What Post Brexit Means For International Property Buyers
For Britons looking to buy property in Europe, the impact of Brexit and buying property abroad on international property buyers must be carefully analysed as its many twists and turns have made the process even more difficult and can have huge implications.
It’s always vital when planning to buy a house abroad, making overseas investments, or even applying to emigrate, to work with key professionals who can guide you through the process.
Even the most experienced investor can benefit from a trusted guide – explaining the economics and legalities of the situation; alerting you to how markets are moving and what it means for your money; and identifying and addressing where both the risks and the opportunities lie.
Halo Financial has talked with leading international property professional, Peter Robinson, Chief Executive of international property trade body, the Association of International Property Professionals (AIPP) about Brexit and the implications for buying, owning and selling international property.
Brexit impact on international property
Mr Robinson discusses the implications of Brexit on international property, including the buying process, living overseas and on the industry.
He says, “The overseas property sector is in for a bumpy ride over the next five years” as the ramifications of Brexit play out. As a result, the AIPP wants to ensure that the rights and protection of British-resident owners of a foreign property – estimated to be more than one million – are included in government considerations over Brexit.
Will Brexit discourage international second-property buyers?
In the short term, Brexit-triggered currency movements have negatively impacted British buyers’ ability to afford a foreign property in popular destinations in Europe and the USA. This appears to be affecting discretionary buyers of holiday homes more than the older buyers looking for retirement properties. A survey by Halo Financial reinforces this, as it found that currency volatility has had a negative impact.
Before the financial crisis in 2008, the pound-to-dollar and pound-to-euro exchange rate was strong. One pound was worth as much as 1.52 euros, compared to the 1.08 that it is trading for today (at the time of writing). The GBP/EUR exchange rate has endured endless volatility since the Brexit campaign with the coronavirus pandemic only making matters worse and low currency exchange rates may be off-putting for those looking to buy a property in the EU after Brexit.
How did the Brexit volatility affect the overall cost of international property?
Challenges around freedom of movement, which will be a factor in a number of European elections set for this year, may result in restrictions or at least onerous visa requirements. However, Mr Robinson states that, “it would be very hard to see British residents refused entry visas to visit their foreign property (contributing, as they do, to the local economy), but some will certainly no longer feel ‘welcome’ in their host country.”
Will Brexit persuade more UK citizens to emigrate?
“Online searches from the UK to move to such countries as Australia, New Zealand and Canada have certainly spiked following the referendum,” says Mr Robinson. However, he believes the choices for emigration are often personal, “the reality of being out of the EU will certainly motivate some to move country – but perhaps only being a catalyst to those who had been considering such a move anyway.”
Indeed, Halo Financial’s survey found that 62% of buyers said “no” or “not really” when asked if Brexit influenced their overseas property purchase.
Besides Brexit impact on international property, how will this affect visas, tax, passports, currency, and migration?
There are many potential political ramifications, especially due to the UK’s desire to opt for a points system, similar to the design in Australia. From January 2021, there will be no free movement between the EU and the UK and although it is not clear what Britain’s immigration system will look like, it could lead to exit from the single market.
Part of the agreement between the EU and the UK was a settlement scheme which gives British citizens the right to reside, work, study or open a business within the European country they have emigrated to. It does not however, include the right to freedom of movement within the EU. Access to social security, benefits and working rights might also change for individuals looking to buy a house abroad or work abroad.
The Potential of Brexit impact on international property owners
|Potential change||Implications for overseas property owners|
|Visas||Visas may be required to visit some European countries||Could be expensive or administratively difficult as countries impose reciprocal limitations|
|Tax||Existing tax harmonisation treaties will need to be re-thought
and re-negotiated – avoiding the jeopardy of being taxed twice
|Financially hard-pressed EU countries could hike taxes on foreign property owners to raise revenue|
|Passports||New passports will have to be issued||Reminder of UK’s solo status for emigrants|
|Currency||Pound may rise against the Euro if the economy improves||Unlikely that currency controls restricting the amounts that individuals can transfer between countries will be put in place|
|Migration||Freedom of movement a key issue in national elections throughout EU||European host countries may increasingly view foreigners with suspicion|
However, Mr Robinson believes that stemming the flow of cash from British expats would not be pragmatic. After all, “more than 1.2 million British expats live in (mainly) Spain, France and Ireland with an estimated one million plus British residents who also own property in the EU and visit regularly for holiday or retirement purposes. It would be folly for an EU (political) decision to dis-incentivise these 2.2 million British people spending their money in EU countries.”
What protection would you like to see in place for UK property buyers overseas?
“What the AIPP would like to see is a genuine engagement with the UK government to ensure it fully understands the key issues and vulnerabilities British resident owners face through, what promises to be, some tough Brexit negotiations,” says Peter Robinson. The general view is that, above all, the AIPP does not want to see British citizens ‘punished’ by political expediency.
