To Buy Or Not Buy?
With B-Day just a few weeks away (possibly!) this is a question some of you may now be asking yourselves?
You may have spent the last few years carefully planning your retirement to warmer climes or dreaming of just dropping everything for a well-deserved break in your very own home under the Spanish sun whenever you like.
You´ve finally got all your ducks in a row and you´re ready to pull the trigger. Your finances are all in order, work is going well and the whole family is on board with the idea. Finally, there is nothing stopping you from making your dream become a reality. That is, apart from the small issue of the UK leaving the EU in less than 4 weeks´ time.
So, should you really let a little thing like Brexit get in the way of your dreams and scupper all those carefully made plans?
I personally don't think you should. But then why would you listen to me?
After all, I own and run a property sales consultancy in Spain so my advice may not be so impartial. That said, I have over 8 years market experience, have been in the exact same position myself and had to deal with the same dilemma myself.
However, at that time I would have preferred to deal with Brexit rather than a full-blown, world-wide financial meltdown!
It was one evening in Autumn 2009 and after another draining day in the office followed by the twice daily, hour-long, slog through rush hour traffic I walked into house and just thought why the hell am I doing this?
Not thinking for a moment that she would actually take me seriously, I casually asked my wife, Christine, if we should just pack it all in and move to Spain.
A few months later I´d given up my steady job as a Search Consultant, Chris had left her 2 successful hair salons in the hands of her managers, and we´d rented out our brand new family home in Yorkshire to a very nice couple called Mike and Lisa.
So just 12 weeks after the initial "idea" we were now heading to Spain with our 2 year- old daughter, Siena, to set up a property sales and rental business. Right at the outset of the worst global recession in recent history.
The exchange rate was also close to parity, the property market in Spain was going backwards fast and buyers with spare money for second homes were scarce.
Despite our apparent abysmal timing, 9 years later we are still here and completely settled in Spain. In addition, my parents also recently made the move over. They live just 100 yards down the street from us and my in-laws own a holiday home and rental property 5 doors further on from them.
So, what is the reason for all this “personal sharing?"
Firstly; we bought and made the move to Spain at a much worse time and faced far worse potential risks than those posed by the current Brexit situation. Yet everything turned out just fine.
Secondly; my advice that you should not let Brexit stop you buying now is the exact same advice I would follow myself and gave to my own family.
Whilst knowing I practice what I preach may show that my advice is at least sincere it does not mean it is necessarily right and correct for you.
So, let´s look at the actual facts and the potential issues posed by Brexit.
Will you still have the right buy and own a property in Spain as a non-EU citizen?
Being a non-EU resident will not make any difference to your right to buy or own a property in Spain. Non-EU citizens from all over the world including the Swiss, Americans, Norwegians, Indians, Chinese & Russians have all been buying property in Spain without problems for many years.
It will be just the same for Brits post Brexit and I expect, as Spain´s largest customer, they will probably make it easier.
In addition, the Spanish government actively encourage non-EU citizens to buy here and are always looking for new ways to encourage foreign buyers from outside the union. The Golden Visa scheme which gives guaranteed residency to Chinese & Russian buyers and ongoing preferential finance deals for Norweigan buyers are just a few recent initiatives.
Will It be harder to visit Spain and your new holiday home after Brexit?
The UK still accounts for the highest number of property purchases in Spain amongst foreign buyers. In addition, over 18 million Brits visit Spain and its Islands each year.
In simple terms, Tourism is Spain's 2nd largest industry and Britain is its largest and best customer.
As such it seems very unlikely that the Spanish government will do anything that could sour our ongoing love affair with their sun, sea and sangria.
As such, expect they will remain keen for us to continue moving freely and easily throughout their country with our wallets wide open.
Are there different issues to consider if you are buying a holiday home or permanent residence?
Yes. The potential perceived issues are very different if you are buying a holiday home or rental investment than if you are packing up and moving lock stock and barrel to Spain to work or retire.
If you're looking for a family holiday retreat or rental property there are just 2 key things to consider before buying. The exchange rate at the point of purchase and the ongoing annual non-residents taxation on your future property.
If you are looking to make a more permanent move then you need to look more carefully at how Brexit may affect income tax, pensions and your right to work or receive free healthcare.
Should you wait for the exchange rate to improve?
At present the exchange rate is currently quite healthy at around €1.16 to £1.00.
You could wait until after Brexit to see if the exchange rate improves. However, all economic and financial projections for the near future suggest that the UK economy will suffer after Brexit making it highly likely that the exchange will also be less favourable for British buyers. Especially if we do experience a hard Brexit and leave without any withdrawal agreement.
As a further point, despite UK buyers holding back because of Brexit, the property market in Spain continues to be driven forward by large numbers of buyers from Scandinavia and Benelux. This means property prices are also continuing to rise as they have done for the last 2 years.
This means even if you wait and do get a slightly better exchange rate the price you will pay for the property may well be higher. Nullifying any gains you may have made on the improved rate.
Will you have to pay extra property taxes as a non-EU citizen?
Whilst it is of course possible that the Spanish Government could increase annual taxes for British owners, it is seems highly unlikely that they would tax us more than the Swiss, Norwegians or any other foreign property owners. All of whom, don´t currently experience any higher charges than EU citizens.
Will you still be able to receive state Healthcare after Brexit?
If you are ill whilst on holiday or visiting Spain, you are currently covered by the reciprocal healthcare agreement offered by all member states to all EU citizens. I fully expect this to continue in future as this reciprocal agreement is in both the UK and Spain´s best interests.
If not, then it will be the same scenario as visiting any other non-EU country. You will be covered for emergency medical care by your travel insurance.
If you move to Spain, are working in the country and therefore paying National Insurance, you will benefit from same state healthcare (which is far better than the UK´s) that all Spanish residents receive.
Whilst I hope and fully expect there to be an agreement in place between the 2 governments to provide healthcare for UK retirees living in Spain we don´t yet know what this will look like.
The alternative to this will of course be to contract private medical cover.
Will you still be able to draw your UK Pension?
If you are drawing a pension you can simply draw it in the UK and transfer it over.
Before deciding to make a permanent move I would suggest you need to account for any potential changes in exchange rate. The best way if doing this is to check if you could still cope if the rate did drop and for example was a straight 1:1.
For expats with private pensions there are QROPS, which are much more tax efficient than for UK residents and these are available now.
Right to remain in the country if you become resident before Brexit?
If you already live in Spain or become a resident before there are any changes made to the agreement you are protected by the Vienna Convention of 1969. This states that the termination of a treaty “does not affect any right, obligation or legal situation of the parties created through the execution of the treaty prior to its termination." In other words, you will retain the same rights as you did before Brexit.
This is probably the key reason there has been a recent increase in UK citizens looking to retire to Spain taking residency prior to the Brexit deadline. If the deadline is extended then I believe we will see a further spurt of applications before the revised B-Day.
The current exchange rate is pretty good and we don´t expect to see it improve post Brexit, regardless of whether a withdrawal agreement is made or not. In fact, as it is expected to worsen and not improve this alone makes a very convincing argument for buying now rather than waiting.
The Spanish Government are already putting their own decree in place to assure UK citizens are looked after post Brexit and therefore keep visiting, buying properties and taking up residency here.
Looking at this and all the worse-case scenarios, there doesn´t appear to be any potential changes that would cause real significant issues. Non at least that couldn´t be resolved or easily managed.
If I was in this position and now ready to buy a property in Spain, I wouldn´t personally let Brexit stop me. However, I already made my decision 9 years ago.
"To Buy or Not To Buy?" …it´s your decision now
6 Mar 2019