The bars of the Costa del Sol frequented by the British were before 23 June abuzz with discussions which centred on whether or not to stay in the EU. Since then, they have been left wondering, what now? “They see themselves as victims,” said Anna Taylor, who has been a resident of Torremolinos since the eighties and is head of a rental company for holiday homes. “In the rental market I have not noticed any impact yet, but currently they are not thinking about buying or selling”.
Although it is early to measure the impact of Brexit on home buying decisions of the British in Spain, several agencies consulted agree that there has been a halt in operations on the coast since last June. Uncertainty about the value of the pound against the euro, if it will continue to depreciate or if it will bounce back, is delaying purchasing decisions. But doubts about whether the British residents in Spain will no longer have access to public health care because of Brexit has led to caution when considering purchasing a home. “There is fear of losing health care as many regular buyers are retirees,” said Taylor.
“I have noticed a drop in home ownership by the British” highlighted Pia Arrieta Morales, director of Diana Morales Properties-Knight Frank in Marbella. “I began to notice late last year, I think for fear of possible repercussions of Brexit”. “In Marbella the British have traditionally been the most active in buying homes, but in the last year Norwegians, Arabs, Belgians and Dutch buyers have grown, the market is now more diversified,” she explained. “Talking to British customers what they tell us is that it is a matter of confidence, as they are now in shock, you have to take more time to definitely know how Brexit will influence things.”
The pound has depreciated by more than 18% since June the lowest it’s been in 168 years. Goldman Sachs estimated in February that if the UK left the EU, the pound would lose between 15% and 20% of its value against the European currency. The British Chamber of Commerce recently published its first forecast since the referendum held in June, predicting a growth in UK economy for this year of 1.8%, less than the 2.2% estimated last March, due to Brexit, and 1% for 2017, instead of 2.3% previously anticipated. Sophie Tahiri, analyst at rating agency Standard & Poors (S & P) warned in a report that the macroeconomic data for August which pointed to a rebound in the British economy after the vote for the country to leave the EU was a mirage. “Any event leading to the conclusion that the rebound in August has returned the British economy to normal probably is best shown as premature or even as a mirage, at least in the long term,” she wrote in a report analyst at S & P. This has now been evidenced to a degree by the flash crash of the pound earlier in October which plunged it to almost parity with the euro.
“Home sales from midlevel –high value properties have remained stable but the impact has been felt for properties below 150,000 euros,” said Mary Monastery, director of Aguirre Newmann in Andalusia. The executive of the real estate consultant states that it is still too early to know exactly what will be the impact of Brexit on home buying decisions on the Spanish coast, but notes a surge of operations performed by the Dutch, Belgians and Norwegians.
Paloma Pérez Bravo, policy consulting firm Engel & Völkers stated that she has noticed a drop in home ownership by the British but still has a steady flow of British buyers.
The slowdown in home buying decisions on the Spanish coast by British, is not only affecting individuals. Also big investment operations are being delayed by uncertainties generated by Brexit. A recognized expert in the housing sector pointed out that a British investor, who prefers not to be identified, has suspended an investment operation on the Spanish coast.
“Before the announcement of the referendum, Brexit was already having an effect in the decline in the percentage of British clients,” mentioned Fernando Elvira, director of corporate marketing Aliseda Real Estate, Bank Popular. “We believe it is still too early to make a forecast about how the UK’s exit from the EU will affect the Spanish housing market,” said the executive agency of the Spanish bank, which has for sale in Málaga over 30 housing developments with prices between 50,000 and 350,000 euros. “What is certain is that, despite the demand for British citizens temporarily slowing down, the Costa del Sol is for them a destination that has no competition.”
Between May 2015 and May 2016, for the first time since 2007, the supply of new housing on the Costa del Sol rose by 4.87%, with the number of available housing units increasing to 15,555, according to the Report of the Residential market in 2015 for the Costa del Sol, prepared by Aguirre Newman. Of the total housing, 31.6% of new construction are unsold, compared with 32.3% in the previous period. Between May 2015 and May 2016, the sale of 49 new developments were recorded, almost 69% more than in the previous review period on the Costa del Sol. “This data shows the consolidation of the growth trend in the residential market for second homes on the Costa del Sol, since the development activity for the last seven / eight years has been very low and in some areas just existing,” he explained.
The consultancy predicts that prices of newly constructed multifamily housing will experience an increase between 8% and 10% in towns like Marbella, Estepona and Casares.