able to go ahead and make purchases, however…”, he laments.
For Sánchez, nevertheless, the problem that will penalise the housing market the most will be the bureaucractic aspects. “If the United Kingdom leaves the EU, it will become much harder for British citizens to settle down in Spain. They will have to request residence and work permits, take out private health insurance, and they don’t know what will happen in terms of inheritance and gifts, etc”, he said. In any case, the head of E&V believes that Brits will continue to weigh up the appeal of living in Spain. “I think that they will keep buying homes because they want to retire here”, he said.
On the other hand, most economists and real estate experts consulted agree that Brexit is bad news for the recovery of the (housing) sector in Spain, which had been started to gain strength, including along the coast. And it is precisely in the coastal regions where the United Kingdom’s departure from the EU will cause the most negative effects, given that Brits account for 21.3% of house purchases by foreigners, and the vast majority of those purchases are made by the sea. The experts are certain that the devaluation of the pound and the on-going uncertainty will weigh down on this buoyant purchasing activity, both at home and overseas. (…).
Meanwhile, Gonzalo Bernardos, Economist and Director of the Real Estate Masters at the University of Barcelona, is much more positive than his colleagues, and offers a Brexit analysis with a broader outlook. “In light of this emergency situation and to avoid a catastrophe on the markets, I think that the European Central Bank (ECB) will inject a lot of liquidity into the market, which means the banks will have more credit and that will drive the Spanish economy and, therefore, the housing market”, he said. “The current neoliberal EU will be completely redesigned and there will be a major reorganisation of the union to prevent any other country from leaving. We will say goodbye to the strict deficit demands for individual countries. In the case of Spain, the fine that was going to be levied on us, will become worthless”, he said. (…).
Original story: El Mundo (by Jorge Salido Cobo)
Translation: Carmel Drake