BREXIT is the biggest thing to have hit the market. Prior to the vote on June 23, the pound fell slightly, but the principal effects were in potential buyers waiting for the vote before committing themselves, some with a clause permitting them to pull out of the contract in the event of a Leave victory.
Since the vote there has been a marked drop in British interest in Spanish property, evidenced in this office by three pre-acquisition building surveys being cancelled the day after the vote.
Foreign exchange companies have reported a considerable drop in enquiries from the UK, but a big increase from people on the Costa del Sol looking to transfer funds into sterling.
After the vote, the exchange rate dropped by 10% and has maintained that low-level, making property purchase here by sterling buyers that much more expensive.
However, for sellers wishing to go back to the UK, they are now going to achieve 10% more sterling when they sell. Accordingly, some sellers indicated that they are prepared to drop their asking price and/or permit negotiation on that price.
While the British market leads in some areas, it is not the only one and thus buyers from other currencies will have found more bargains.
The end result is likely to be a continuing reduction in UK buyers, both due to volatility in the exchange rate, but also uncertainty with regard to health care, working rights, tax levels, etc.
The UK political situation has stabilised slightly with the appointment of a new prime minister who has stated ‘Brexit means Brexit’ and therefore the perception in the market will be that it is something that we must now deal with. However, there could still be legal and political challenges to it so in addition to the uncertainty regarding the eventual economic environment for UK passport holders, there is continued uncertainty as to whether the UK will pull out of the EU and when that might be.
Within Spain, there was also an election three days after the Brexit vote, which, as in December last year, was inconclusive.
But given that the property markets of the Costas are so heavily influenced by international buyers, the areas where these buyers predominate are largely unaffected by Spanish national politics.
The exception to this and significantly affected by Brexit, are the areas where Gibraltar residents, workers and investors catering for them have traditionally purchased. These areas are likely to be significantly affected by Brexit, with concerns that Gibraltar’s economy will be severely hit and the gates to Spain could even be closed as they were in 1969. The PP is also the most strident in its demands for the change of sovereignty for Gibraltar and in continued harassment of businesses, tourists and general personnel travelling to and from the British territory.
In general, the market has undoubtedly been shaken by the run up to and especially the actual Brexit decision. However, most sectors are just dealing with it as best they can. The general impression is that most serious potential buyers are unlikely to put their lives on hold for two or three years while the Brexit effect is worked out and will proceed, but perhaps with a little more caution than before.
While these experiences are principally relating to the British buyer market, as stated above, other nationalities working in other currencies are seeing opportunities left by the absence of the British, which is likely to be a temporary situation.
The natural assets of climate and close proximity to northern Europe with a (so far) stable government and economy will continue to attract buyers and sustain the residential market.