Posted: May 23, 2016
In this month’s column, 20 property pros from around the globe share their views on the possible impact if Britain leaves the EU.
The countdown has started. In a few weeks, Britons will head to the polls to decide whether they stay or leave the EU. It is a hotly debated subject. Hardly a day seems to pass without overhearing a conversation on the train or watching the latest news story on television.
And this is only the start. As we draw closer towards June 23, the arguments on both sides will surely intensify. But what does it mean for the property sector in the UK and overseas? Here 20 leading property professionals from the UK, France, Austria, Spain and Italy share their views and opinions.
Some agents suggest that it is time to outsmart the market. Bag a bargain before prices bounce back. Others, give steady advice about the future of the British property sector or the impact on their local markets.
And interestingly, since we re-launched www.everythingoverseas.com, nearly a year ago, no topic has sparked such a tidal wave of interest as Brexit. But one thing is clear: the EU referendum can’t come a moment too soon. It’s time to leave any clouds of uncertainty behind us.
1. A balanced view
“So far the risk of Brexit has primarily affected Sterling, making it cheaper against other currencies. In housing market terms that is more important in London, where overseas investors are most prevalent, but the effect is ambiguous. On the one hand, property in the UK becomes cheaper to buy in overseas currency. But on the other, any existing property owned in the UK will be worth less when converted back into local currency. Depending on what investors believe will happen if the UK does leave the EU that will affect their buying and selling behaviour. But the UK, has and will continue to benefit from its attractiveness in terms of its stable political and legal systems and its standing as a premier global city.
“For the mainstream domestic market and uncertainty about the UK’s economic prospects outside the EU, it could unsettle funding markets. That would affect the cost and availability of mortgages. On top of that if the currency continued to fall, there would be increased pressure for a rise in interest rates, also affecting mortgage costs. But if the release from EU regulations does indeed lead to stronger economic growth in the UK in the longer term, that would be good news for the housing market.”
2. Seize the day
“In recent weeks, the pound has hit a seven-year low against the US dollar and it has softened against the euro. This is as a result of uncertainty surrounding a possible Brexit. Transactions at the upper level are down around 50% due to a delay in decision-making, which has resulted in a shortage of stock being put onto the market by sellers and an unwillingness from buyers to commit to a purchase. While uncertainty can be bad for the market as investors adopt a ‘wait and see’ attitude, we expect bolder foreign buyers to see this as an opportunity. I am hopeful that we will see some shrewd European and US buyers take advantage as long as vendors are realistic in their price expectations.
“London property has always been affected by uncertainty one way or another and this is likely to continue until after the June referendum. Despite this uncertainty, it remains true to say that there is no other property market like London. This means long term investors will continue to choose the capital as a place to invest their money.”
3. Any impact on Italy?
“As the UK does not share a common currency with the EU, there will be no immediate strong impact. If this had been the case, it may have resulted in an immediate significant shift in property values. Brexit would take a long time to take effect, resulting in a long period of relative uncertainty. This is generally harmful to an economy, so a number of UK residents may wish to bring part of their assets into the Eurozone. Having said this, Italy has always been one of the favourite destinations for British investors, both for those seeking secondary homes in lifestyle destinations and for those seeking return on investment. The most plausible impact is a higher British interest for Italian real estate, especially if the markets end up pushing Sterling upwards and/or the Euro downwards.”
4. La Dolce Vita
“Brexit will represent a big change in the European and worldwide scenario. It would impact on both British buyers planning to purchase a place in the sun, such as Italy, and house hunters in the UK for years after the exit from the European Union.
“Why? Authoritative studies confirm that present agreements would be cancelled, and it could take up to two years until the end of the stipulation of new covenants between the UK and other EU countries.
“This will also involve property markets. But it is highly unlikely to affect the existing relationship between Britain and Italy, since there would be disadvantages for both countries.
“In fact, according to our data, Brits are one of the top three nationalities searching for a second home in the Italian peninsula. While Italians are the top property buyers in London, after the British themselves. So a drastic alteration of this balance would be risky for both.
