Overseas home buyers won't be giving up on Europe so easily.
Because the sun, sea and sunshine are going nowhere!
It was all going so swimmingly well, wasn’t it? After the 2008 Financial Crisis, Spain’s housing market was well and truly making a comeback, fuelled by foreign buyers of whom Brits formed the biggest group…
Then along came Brexit.
We barely had a chance to take a breath before, along with threats of a recession, the pound crashed to its lowest for 30 years.
Despite expectations that Brits would be less likely to buy abroad amidst all the uncertainty, the opposite turned out to be true. Let’s Live Abroad was not alone in experiencing a rise in clients buying properties abroad after the Brexit vote with Spain topping the list. This could simply be because it will take more than Brexit to overturn what was already a growing trend to own a second home in a sunny place, or perhaps a rush to beat any extra taxes that buyers feared might be imposed by a cash-strapped British government on those seeking to buy a second home in the European Union.
But realistically, what changes could be expected now that Britain has fired that Article 50 gun, (something that incidentally can still be rescinded), sparking two years of frantic re-negotiations with our European partners?
Well, as far as buying a home abroad is concerned, not much. It is highly unlikely you will end up needing a visa to travel in Europe and there are still doubts that Brexit will happen at all.
In 2017, Prime Minister Theresa May’s ‘hard Brexit’ was compromised in a coalition with Northern Ireland’s DUP (remember, Northern Ireland voted to remain part of the EU). In this melee, there has been speculation that Britain could become part of a Common Travel Area which currently exists with Ireland. But even in the worst-case scenario we could benefit from a visa waiver like the USA’s Electronic System for Travel Authorization (ESTA) programme. The EU countries are Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the UK. One of the options discussed was Britain remaining part of the European Economic Area (EEA) along with Iceland, Liechtenstein and Norway. It allows them to be part of the EU's single market. Switzerland is neither an EU or EEA member but is part of the single market which means Swiss nationals have the same rights to live and work in the UK as other EEA nationals.
Rights to owning a property are not likely to change, or purchase taxes, or the council tax, or stamp duty, or VAT because of Brexit... Sunny European countries like Spain, Italy, Portugal, France, Greece and Bulgaria are all very desirable places for citizens outside the EU, like Norway or Switzerland, to buy, and are likely to remain so.
Boris Johnson is pictured in France’s daily newspaper, Liberation, hanging from a zip wire.
With regards to making an income renting out your property, the Spanish government brought its inheritance and income tax rules into line with the EU following recent decisions by the European Court of Justice, so that if a ‘hard’ Brexit was to occur, at the worst, it will mean that instead of paying tax on rental income at a rate of 19%, Brits will pay tax at the rate of 24% which could be set off against your tax bill in the UK for the same income.
With any ‘hard Brexit’, after an owner’s death a higher rate of inheritance tax could be paid on Spanish assets owned by Brits. Spain has different rates depending on the closeness to the deceased. A husband or wife will pay less than say, a nephew or niece. The higher rate could possibly be the same rate that was payable by Brits until a recent ruling of the European court forced Spain to offer European nationals the same inheritance tax breaks as it offers its own residents. More information can be found here.
The EU guarantees its citizens free movement in Spain. You can live or work in Spain if you want, and when you reach retirement age, benefit from the same access to the Spanish healthcare system as the Spanish. With a reciprocal agreement – known as S1 - EU members are guaranteed healthcare with a European Health Insurance Card (EHIC). In the worst-case scenario, if you can’t travel back to the UK for healthcare, you will need to pay.
Spain enjoys a high standard of health care and has a state-run private health care scheme you can buy from 60€ a month. Medical insurance doesn’t have to be pricey. You can compare private health insurance providers in Spain using Spanish price comparison sites like Acierto.com or Rastreator.com. If, after some years, you are settled in Spain, you can always apply to become a Spanish citizen and none of this will be an issue.
The European Health Insurance Card (EHIC)
There are said to be almost a million Brits living in Spain. Spain thrives on the income it earns from tourism and foreign investment along the Costas and elsewhere, the Spanish government is unlikely to ever want to rock this boat. It does not make any sense at all to spark a panic that would see thousands of houses put on the market and ex-pats being forced to return home to become ‘ordinarily residents’ of the UK to qualify for healthcare. The Nuffield Trust estimated that the NHS could face a bill of almost half a billion pounds if retired British people currently living in other EU countries decide to return to the UK although those figures have been shown to be exaggerated.
In the English version of El Pais it was reported: -
"Rajoy (acting Prime Minister of Spain) has asked for the process to take place "with maximum calm, serenity and predictability". It is not for nothing. Spain is one of the countries that stands to lose the most from Brexit, since there is a community of around 400,000 British expats in Spain, and nearly 200,000 Spaniards living in the UK. Nearly a fourth of all tourism to Spain comes from the British Isles; Britain is the first destination for Spanish foreign investment, and Spain has a trade surplus with Britain."
The whole Brexit project has rested on uncertainties. Indeed, it began with the High Court in London ruling that the Crown had no power to trigger Article 50 by use of a Royal Prerogative and without an Act of Parliament. French leader Emmanuel Macron took a reformist attitude to the top of the table in Europe andTheresa May spent £100 million on reducing her majority to begin her negotiations on a very weak footing indeed. As a new Prime Minister, Boris Johnson's majority continued to dwindle. The devolved nations of Scotland and Northern Ireland voted to remain, along with major cities like London. A former Advocate General at the European Court of Justice, Prof Miguel Poiares Maduro even said that Scotland could have stayed in the EU and UK adding that Scotland could have thrived under such an arrangement - just as the Scottish Government had tried to tell May.
As the costs and uncertainties are exposed, Brexit could still unravel. Already, the UK has been forced to focus on the economy (and its own debts), put businesses first and negotiate the sort of compromises that spell out a very ‘soft Brexit’.
If Britain remains part of the European Economic Area (EEA), bilateral agreements could be thrashed out to cater for the needs of Brits living in Spain mindful of the rights already enjoyed by Spanish citizens living in the UK.
Scotland votes Remain.
Many are putting off buying until this period of uncertainty dies away, but even then, an opportunity might be missed by new investors who’ve been previously deterred by an overly competitive market place. And with regards to any fall in the pound, get the best advice from a currency exchange dealer.
Setting out to improve your life by living in a sunny climate will never be without its challenges. One of those most frequently cited has nothing to do with Brexit: it is learning a new language. But you can tackle learning a new language by applying the same principles you would to buy a home abroad: Focus on what you want to achieve and just go for it!
Let’s Live Abroad 2019