IF the flapping of a butterfly’s wings in Brazil can set off a Tornado in Texas, as Chaos theory suggests, then what does the surprise Conservative victory in the UK elections mean for property on the Costa del Sol?,? where the British are the biggest group of buyers after the Spanish?
?It’s not a trivial question. Last year the British were 17 per cent of foreign demand for property in Spain – the biggest group of foreign buyers by a wide margin – and growing ?fast…up nearly 30 per cent last year.
Around 25 per cent of British buyers head for Andalusia’s Malaga province, home to the Costa del Sol, so British demand is crucial to the local property market.
As I see it, there are two main ways in which UK election result affects British demand for property in Spain:
1) The exchange rate and
2) Relations with the EU
The pound has strengthened around 35% since its lows of 2009, although it is still 15% below it’s boom-time highs of around 1.6 €/£ or more.
The pound surged two per cent against the euro in the first 24 hours after the election result was known.
That shaved 2,000 quid of the price of a €100,000 property, and the savings will only get bigger if the pound heads back to 1.4 €/£ or more, as it looks like it might.
“We’d expect to see sterling now continue to gain across the board as the focus falls on whether Greece can avoid a default or not,” explains Luke Trevail, a senior trader and analyst a TorFX, a currency broker.
A stronger pound, coupled with lower Spanish house prices in the wake of a seven-year crash, makes Spanish property seem much cheaper to British buyers, who have also watched ?house prices surge at home, making property seem like a safe bet once again.
On balance, a Conservative victory suggests a stronger pound in future, which, in turn, should boost demand for property on the Costa del Sol.
The other big variable that might influence British demand is the in-out referendum Cameron promised? on EU membership promised by 2017.
Would leaving the EU reduce British demand for property in the EU, including Spain?
My guess is yes, but I also I suspect the British will vote to stay in the EU, particularly with the sheer amount of business bosses vying for it, so I don’t think the Tory victory will reduce demand for this reason?.?
?In the meantime, a stronger pound?, if that’s what we get,? is almost sure to help lift British demand for holiday homes on the Costa del Sol.