During the economic contraction and currently, in Spain, foreign home buyers play a very important role in the real estate market. In 2015, of every 100 homes sold in Spain, 20 were bought by foreigners. And of these, 21% were British, meaning a 4% of the quota.
According to UVE Valuations, home purchases by British citizens in Spain fell by 12% of the total in the fourth quarter of 2021 and the first quarter of 2022, which represents a drop of 12 points compared to the figures before Brexit.
The areas most affected by Brexit when buying a home in Spain are, above all, the Costa del Sol (Málaga), the Costa Blanca (Alicante) and the Canary Islands. However, the British are still the ones who bought the most houses (9,5%), despite the historic lows of late 2021 and early 2022. Closely followed by the Germans (9%) and the Moroccans (8.3%), rising investors in recent quarters. However, and despite the worst omens, the “mass” abandonment that was so feared, especially on the Costa del Sol, with the entry of Brexit, has not occurred.
The fact that the United Kingdom is no longer a member of the European Union It has tax consequences for home buyers in our country. According to Avalanding, Brexit complicates the purchase as an investment less than the acquisition of a home to spend time in Spain. Although it is true that the application of the Taxation prevents the British from deducting maintenance costs and other expenses, of the homes that they have rented, which represents a disadvantage compared to a buyer from the Union of almost 24% on the gross rent in Spain, since the European citizen can deduct the expenses before paying taxes.
The future prospects seem promising since sAccording to the opinion of expert economists, neither the limitations of Brexit, nor The pandemic will affect British home purchases in Spain. Although they highlight that the investments will demand new services in homes, in accordance with the new demands of the pandemic, larger spaces with light, terraces, gardens...
Economists and real estate, also They believe that once the uncertainty of the pandemic is over In Spain there will be an increase in second home buyers, Europeans and also British. These experts point out the benefits that bilateral agreements between Spain and the United Kingdom would bring that mitigate the impact of Brexit and facilitate mobility between both territories.
According to official data from the College of Registrars, the British, who have traditionally led the purchase of houses in Spain very prominently, continued in first position in the second quarter of 2021, but registered a collapse and a historical minimum, accounting for 9.5% of total purchases, with the Germans hot on their heels for the first time (9%).
The progressive decline comes from afar and is not only due to brexit, but without a doubt the exit from the European Union has accelerated the collapse. In fact, the British represented almost 35% of home purchases in Spain by foreigners in 2010, with an advantage that year of more than 25 percentage points over the French and Germans. Now, in the second quarter of 2021, the distance between the British (9.5%) and the Germans (9%) has been reduced to almost equal.
Brexit is going to represent a slowdown in the short and medium term in the purchase and sale of homes by Britons. The Costa del Sol, the Levante and the islands will be the most affected areas
The British exit from the European Union (EU) will produce, in the short and medium term, a slowdown in buying and selling housing in Spain by British clients. This will be due, according to Jesus Lorid, director of the Real Estate area of KPMG in Spain, both to the fall of the pound in recent years, “which has made housing prices more expensive,” as well as the emergence of a less favorable legal framework for these buyers, “because they are no longer community citizens.”
From this organization they point out that the areas that "without a doubt" are going to be most affected by the lower demand from British buyers will be the Costa del Sol, the Balearic Islands, the Canary Islands and the Levant. This forecast, for the Andalusian case, is confirmed by Álex Radford, partner of My Lawyer in Spain, who assures that both in towns in the interior of the province of Malaga and in coastal towns, "such as Antequera, Oria and Marbella", the number of sales can fall "between 20% and 40%."
The need to have a residence permit is the key to understanding the loss of British appetite for Spanish housing. Requirements need to be relaxed
According to sector experts, Brexit does not mean any change in the home buying and selling process and does not have any impact on the operation costs. However, the decision of the British to purchase housing in our country is conditioned by the need to have a residence permitWell, as he points out Radford, "otherwise they can only spend 90 days in Spain within a six-month period."
From this organization they indicate that this restriction “limits the shopping appetitea” on the part of this group, “who wants to have the option to spend more time here without restrictions.” In fact, Radford believes that measures should be put in place in this regard, which has led him to ask “both governments to soften the residency requirements in Spain". In this regard, this lawyer states that Norwegian citizens are not part of the European Union either and, however, "they have the same residence conditions that the British had until last year."
The residence permit and the limitations that it entails for the acquisition of housing by British people in Spain are also highlighted by Raisa Venermo, founding partner of Avalanding. Specifically, this expert maintains that the Brexit does not complicate the desires “of those who only want to buy to invest”, something that does not happen with buyers who want to live or spend time in our country. As possible solutions, from Avalanding They advance that those who purchase a property worth more than 500,000 euros “have the option of requesting a Golden Visa” and that, if these are clients with purchases lower than this quality, alternatives can be developed “such as non-profit visas, in the case of retired people.”
Britons who already have a home in Spain will be affected by a new tax system, with which they will have to pay more taxes on their properties rented out
The fact that the United Kingdom is no longer a member state of the European Union also has consequences in terms of taxation for those British citizens who own a home in Spain and intend to make your investment profitable through rental. About, Venermo declares that, as they are not part of the EU, the British cannot deduct the expenses of the property, "such as some works, changing the boiler or other similar arrangements."
From Endorsement they advance that british owners They now have to pay a 24% on the gross rent in Spain, “which is much more than a European citizen would pay”, since a European citizen can deduct the aforementioned expenses before Paying taxes. In this line, Radford requests that the Spanish Government lower this tax rate to 19% “for third country nationals”.
Neither the limitations of Brexit nor the uncertainties of the pandemic will stop the purchase of British housing in Spain, since investment from this country will continue to play a predominant role.
Despite the uncertainties produced by Brexit in recent years, and the consequences that the UK and EU divorce will have in the short and medium term in the Spanish residential market, Lorid bets because the British will continue to have “a predominant role” in the market home purchase and sale by foreigners. No however These are clients, this expert asserts, who will demand new services in their homes, “in accordance with the new demands of the pandemic", so the operations that are closed will have as their object properties with greater spaces, light, terraces or gardens.
Carlos is of the same opinion. Smerdou, CEO of Foro Consultores Inmobiliarios, who predicts that once the pandemic ends, Spain will experience an increase in second home buyers, “fundamentally European, but also British.” Thus, this organization believes that “the most logical thing” is to negotiate bilateral agreements between Spain and the United Kingdom to improve the conditions of the citizens of both countries, which "will help keep the impact of Brexit low and facilitate mobility between both territories."