“There may be some new bureaucratic practices after the referendum. So, Brits thinking of moving or simply going to Italy on holiday will then need to obtain a visa and health insurance before flying to the 'bel paese'.”
5. The French Connection
"We've just published our first quarter figures which show that, so far, the possibility of a "Brexit" has had zero effect on demand for French property. Our 2016 sales (Jan 1st - March 31st) are 40% up on last year and our pipeline of "offers accepted" and "sales exchanged" has seen a similar increase. The French market has been in the doldrums since 2008, but the Notaires de France recently announced that prices had stabilised and, in some areas, begun to rise again. International buyers have seen this and realised that it isn't going to get any better. A strong pound, low prices and cheap financing is a powerful trinity that trumps any political uncertainty brought about by the referendum on June 23.
“The continued British love affair with France is highlighted by our recent figures, where they account for 82% of all our buyers. This is a slight increase on our normal figure and proves that while talk of a "Brexit" might be dominating our TV screens, it's not actually influencing our buying patterns.
“In terms of where people are buying the answer is "all over France" but the three most popular regions this year have been Poitou Charentes, Aquitaine & Limousin. Our buyers remain families and professionals, typically heading towards retirement age and looking for a second home that they may even move to permanently.
“In summary the Great British love affair with France is more amorous than ever!"
6. Austria: take a long-term view
“I believe the effect of a Brexit on property ownership in Europe is likely to be minimal. Firstly the right to buy or own property in the EU by a Brit is not going to be materially diminished, whatever happens. There are one million Brits who own properties in the EU, so it is extremely unlikely that the host countries will suddenly impose restrictions. The Swiss and Norwegians have not been penalised and there are lots of Americans, Russians and Chinese with property in Europe.
“With regards to Austria, non EU-citizens can buy property in Austria now and in any event, you can opt to buy property through a limited company which has a registered office inside the EU. It is no longer necessary for the shareholder or ultimate beneficiary to be a European citizen.
“A Brexit would have no impact on the UK's extensive double tax treaty network, which is not based on EU membership. The double tax treaties we have signed with EU countries will remain unaffected because the agreements to ensure people are not taxed twice on the same money are made individually with each country.”
7. Can you believe the polls?
“There is currently much thought around the repercussions that would follow if Britain decides to leave the European Union. I don’t believe the British public will ultimately vote to leave and the independent polls back this up at present. David Cameron has already negotiated an interesting deal to stay in the EU, and it is in both the UK’s and EU’s best interest to gain strength together.
“I think there is currently much confusion surrounding the pros and cons of each camp. I hope both parties mount clear campaigns, so the public can make informed decisions before the referendum in June.
“Whatever the outcome, aside from the effect on the exchange rates, we don’t believe there will be a huge impact on those looking to relocate or buy property overseas. There are more than two million UK citizens living overseas, with approximately 300,000 in France and nearly one million in Spain. Not to mention the Europeans who are living in the UK of course. If the UK choose to leave the EU, a solution will put in place for the freedom of movement within Europe.
“With regards to exchange rates, the value of the pound has been affected already and I am sure we have some volatile weeks ahead while the outcome of the referendum remains uncertain. However, we have not seen any immediate impact on enquiries, viewings or sales. In fact, last week was the best week in our history (since 2005). We helped seven clients get offers accepted on properties (with a combined property value of more than 27 million Euros). Of the seven buyers, three of them were British.
“If the UK votes to remain in the EU, then it is predicted that the pound will surge in value, which would lead to more interest in French property from the UK.”
8. Will Brexit deter Brits buyers in Spain?
“The real question is how disruptive a “leave” vote might be for buyers thinking of buying homes in Spain – and on balance we think the effects of Brexit would be very limited.
“We do not anticipate any changes occurring in the Spanish market soon, off the back of a Brexit.
“If the UK vote ‘out’ then the British parliament would need to invoke Article 50 of the Lisbon Treaty in order to leave. This would likely take two years to disentangle the country from Europe. In other words: This time next year Britain will still be in the EU and British buyers will have the same rights they have today.
