there have been varoius warnings about the effects of Brexit the amount
of Brits that travelled on holiday to Spain this summer was at its highest
level. This figure has historcally related to the amount of property bought
by Brits in Spain - the more tourism, the more property bought. There
seems to be as much activity now from UK purchasers as there was pre-Brexit
referendum. One noticeable change in recent years has been the increase
in properties for sale owned by UK nationals. Perhaps the strong euro
has something to do with this.
good economic data across europe is dominating, and the property market
in Spain is no exception. Prices in Asturias and Galicia are not currently
rising as fast as many other parts of Spain. However, there have been
reported rises above 10% in Cantabria and the Basque Country. This summer
is seeing many foreign purchasers taking the plunge here in northern
Spain and the British are buying - Brexit or no Brexit.
of the properties that are available in northern Spain have been on
the market for a substantial time. Firstly, there is always the issue
that the properties are over priced but also, many rural properties
in the region offered require substantial renovation and bank finance
remains difficult to come by when considering renovation works. Therefore,
the transactions tend to be cash driven without the need of finance.
This is where the foreign purchaser comes in; with cash amounts readily
available for that second home or for those selling up and moving abroad.
The purchaser profile is generally those close to or having reached
retirement age. When taking on a renovation project one must remember
that the system dictates that costs for obtaining planning permission
have increased in recent years.
the market seems to be functioning at a steady pace with a few serious
purchasers undertaking transactions. The most popular type of property
is still the rustic stone cottage or house and many are looking in the
interior of Galicia where prices remain more than afordable - less than
100,000 euro for a house with land in need of some renovation. There
is still a steady supply of property available but be aware; some of
the rural properties have more liabilities than one might realise.
good weather continues in northern Spain as is often the way. I always
say that September to Christmas is the best part of the year. There
are certainly a few more purchasers around and I would suggest that
this is likely to continue into 2017. One matter of concern is that
potential purchasers still seem to be taking risks and leaving their
brains at home when it comes to contracting property. One recent example
was a person who contacted me who had paid a reservation fee without
any paperwork or contract. It is fundamental not to part with money
until a proper form of contract is in place - always obtain independent
weather has been extraordinarily good over the late summer and early
autumn period. This would normally bring on the purchasing
enthusiasm of the would be foreign purchasers for property. This will
remain to be seen as the time lag between the pleasant holiday or trip
and the decision to purchase would normally be at least three or four
months. It will remain to be seen whether in February or March 2017
and beyond there will be a push to purchase. Things could be different
depending on the future strength of the pound and the post referendum
power of the pound is affecting the purchasing power of the UK tourist
in Spain, along with the power to purchase property. Many clients are
considering selling their property in Spain and taking advantage of
the relatively strong euro to repatriate their money back into sterling.
Although the pound has dropped approximately 17% against the euro and
therefore there would be a potential 17% gain turning your money money
back into sterling, it must be remembered that many property owners
are more than 17% down on their property value due to the Spanish property
crash since 2008. Perhaps if you do not have to sell you should hang
on and ride out the next few years whilst Brexit negotiations take place
and enjoy your property abroad.
official Spanish figures show that property price increases are currently
standing at an annualised rate of about 7%. This is the first significant
move since the big economic crisis which is now nearly ten years old.
The Spanish property market was badly hit during the crisis and therefore
one would expect that there will be up-ticks in value, but as usual
these increases are regionally based. In the north of Spain along the
Costa Verde most agents are reporting a fairly stagnant market and especially
in the "bread and butter" property that the average spaniard
utilises. Some agents are reporting movement within the more rural property
market which tends to be frequented by the foreign and UK purchaser
for second or hoilday homes. Foreign buyers are sniffing around as ever
but there has been a marked downturn in the activity from the UK buyer
since the referendum.
is probably with us for some time now and the politicians have to decide
how matters will be taken forward, but the short term effects are already
being seen with the pound at the time of writing around 1.19 to the
the euro. One would expect this level to be maintained unless there
is further negative news which will cause short term volatility. We
have noted that in the last week several clients have put projects on
hold pending future decisions by the UK government. Some clarity will
be required in order to assess the implications for property owners
in Spain but for the moment there has been no fundamental change to
foreign ownership status and purchasers, can in theory, continue buying.
Brexit vote is demanding a lot of media intention and apparently the
potential outcome is uncertain. The pound at the time of writing, 1.28,
has not deteriorated in a month and the opinion of the writer is that
all the experts really don't have an idea of what the potential outcomes
are. We are predicting a close vote to stay in; and that the pound could
rise up to 10% which would remain advantageous for the property purchaser
in Spain. However it is close and a vote to leave could weaken the pound
in the short term.
has been considerable discussion and media interest in the upcoming
vote on the EU membership. The truth is no one knows the implications
of a vote to leave but as previously reported new deals will have to
be struck which may have tax implications on the property owner here
in Spain. Currently there are over two million UK residents in the EU
countries outside the UK and reports suggest that half of these reside
in Spain. In the short term leading up to the vote and several months
beyond the exchange rate between the pound and the euro will be one
of the most important factors. The pound has suffered and is now at
approximately 1.27 but many argue that this level could head south.
One thing is always certain - uncertainty will stop investors taking
risks and this holds true for the property market as well. There has
been a notable drop-off in the transaction levels in the last month
or so - but don't be surprised if transaction levels pick up in the
second half of the year whether we're in or out.
seems to be the name of the game. There is great discussion amongst
expats on the implications of a vote to leave the european union. My
personal stance on the situation is that it will make little difference
to the property owner in Spain. If a property is used for vacation purposes
then it is more likely, under the current climate, that more Brits will
come on holiday to safer and nearer waters. If you live here then matters
such as health care are being discussed but if there is an exit then
new deals based on old deals will be struck across the board. Perhaps
more importantly, issues such as the exchange rate and general purchase
and ownership taxes on property will be foremost as well as the general
cost of living.
The previous month has been fraught with financial and commodity market
volatility. The price of oil dropped below 30 dollars
and the pound lost 7% or so against the euro. January and February are
traditionally quiet times for the property market and northern Spain
is no exception. However, if you are considering or have arranged a
purchase in euros then the currency fluctuations should be considered.
(please see our euro page)
will probably prove to be a pivitol year in the Spanish economy which
will be reflected in the performance of the spanish property market.
In our view the property market will likely stabilise and the pressurre
for price rises will outweigh the trend of downward movement. As ever,
the northern spanish property market will fluctuate less and with a
predicted increase in demand from the foreign purchaser the transaction
levels will start their road to normalisation. Over the past year the
increased supply of property has been notable but many of these are
still unreasonably priced and there could be pressure for vendors to
reduce to more realistic levels.
vendors of more expensive property are beginning to test the market
to see if those fairly scarce purchasers have the confidence to proceed.
One thing is for sure; some of the asking prices remain unrealistic
and as ever the would be buyer ought to ensure they have the proper
professional advice in terms of value and structure and not forgetting
that planning and other legal issues should be checked.
a generally improving economic situation in europe and a spanish economy
that is outpacing other countries there is cause for optimism. The property
transaction levels in Spain are on the increase, allbeit from a low
level, and the property market is showing signs of real recovery. Price
movement pressures are still slight due to the supply of property for
sale coming to the market but there is now, for the first time in many
years, reason to believe that prices could start to rise. The strength
of the pound against the euro over the summer has brought potential
purchasers to a point where there might be best value achieved.