The pound initially appeared to be in a strong position last week, with the currency firming through the start of the session, amidst an upbeat market mood.
Fortunately, the process for UK nationals buying property in Spain won’t change. Even though the UK is out of the EU, Brexit hasn’t changed your rights to buy in Spain or made the property purchase any more expensive.
However, new Brexit rules have created some additional hurdles, and impacted second home ownership and renting out property.
Brexit and an end to freedom of movementOne of the big changes after Brexit is that as a UK national you will no longer benefit from freedom of movement. While this doesn’t affect buying or owning property, if you want to move to Spain permanently, you’ll have to get residency, or the length of time you can stay in Spain will be limited.
As things stand, UK nationals will face the same existing rules that apply to non-EU/EEA (‘third country’) nationals.
Unless you registered as a resident in Spain before 31st December 2020, the maximum you can stay in Spain without a visa is up to 90 days within any 180-day period. The 90-day rule applies to property owners, visitors, or anyone that isn’t a resident or visa holder.
However, immigration rules are still yet to be finalised for non-Spanish-resident UK citizens. The Spanish government could still pass legislation in future that allows property owners to stay for longer, although nothing has been announced yet.
If you do intend to obtain a residency permit in Spain, a key change due to the end of freedom of movement is that you’ll need to prove you have sufficient income.
According to the BBC, to live in Spain post-Brexit you’ll need to show that you have at least £2000 coming into your account each month through an employment contract or pension, for example.
Can I still rent out my property post-Brexit?If you’re planning to buy and then rent out your property to holiday makers or long-term tenants, then new Brexit rules will have a significant impact.
While your rights to property ownership and the rental process will remain largely unaffected, as a non-EU national you’ll be subject to a higher tax rate.
Before Brexit, UK nationals – like any other EU citizen – paid a rental income tax of 19%. However, since Brexit on 1st January 2021 UK owners now have to pay a rental tax rate of 24%, the same as other non-EU nationals.
What about Spain’s property market 2021?The coronavirus and Brexit look set to cause dramatic fluctuations in Spanish property prices through 2021.
For the past few years, the property market has been in a recovery phase since its fall 30% fall between 2008 and 2014. But since then, it has generally been a good investment. After all, 2019 saw Spanish property prices rise by up to 6%.
However, according to US credit rating agency S&P, property prices fell 1.4% in 2020 during the coronavirus pandemic, but prices are forecast to rebound.
While not as significant growth before the pandemic, S&P forecast prices in Spain will rise up to 4.5% by 2022, one of the top risers in Europe.
So, we could see the market begin to surge once the rollout of Covid-19 vaccines has been successfully implemented. And with the EU setting a target for vaccinating 70% of its population by summer, we could see the Spanish property market quickly recover.
Although it is worth noting, some analysts predict a fall in property prices in Spain through 2021, and that different regions will experience greater rises and falls in prices.
How will currency volatility affect property prices?A key consideration of buying property in Spain in 2021 is avoiding unfavourable shifts in currency markets.
The consequences of the Brexit deal, which will continue to unfold over the years, will inevitably influence the Pound to Euro exchange rate. As a result, this will affect the price of property and the price of living when moving to Spain from the UK.
Getting the most out of your money has always been a challenge, but coronavirus and Brexit have driven significant fluctuations in the GBP/EUR exchange rate in 2020.
At the height of the crisis in 2020, the GBP/EUR exchange rate plummeted from €1.20 to €1.06 within a month, meaning a difference of €28,000 if you were to transfer £200,000.
While exchange rate movement isn’t always as dramatic as it was early in 2020, volatility looks set to continue well into 2021 as we wait for vaccination programmes to hopefully return some normality.
The eleventh-hour Brexit deal provided some relief to currency markets, but nationwide lockdowns and rising coronavirus cases continue causing wild swings in exchange rates.
In addition, coronavirus and vaccine developments continue exposing unresolved Brexit issues as tensions linger between the UK and EU over the Northern Ireland Protocol after a vaccine distribution dispute, and talks continue over the UK’s financial sector’s access to EU markets.
In summary, a post-Brexit EU will offer a quite different experience. But with some laws around movement and taxation still set to be ironed out between the UK and the EU, there’s still a lot of room for surprise – pleasant or unpleasant.
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