This is our 10th Quarterly Report. We have kept it brief and specifically relevant to the locations where Survey Spain is especially active.
As part of the research we have identified a number of wider and national property comments.
Votes and Results
- Brexit is the biggest item to have hit the market. Prior to the vote on 23rd June 2016, the £ sterling fell slightly, but the principal effects were in potential buyers waiting for the vote before purchasing or committing themselves to purchase, some with a clause permitting them to pull out of the contract in the event of the UK voting to leave the EU.
- Since the vote there has been a marked drop in British interest, evidenced in this office by 3 pre-acquisition building surveys being cancelled the day after the vote.
- Foreign exchange companies report that they have experienced a considerable drop in enquiries from UK, but many enquiries from Costa del Sol to transfer funds into sterling.
- After the vote, the exchange rate dropped by approximately 10% and has maintained that low-level, making property purchase here by sterling buyers that much more expensive.
- However, for sellers wishing to go back to the UK, they are now going to achieve 10% more sterling when they sell. Accordingly, some sellers indicated that they are prepared to drop their asking price and/or permit negotiation on that price.
- Whilst the British market is the major one in some areas, it is not by any means the only one and thus buyers from other currencies will have found more bargains.
- The end result is likely to be a continuing reduction in UK buyers, both due to volatility in the exchange rate, but also, for those intending to take up residence, uncertainty with regard to health care, working rights, tax levels, etc.
- The political situation in the UK has stabilised slightly with the appointment of a new prime minister who has stated that “Brexit means Brexit” and therefore the perception in the market will be that it is something that we have to deal with. However, there could still be legal and political challenges to it so in addition to the uncertainty regarding the eventual economic environment for UK passport holders, there is continued uncertainty as to whether the UK will pull out of the EU and when that might be.
- Within Spain, there was also an election 3 days after the Brexit vote, which, as in December last year, was inconclusive in not appointing one party with sufficient votes to govern independently. As before, there is considerable negotiation between the parties, but as of this date there appears to be no conclusion in sight and the Popular Party continues to govern in absence of any decision.
- This is likely to continue the uncertainty within the Spanish economy and, whilst there are reports of increased demand and resultant property development in the principal cities of Spain, this is unlikely to spread out to the country as a whole due to the continued indebtedness of individuals, banks and the Spanish national economy.
- Given that the property markets of the Costas are so heavily influenced by international buyers, the areas where these buyers predominate are largely unaffected by Spanish national politics.
- The exception to this and significantly affected by Brexit, are the areas where Gibraltar residents, workers and investors catering for them have traditionally purchased. These areas are likely to be significantly affected by Brexit, with concerns that the economy of Gibraltar will be severely hit and even the gates to Spain closed as they were in 1969. The Popular Party is also the most strident in its demands for the change of sovereignty for Gibraltar and in continued harassment of businesses, tourists and general personnel travelling to and from and connected with the British colony.
WITH the Bank of Spain’s proposed modification to Circular4/2004, Spanish registered banks may now be required, at least once a year, to assess the accuracy of all property valuations and reappraise if there is a significant depreciation
As we predicted more than two years ago when energy efficiency certificates were initiated in Spain, in the last few days the government has announced that local property taxes are to be discounted for properties with better energy ratings. The lower two ratings F and G, which is by far the majority of buildings we encounter, receive no discount nor do those of course that do not have a rating assessed as yet. We foresee that the lowest rated properties are likely to be penalised in the near future as a further incentive to upgrade the efficiency of the property (and raise money!). Owners will now be more encouraged to balance the energy and tax savings of improvements of the property against the cost of those improvements.