The AIPP sent a document to Minister for Brexit, the Rt. Hon David Davis, M.P. examining Brexit impact on international property and outlining 20 Key Points of Issue facing British owners of a foreign property in the European Union.
AIPP’s 20 key points for British property owners in the EU
- The ability to visit European countries: i. Visa requirements, ii. Time limits iii. Restrictions iv. Travel arrangements (driving, flying, ferry, boats etc) v. Ability to take items in and out of the country (own assets, goods bought in a country etc)
- The ability to travel freely within Europe once you are there: i. Visa requirements ii. Time limits iii. Restrictions iv. Travel arrangements (driving, flying, ferry, boats etc) v. Ability to take items in and out of the country (own assets, goods bought in a country etc)
- Ability to bring goods back to the UK freely and take goods to Europe: i. For example, taking your furniture to your property in Spain, bringing back household items bought in France etc. – whether for personal use or for business
- Ability to own property in EU countries: i. Restrictions on where you can buy? (e.g. country or even within a country – military sensitive areas for non-EU citizens, borders etc) ii. Restrictions on how many properties you can buy? iii. Ability to rent out / restrictions on rental iv. Permission needed to buy? v. Do you have to be resident or can you also be non-resident? vi. What does ownership entitle you to, if anything, over and above just a normal visit to the country?
- Ability to live in Europe: i. Work a) Requirement for work visas? b) Limit on length of time? c) Ability to set up a business d) Ability to be shareholder / director of a company ii. Retire after retirement age iii. Retire “early”
- Harmonisation: i. Ability of non-EU spouses of EU citizens to enter & reside, travel without visa
- Implications on double taxation treaties: i. Capital Gains Tax ii. Income Tax iii. Inheritance tax
- Treatment of taxation generally: i. Impact on tax harmonisation; local taxes on foreigners reduced to same level as for nations (e.g. CGT in Spain) ii. Additional taxes on non-EU citizens
- Inheritance: i. The harmonisation of Inheritance Laws within Europe in August 2015, which has made this area much easier and fairer
- Consumer protection laws i. For example, Timeshare legislation, advertising standards, enforcement etc
- Enforcement of judgements / debt collection between the UK and the EU
- Lending laws/mortgages
- Healthcare: i. For visitors to EU a) Free emergency healthcare (EHIC) b) Non-emergency treatment/necessity for travel insurance ii. For people working in EU a) What is included / free b) Necessity of insurance? c) The requirement to work there? iii. For people retired but under retirement age (which retirement age – UK or EU Country?) a) What is included / free b) Necessity of insurance? iv. For people retired but over retirement age (which retirement age – UK or EU Country?) a) What is included / free b) Necessity of insurance?
- Cross border transactions (for example agents selling property): i. What laws in which countries apply? ii. What happens if the laws conflict? iii. Increased red tape due to, for example, requirement to register for anti-money laundering in two jurisdictions? iv. Consumer v. Taxation on sales vi. European Professional Card / Licenses to sell property in EU?
- Retirement: i. Pensions; a) Ability to have a pension paid directly to that country b) Increase in pensions in line with inflation or static at date of moving? ii. Voting rights
- Ability to apply for citizenship of EU country
- Cars (and other vehicles including boats and planes): i. Travelling within EU ii. Ability to export a personal car to another country. How long do you have to re-register iii. Insurance issues when travelling in Europe iv. Enforcement of traffic legislation between countries
- Pets: i. Ability to travel with pets / Pet Passport
- Administration: i. Ability to have official documentation in a language of the EU / right to have documentation in English
- Banking: i. Ability to have a bank account / open a bank account ii. How much money can you have in account iii. Restrictions on transfer of money iv. Protection of money in accounts v. Ability to open an account in one country for use in another when the bank has a branch in UK vi. Ease/harmonisation of AML – Anti Money Laundering Regulations
The AIPP focuses on two key aims: Trade – Business Development & Best Practice and Buyers – Education & Protection.
AIPP has 370+ corporate members (2,500+ people within) in 31 countries around the world, including estate agents, developers, lawyers, banks, currency, technical advisory and other cross-border professionals.
Exchange rates and Brexit
The team at Halo Financial is also closely following and analysing the implications of Brexit for its private and business clients.
Founding Partner, David Johnson explains, “The general view is that the exchange rate has influenced some decisions about property purchases or emigration to countries such as the USA, Australia or New Zealand. On the other hand, with the passage of time since the vote, there has been a greater demand for currency exchange services from UK businesses, who are seeking to manage their currency risk more proactively to offset the movements in the markets and protect the bottom line.”
Overseas property professionals recommend that buyers always carry out appropriate due diligence and take advice from real estate, legal and financial experts.
Halo Financial’s free report, Vision: Brexit explores in more detail the implications and impact of Brexit for individuals and businesses. Contact the Halo team today to discuss your Brexit concerns and see how we can help.