“In the longer term, we expect to see a bilateral deal emerge that would (at worst) make it only slightly harder for UK buyers to invest in Spain. EU membership is hardly a barrier to investment: China is outside of the EU, but it hasn’t stopped the Chinese taking an active part in the Madrid property market. British buyers would be no different.
“Regional variations: in Spain, international buyers are a diverse group and some regions will clearly be affected more than others, so we’ve compiled a list of British vs. other nationalities in each region of Spain. The effects of Brexit would be very localised. Murcia is most exposed, but even the worst scenarios would only see the market move in single digits.
“The Bottom Line: we do not see Brexit as a major problem, especially as our agents are dealing with a broad range of nationalities. The timeline is slow, the market is diverse and alternative arrangements are unlikely to dent the British love affair with Spain.”
9. Bargain hunting
“In the run up to the referendum, we are seeing two types of clients. Some clients are very aware of a potential Brexit and the uncertainty that surrounds the referendum. They therefore want to put their search on hold until the result is known. We have other clients who couldn’t care less. They want to buy, and buy now, and actually see the uncertainty surrounding the referendum as a good opportunity to get a better deal on their London property. The uncertainty is also having an effect on sterling, making London property cheaper for foreign buyers.
“Should we vote to leave, then this will create ongoing uncertainty as the UK seeks to agree a way forwards with the EU. Sterling may weaken even further, again, making London property very attractive to foreign buyers.
“Should we vote to stay in, normality will return to the market straight away and we may see a pickup in transaction volumes as a result of pent up demand from buyers that were waiting in the wings.
“In general terms, London is going to retain its attractiveness to wealthy international buyers regardless of whether the UK remains in the EU. Its cultural attractions, geographic location, legal system, and concentration of talent mean that there will always be demand for prime central London property.”
10. Summer sales?
“Brexit has caused a divided reaction among buyers. We have a lot of prospective overseas buyers who are keen to purchase in London, but are delaying their plans until the referendum and after-effects are known. This is largely down to an expectation that the sterling will weaken after the referendum, which will make buying cheaper for them when converting their currency.
“With UK-based buyers, they are falling into two camps. Our family clients are buying as normal, whether they have to move to upsize, or be closer to certain schools. We call these ‘necessity purchases’ and the referendum has had very little impact on this part of the market.
“With our other UK buyers, who don’t necessarily need to buy now, they’re holding off to see the outcome. This has resulted in very different market conditions within the micro areas of London. Prime areas, such as Mayfair and Knightsbridge, which attract a lot of overseas and non-necessity buyers, are quiet at the moment. On the other hand, other areas, such as Islington and Wimbledon, which have lots of family and ‘real’ buyers, are really busy.”
11. Peak viewing in the Alps
“The current uncertainty surrounding the EU referendum is something we’re monitoring closely, as 20% of our clientele are British. The debate surrounding Brexit has led to a handful of investors postponing their purchase until the outcome is announced. But overall sales have remained strong, with completions near the same levels as this time last year. What has worked in our favour is the extended period of low mortgage interest rates in France, with some institutions offering as little as 2.5%. This has helped fuel the market and negate some of the angst brought about by Brexit.
“Regardless of the outcome, people will still want to ski and to own their own luxury home in the Alps, so either way we forecast strong interest from the UK moving forward. We don't anticipate any changes that may come into play with a Brexit to have devastating effects on the market. However, with our French hats on, it goes without saying that it would be good to see Britain remain within the EU and continue to help make the region stronger.”
12. The great escape
“Ok it's time to face up to the facts. We live in the greatest city on this planet, and you know what? Leave or remain, London will flourish after the June referendum.
“One could be forgiven, having read the headlines of the past two weeks, that it was time you went home, kissed your partner, hugged the kids and sat around in a circle singing sad songs and waiting for the end of the world.
“The scaremongering has been quite something to watch: all manner of civilisation ending consequences have been banded about by the remain camp. Yet the leave camp aren’t much better as they have so far, singularly failed to paint a picture of what life will be like outside the EU.
“The sad reality is that we, face a choice that will be defining for the United Kingdom and its place in the world. And yet we have been given no facts, only conjecture on which to base our selection of remain or leave, and this is unlikely to change.
