Market confidence returning following Brexit
It is now over two months following the Brexit result and despite all the predictions, the UK economy seems in rude health. The only disaster not foreseen by the establishment was England crashing out of Europe by losing to Iceland. It seems the experts weren’t totally on the ball in a number of fields.
The stock market, residential property markets and manufacturing and servicing industries all seem to have taken the decision to leave the EU in their stride. However, there have been some losers most notably in the value of Sterling and the commercial property market.
For those looking to invest overseas, the drop in the value of the Pound against the Euro and other major currencies has resulted in overseas properties becoming approximately 10% more expensive in Sterling terms. A 10% drop can often mean overseas properties becoming tens of thousands of pounds more expensive. This is not an insignificant amount for your average investor.
The second area hit has been the commercial property sector in the UK. It was expected that overseas investors would be looking to pounce if sterling fell. There has been a massive inflow of overseas monies into equities and a few notable companies such as ARM falling prey to overseas investors. However, it appears that overseas investors are keeping their powder dry waiting for the commercial property market to stabilise and assess whether there is going to be a drift of companies from the UK to within the EU.
So, where does this leave the rest of us looking to buy residential property overseas?
No matter which way you look at it, literally overnight, the overseas property just got more expensive. However, it is all not doom and gloom.
Europe’s economy remains in the economic doldrums and key EU residential markets still remain below their pre-recession levels of 2007/2008. This particularly includes much of Spain, Portugal and Greece. There are still bargains available. Even France and Italy are not relatively expensive when compared to their historical values.
In contrast, UK property values have done exceedingly well particularly for those in London and the South East. For those switching from one property class (UK property) to another (continental European property) will be doing so on relatively favourable terms.
What is also clear since the Brexit result is that UK investors are investigating how to preserve their freedom of movement across the EU.
Whilst there is no guarantee of the final outcome of the Brexit negotiations, the consensus is that Brits living in Europe will have their EU rights preserved (and vice versa, EU nationals living in the UK).
Given this backdrop and a likely two-year window, rather oddly, we are actually now seeing an increase in Brits looking to buy within the EU.
The second area that is receiving a lot of interest is for Brits (and other non-EU nationals) looking to invest in EU property to gain residence and citizenship via Golden Visa schemes. Such schemes are available in Portugal, Spain, Cyprus, Greece and Malta. An EU passport can be obtained with as little as a €250,000 freehold property investment. For more details, download our summary of the schemes Golden Visa Background.
These Golden Visa programmes were originally established to generate inward capital investment following the financial crisis and to help stabilise property markets. All of the countries mentioned are now seeing significant inward investment and it is possible that these schemes could be withdrawn in the next few years.
Now, we are not encouraging people to invest in overseas property just to obtain residency but if you are looking to invest in overseas property anyway, this could be a secondary benefit worth consideration.
Whilst the drop in Sterling has not been a welcome development, our view at Escape to the Sun is that much of the Mediterranean still represents good value based on relative historical values. Those switching from UK property will also have done relatively well. There may also be valuable preservation of rights obtained if you purchase in the EU or via the very popular Golden Visa schemes in the next few years.
A final thought, our customers are not generally motivated by just price. The motives for moving overseas are to enjoy new experiences, a change in lifestyle and a better climate. So irrespective of the referendum result, all these factors still hold…..perhaps even more so.Back to news