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Optimism Remains in the Spanish Property Market After Brexit Spain News

British Prime Minister, Theresa May triggered Article 50 on 29th March 2017. Faced with negotiations for Brexit spanning several years, there have been concerns of a knock-on effect on British purchases of Spanish property. Many Brits may well be feeling cautious now that the UK is preparing to withdraw from the EU, but among the trepidation there are a number of reasons to remain optimistic.

3 Reasons the Spanish Property Market Will Bounce Back

Reason #1 - Pound to Bounce Back After the Election?

In-spite of dire predictions, it seems the pound hasn't fared as badly as people feared. In fact, since Mrs May announced a snap general election on 8th June 2017, the pound has recovered a little and the exchange rate between the pound and the Euro has continued to strengthen.

While the FTSE has struggled in a wildly fluctuating market, the pound has surged to a six-month high, jumping by as much as 2.37pc to $1.2904 against the US dollar.

After Mrs May's announcement the pound also made ground against the Euro, hitting a four-month high of €1.1936, up 1pc on the day prompting Deutsche Bank, to describe the early election as "a game-changer" for the pound. Meanwhile, other economists and strategists stated that the move by May was 'clever', lessening political uncertainty and reducing the likelihood of a 'hard Brexit', because if her strategy paid off, May would have a mandate that could strengthen her hand, and smooth out the transition as Britain exits the EU.

Chancellor Philip Hammond described the bounce in the pound as "new found confidence that the markets have in the future of the country, under a Conservative government with a new mandate." The Daily Telegraph described Theresa May's decision to call the snap election as one of the 'Defining moments for the pound since the Brexit vote'.

Reason #2 - Brit Holidaymakers Will Continue Their Love Affair with the Spanish Costa's.

Spain is still the most popular destination for British holidaymakers and this will no doubt continue for many years to come, meaning Brits will continue to vacation in the country and buy holiday homes. In the ten years leading to 2016, the numbers of UK visitors increased, hitting a record over the summer of 2016 (with an increase of 12% on 2015) even after June's Brexit vote and the decline in the value of sterling against the Euro.

And the upward trend is set to continue. The number of early bookings for Brits is up again – 16% on last summer when 17.8 million people descended on Spain. Concerns that Brits would stay at home seem to have been misplaced. Security worries in Tunisia, Turkey and Egypt mean people want to stay closer to home, and Spain is still the destination of choice. Throw in a short flight, the gathering pace of the pound against the Euro, and guaranteed sun, and Spain is a big winner for tourism in 2017.

Reason #3 - British Buyers Are Just Adopting a 'Wait and See' Approach

Of course people are concerned about what lies ahead, but Brits are notoriously stoic and fond of adopting a 'wait and see' approach to life. They may place property purchase on hold now while they observe a period of uncertainty, but there's no reason to think it will last forever.

Some Spanish property companies have voiced concerns that there has been a decline in enquiries since the referendum in 2016, and this concern seems to be most apparent in the over 55 age group. It is this generation who have the most to be concerned about because they fear the impact Brexit will have on property rights, mortgage lending, the mechanics of purchasing in Spain and the situation regarding healthcare and pensions. Will there still be a reciprocal healthcare arrangement in Spain post-Brexit, for example? So far the British government have been unable to offer clarification and this worries many potential older purchasers.

Figures suggest that the number of homes in Spain sold to British buyers has slumped by up to 16% after steadily increasing since 2011. In 2015, a strong pound led British buyers to purchase almost 10,000 Spanish homes, up 42% on 2014, meaning Brits had a 21% share of the number of homes bought by international buyers. The most popular areas for purchase include the Costa del Sol and Costa Blanca, along with Murcia, the Canary Islands and the Balearics.

Unfortunately, since the referendum, house purchases by Brits on the Costa del Sol and the Costa Blanca have fallen by around 50%. Uncertainty about Brexit and the weakening pound have been factors.

However, given the signs that tourism remains buoyant and the pound is strengthening, it is likely that the property market will remain resilient and demand for homes in Spain will remain high among Brits. Spanish property experts have shown that the property market tends to fluctuate along with the pound, and now that sterling is rising, there is reason to be optimistic, they feel. In any case, many other European nations are picking up some of the slack, with Spain becoming increasingly popular among Germans.

Analysis of the Spanish Association of Land Registrars recently published market report, demonstrates that overall the Spanish housing market was up 14% in 2016, with home purchases by foreign buyers up 16%. The British lead the field in house purchases ahead of Germany and France, meaning that even after Brexit, the UK still have the largest market. While British demand is down overall, there has been a notable increase in demand from the Netherlands.

Of course, no-one can predict what will happen in the next six weeks, six months or six years. Everything is up in the air and UK citizens continue to worry about how 'hard' a Brexit the UK will experience. It all depends on how well negotiations go, but the long term picture is positive and it is highly unlikely Brits will desert Spain en-masse.