Brexit: A few thoughts. What does it mean for future British buyers or expats already living in Spain?
Dear friends, clients and readers,
Following the aftermath of the recent UK’s decision to leave the European Union, we have been receiving hundred of enquiries from people who are becoming increasingly concerned and anxious about how their rights as British expats will be affected by The Brexit.
Consequently, this article aims to provide some useful advice to new private or business investors, as well as to the almost one million Expats Brits estimated to be living in Spain, who are now affected by this unexpected situation.
1) In the first place, what does the referendum in practice means?
Bear in mind that this referendum is advisory and non-binding, and British politicians will now enter a protracted period of negotiations over what to do next. Subsequently, it is not a foregone conclusion that Britain will completely leave, because there must first be primary legislation, and if it does, it is likely to take at least two years, and many more years to settle the resulting changes in trade agreements.
At the end of the day, I totally agree with the view expressed by 120 Barristers in the UK, who correctly consider that the referendum did not concern the negotiating position of the UK following the triggering of Article 50 of the Lisbon Treaty, nor the possibility that no agreement could be reached within the stipulated two year period for negotiation, nor the emerging reality that the Article 50, negotiations will concern only the manner of exit from the EU and not future economic relationships. In other words, all of these matters should need to be fully explored and understood prior to the Parliamentary vote.
I strongly recommend reading the full text of the Barrister’s opinion at the following link: http://thejusticegap.com/2016/07/barristers-call-parliamentary-vote-brexit/
2) What does the decline in The Pound involve?
I am of the opinion that it is still early to predict whether the fall in the value of the Pound will continue in the long run, but worst-case scenarios had the Pound falling by as much as 20-25%, it is likely that the Bank of England and European Central bank might intervene in order to prevent a worsening of the situation.
On the other hand, it is undeniable that Europe without the beneficial influence of the UK will be weakened, so it remains to be seen whether the situation might also affect negatively the Euro currency, since other European countries could also start considering the possibility to follow now the English example and leave the EU as well. (the so-called “domino effect”).
It is true that the fall in sterling together with the menace of an economic downturn in the UK plus uncertainty over British rights to live abroad might have a negative impact on Spain’s property market, in the short term, at least.
3) Will the property market be affected in general?
NOT LIKELY IN THE LONG TERM. British buyers are unlikely to feel the impact for some years. Perhaps by then, the Pound might be stronger than the Euro. Subsequently, as indicated before, I am convinced that at some point, new beneficial trade agreements between Spain and England will be reached that will reactivate the property market, allowing many Britons again to pursue their dreams of buying a property in Spain. In fact Britain will most likely become part of the European Economic Area (EEA) in a similar way to Norway and Switzerland. (Iceland wants UK to join Nordic alliance of non-EU countries).
At the moment, many Norwegians are buying properties in Spain.
4) Is it still possible and advisable to buy a property in Spain?
YES. You can buy a property as a non-resident, like any other European or Non European citizen. I firmly believe that Spain will remain the most popular destination for British second-home buyers in the foreseeable future, due to the high risk, geographical distance and culture barriers of investing in other countries like Turkey or Greece for example. Spanish property remains and will always excellent value basically due to its fantastic weather and geographical proximity to the UK.
As a matter of fact, we are currently helping new clients absolutely determined to pursue their dream of having a property in the Costa Blanca, as they wish to become fiscal residents as soon as possible, and so far, we are not encountering any difficulties at all with the Spanish authorities. Likewise, we are dealing with other two property conveyance cases where both the buyers and Sellers have agreed to pay the purchase price in Pounds instead of Euros,- which is totally legally accepted way of payment,- in order to avoid the fluctuation of the Pound.
Subsequently, according to our recent experience, we are able to confirm that buying a property in Spain, (either as an investment or second residence), still remains an attractive option for both non-residents and/or residents alike.
On the other hand, if we consider The Brexit from the aspect of fundamental rights of Brits already living and working in Spain, I am of the opinion that expats in Spain will retain their “acquired right” to live in Spain and own property here and not to have their work contract terminated. (Despite the fact that the application of art 70 of the Vienna Convention of 1969 is highly questionable and it has been rejected by some Lawyers and Jurists).
In any case, the Spanish Government has not made any pronouncement yet, with regards to other rights, such as healthcare, pension, fiscal rights or benefits. Subsequently, your EHIC card will still be valid, as The European Health Insurance Card provides reciprocal health cover for travellers in the EEA. Likewise, if you move to Spain now, you will get full healthcare, as reciprocal healthcare arrangements will remain in place for at least two years while Brexit negotiations are in motion.
In fact, European countries are keen to ensure that their citizens enjoy healthcare while travelling, so it’s entirely possible an EHIC agreement (or something similar) will remain in place even after Brexit.
Another important issue to consider will be a potential change in inheritance and tax laws. Nevertheless, the double-taxation treaties are NOT made in the EU. As a result, Brexit has no effect on the existing tax agreements between the UK and Spain, and Britons will continue to enjoy the benefits of European citizenship for some years, and can expect a broadly similar deal once Brexit is complete.
In short, what happens next? What would be the most recommended precautionary measures aimed to mitigate the negative financial effects of The Brexit?
First, the most visible effect will be exchange rate fluctuations at least in the short term. Nevertheless, buying in Pounds would be an excellent way to avoid this problem.
Second, it would be highly advisable that property owners might reduce the prices of their properties in around 15-20%. That measure would be an excellent counterbalance to the negative effects of a possible continuous fall of the Pound.
Therefore, if you wish to buy a property in Spain, negotiate hard the price.
Third, in order to keep attracting British investors, the Spanish Government should seriously consider reducing the stamp duty tax at least to 7-6% ( currently at 10% in the Valencian Region)
Fourth, if you already own a property and you live in Spain on a permanent basis, it might be beneficial for you to apply for Spanish residency or even Spanish nationality.
In conclusion, if you are an UK investor, be reassured that we’ll advice you about the best way to acquire a property in Spain, with the most favourable financial conditions.
Likewise, if you are already one of the thousands of expats living in Spain, who is worried about how the Brexit is going to impact your rights and finances, you might want to get in contact also with a reputable law Firm-like “Ricor Abogados&Solicitors”,- to discuss through the most suitable options available to you. Considering that this situation of uncertainty will likely continue in the weeks or months ahead, analysing all the options and seeking expert advice in advance, before making any major financial decisions may prove advantageous. We will be most delighted to advise you where you have the correct paperwork and where you stand on getting Spanish residency or nationality.
Finally, I firmly believe that the UK is one of the greatest countries of the world, not only in terms of its economy, but also from a legal and cultural point of view as well. The economy always fluctuates but we must never forget that despite this recent setback with the referendum, the UK is the country that probably best upholds the Rule of Law without parallel in any other European (or non European) country, so I am of the opinion that as long as the British insight and the vitality of its culture remain, I am convinced that things will work out okay in the end.
Thank you very much again for your attention and should you have any more specific question or enquiry about this important matter, (remember that this article is intended to give just a general overview of the situation and not specific advice), please do not hesitate to visit our website (www.ricorabogados.com) or contact us by E-mail to firstname.lastname@example.org, and we will be glad to be of assistance to you.
We look forward to giving you a personalized service and the benefit of our “know how”, with a totally proficient and always cost effective advice.
Mr. Oscar Ricor Morales.
“NON-PRACTISING ENGLISH SOLICITOR IN ENGLAND AND WALES”, under the “Solicitors Regulation Authority” (SRA) SRA number 519196 and practicing Spanish Solicitor