House prices in Spain have been steadily recovering since the property market crashed between 2008 and 2014. This slow growth suffered in March 2020 when the pandemic took a firm hold of Europe, with house sales in Spain dropping 37% and mortgages by another 28%, according to Spanish real estate website Idealista.
COVID-19 makes it hard to get a good read on the direct impact of Brexit as strict travel restrictions came at the same time as the end of the transition period.
Brits have historically made up the largest percentage of foreign property investment in Spain, but data from Spain’s notaries says the number of Brits buying in Spain was already falling in 2019, with a drop of 12.7% compared to 2018.
However, interest in Spanish property from UK buyers surged by 39% in January 2021 compared to the same month in 2020, according to real estate company Taylor Wimpey Espana, suggesting Brexit isn’t really slowing down British sun-seekers.
How far will the pound stretch in Spain now Brexit is official?
The bottom line is that Spanish property is still very affordable compared to the UK, so Brexit isn’t likely to slow demand too much. But could currency be an issue?
The spending power of Brits looking to invest in Spain has decreased slightly with the fluctuating value of the pound after Brexit and COVID-19.
“There always have been, and will continue to be, adjustments in the relative value of currencies,” says Wolfendale. “It may affect your decision at the margin, but it wont stop the market beyond the short term.
“New rates become the norm and people get on with it. If you are making plans to retire or enjoy your life, you can’t wait for the currency market to be just right.”
According to Wolfendale, wealthy property investors with their sights set on buying land in Spain or a nice sea-view apartment needn’t lose much sleep over it.
He added, “UK citizens represent a significant part of the foreigners buying in Spain. And the more up market you go the less effect it has.”
Will property taxes be more expensive post-Brexit?
The amount it will cost in taxes and fees for a British person to buy or build a house in Spain would be the same as for anyone else, be they Spanish, EU or non-EU: purchase tax, notary fees, registry fee, etc.
However, if you’re planning to rent out your home, Brexit has a tax bump in store for you.
Rental income is taxed at 19% for EU residents, but non-EU citizens, as the British now are, can expect to pay 24%.
So it’s reasonable to think that British investors would at least take this into consideration, but whether or not it’s a deal breaker remains to be seen.
So does Brexit really impact the Spanish property market?
It’s still too early to tell for sure, but considering that Brexit presents very little in the way of red tape to stop Spain’s top foreign investor, there’s not much reason to think it’ll have an effect.
Currency, taxes, permits, and prices are always going to change for one reason or another, so the perfect time to buy or build, if such a thing exists, is always going to be a moving target.
“The simple fact is that Spain is such a wonderful place to have a holiday home in and retire to that people will just put up with almost anything to be here,” adds Wolfendale.
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Source: Spanish Solutions