“However, we go into the voting booths with one certainty: that it will all be ok. For those of us worried about property, we should remember that most of the buildings that we live in or walk past have witnessed more than 150 years of history, including significant economic and political change. Yet they still stand, and they are worth more today than they have ever done in the past.
“If we remain, there is every chance that they will continue to grow in value either faster or slower depending upon the continuing machinations of the economy and the price of Sterling. And, of course, London’s continued desirability as a leading world city.
“If we leave, Britain steps up to the challenge of forging its own destiny. Yes, the uncertainty may lead to Sterling falling, but that, in turn, will help exports, not to mention boost our housing market as London property becomes more affordable to foreign buyers than it has ever been. Even if it doesn't, then, hey, the price of housing will fall, and for the first time in a generation domestic buyers might, just might, have the opportunity to get on the ladder. Something that can only benefit us as a nation in the years that follow.
“Personally, I am all for stepping out on our own; making a break for freedom. Like any great escape, there are obstacles in our path, but once we feel that fresh air on our face, we will realise we are unstoppable.”
13. A clear view
“As a member of the EU, the UK construction industry has benefitted from significant investment, as well as the provision of labour and materials. We’re at a critical juncture. In the event of Britain leaving the EU, the continued provision of a skilled labour force will be more burdensome and expensive, resulting in Britain becoming a less competitive marketplace. This would place further strain on the industry which is already facing a skills shortage.
“Leaving the EU will make it challenging for UK firms to compete both in the UK and the EU. The provision of building materials from the UK to the EU will become more costly with the likely imposition of more EU tariffs. The EU still accounts for around half of total UK exports and imports and is regarded as the largest trading union in the world.
“The benefit of EU Trade agreements in place across the world, which facilitate trade on behalf of all EU countries, will also be lost to British companies who operate internationally. There remains the possibility that these agreements could be renegotiated. However this will take time and deliver uncertainty to the market while those negotiations take place. This will result in significant opportunities being lost.”
“The UK is home to many multinational companies, with many operating their European headquarters from the Capital and beyond. If London is no longer within the EU, then it is unlikely to retain its attraction as the most attractive place to do business within Europe. London is currently Europe’s major financial hub and is likely to suffer should we vote to leave.
“Even once the EU referendum has taken place, in the event of a “leave” vote uncertainty will remain about the implications of that exit. Being part of the EU gives UK companies a competitive edge. Should this be lost, industries will need to re-evaluate how they move forward and their potential for growth. The UK construction industry will be one of the biggest losers of a Brexit at a time when significant challenges already exist for the industry.”
14. Keep calm and carry on
“Despite all the hype and uncertainty about the upcoming Brexit vote, potential buyers rarely mention it to us. Their questions are far more likely to be about property prices, areas of France and general lifestyle. The nearest we come to hearing any questions that pertain to Brexit is with regard to exchange rates.
“We know that many of our buyers who are planning to move to France, do not seem to be deterred by any uncertainty about the UK's future relationship with Europe, or more importantly, with France. There is a general acceptance that although it may be useful to have EU privileges, many Australians and Americans live happily in France without these benefits and so can we, if we have to. Those of our clients who are looking to buy holiday homes seem completely unfazed by any possible implications of Brexit.
“However, although there are some possible implications of a vote to leave the EU all of these are the subject of conjecture as it is not possible to know what the governments of the two countries would ultimately negotiate. There are more than 200,000 French people living in London alone, so France has a vested interest in protecting the rights of their citizens in the UK.
“When we take into account the fact that 75% of people buying in France are buying for a better way of life and that most of the worst case scenarios may be easily ameliorated, we have to say that if the UK leaves the EU, we do not expect to see the numbers of buyers for homes in France decline. There may be a couple of months of gloom, discussion and confusion and then we believe that all will settle down and as the great British do...we will keep calm and carry on buying homes in France.”
15. Considering all options
"As letting agents based in the South East, we have a considerable number of properties which are popular with European tenants due to their location and availability of work. If we were to leave the EU, we would be concerned that it would be difficult for workers to obtain visas and therefore reduce the demand for letting properties.
