How Will Vote Leave Affect Homes Abroad
Brits are adjusting to the reality of Brexit and the challenges and opportunities that it comes with the decision. British home owners in the EU, European residents, and those planning to purchase homes abroad are asking what it means for them.
Already, the property market at home, and other housing related markets, such as home decor, new bathrooms and plumbing upgrades, and wood floor installation, have slowed down because of the uncertainty around currency exchange rates and life in general. Uncertainty tends to have people holding on to their cash rather than spending.
However, there is an increasing demand for British property by European buyers who are taking advantage of the weaker pound and uncertain market to make bargain buys.
In Europe however, the reverse is the case. British buyers do not have as much appetite for holiday homes in European countries as they used to.
Usually, British demand for properties abroad is linked to an increase in the strength of the pound. When the pounds makes gains against the euro, the number of British property buyers increase.
It is not only a weaker pound that has led to the decline, and the decline doesn’t address other concerns Brits have about properties abroad or the demand for property. Some of the concerns that the new government will have to address include the following:
Moving to the Home
There are concerns if Visas would be required to visit any of the EU countries when Article 50 is eventually activated. Many travel and property experts insist that it’s highly unlikely that home owners in the EU will be required to get a visa before they visit their property.
The new foreign minister, Boris Johnson, insists that leaving the European Union does not mean Britain is leaving Europe. He maintains that Britain will not abandon its “leading role in European participation and co-operation of all kinds.”
It’s expected that various deals will have to be negotiated as part of Britain’s divorce from the EU. It’s left to be seen what the outcome will be.
It’s likely going to be harder to secure a mortgage abroad once Britain officially departs from the EU. At the minimum, it’s expected that rates will increase for British borrowers.
One of the factors that drove British holiday home purchases in the past was favourable mortgages. For instance, US citizens are usually unable to borrow as much in Europe as British citizens. The banks view non-residents and borrowers from riskier countries, such as Iraq and Pakistan, differently.
The minimum deposit is about 20% for EU citizens compared to 50% for non-EU citizens. How this will change is yet to be seen. However, many banks already have close ties with Britain and may not necessary view lending to Brits as a higher risk.
British citizens currently enjoy some tax benefits in other European countries as part of their membership in the EU. It remains to be seen how much of those benefit will be lost or retained following Brexit.
If Britain is able to negotiate to remain in the single market under the European Economic Area country, they may be able to retain some of the tax benefits, such as not being taxed the punitive “social charge” in France where lots of Brits have property.
France, for example, is very tough on tax for non-EU citizens, imposing up to 49% capital gain tax. Spain, which is also popular among Britain home buyers, also has a favourable tax policy for EU citizens, allowing EU citizens to pay the same inheritance tax as locals.
The good news is that the double tax treaties that Britain has agreed with various European countries will remain unaffected because the agreement was made individually each country.