“This could cause a significant reduction in tenants and a drop in rental yields. This in turn could affect the popularity of buy to let investment by both UK and foreign nationals leading to a fall in house prices – not a situation anyone wants to be in considering the difficulties of 2008/2009.”
16. Should we stay or should we go now?
“The possibility of Britain leaving the EU and the upcoming Referendum on June 23 has naturally made British buyers and owners of property in Europe wonder what effect a possible Brexit will have on them. We have even had enquiries asking us whether it is worth getting Spanish nationality now in advance of buying a property just in case Britain exits Europe.
“David Cameron has struck a deal with the other EU leaders for changes to the British membership of Europe. On the other hand there is a call to exit Europe. While the deal that David Cameron has struck has been widely reported, what doesn’t seem to have been talked about in great detail is the effect of a full exit.
“The effect of staying in Europe with the terms negotiated with the other European countries would have very little effect for most people who live, work or visit European countries. The right to buy property, work, retire and receive healthcare would continue as it does at the moment. If we have an exit, then the effect would be that all of this would disappear but as there is already so much interaction between the countries. And so many Brits living and working in Europe and even more who own property, it is likely that it would be necessary to put into place treaties to recreate the situation that we have at the moment or at least allow those who are already in the system to continue as they are.”
17. What to expect next?
“Remain: there will be a hiatus until the Referendum. Afterwards the factors affecting the market above £1million, particularly in London, will still be there i.e. Stamp Duty, Fiscal changes to Buy-to-Let, Non Doms etc. Since prices are not rising, and falling in some places, renting is a viable option and this sector could be buoyant as an alternative.
“Brexit: the Pound will fall against the Dollar for a while and there may be a period of uncertainty whilst trade agreements are put in place where property prices may fall further. It will be a good time to buy particularly for international purchasers. Rentals could well be buoyant and if there is an inflow of investment by international companies they will need places for their employees.”
18. Overseas appeal
“We mostly deal with French Alpine property sales, and only a very small proportion of our clients were concerned with Brexit. As the ski season is coming to an end, we can say that we have already increased our sales by 30% this year, and the confidence in the quality of properties we are selling in France, is and will remain what our clients want. Our financial partners in France and UK, along with our legal supports from our network of Public Notaries in France are strong and our client’s confidence in a sound investment remains strong. We, of course, hope that the UK will remain in Europe for ease of access to the EU property market for our clients.”
19. A view from the capital
“The hot topic of the moment is Brexit and how this could affect the UK property market. Although nobody can claim to have the answer to what will happen after the referendum, the market will undoubtedly slow down on the approach to it, as it has prior to other major changes of policy. For example, we saw the same decline in interest before the 2015 general election.
“If Britain leaves the EU, it remains to be seen what exactly the impact will be, although, in our experience, the market tends to stabilise once the general public understands and adapts to major change in legislation/government. If Britain votes to remain in Europe, we expect the property market to return to normal fairly quickly. “Again, it’s impossible to predict the future, but we are confident that ‘staying’ will have less impact than leaving.”
20. And finally…
“We must never forget that the ultimate goal of the Treaty of Rome was political union among its member states. To be clear, political union by definition, means giving up sovereignty and adhering to the rules of a supra-national authority. We signed the Treaty. While this may have been a bitter pill to swallow, our relationship with Europe has always been difficult, from De Gaulle blocking our initial entry to the EEC in the 60’s (twice) to Sterling’s expulsion from the ERM in 1992 through to the Prime Minister’s very public spat with Jean Claude Juncker and everything in between. We put up with this as we wanted access to the world’s largest single market and to have a say as to how it was run.
“Post Exit, there will be a run on Sterling as our economic future would be uncertain, making our imports more expensive (increasing our balance of payments deficit) whilst making our exports and also our companies cheaper to buy. The currency will most likely be propped up (as it was in 1992) by an increase in interest rates making mortgages unaffordable and hurting the housing market. Buyers will wait (including Foreign buyers, who have traditionally supported Prime Central London) leading to a freeze in trading. Exactly at a time when higher interest rates will produce forced sellers.
“The British economy is not yet ready to take on this burden. There is no point being the captain of a sinking ship.”