Although it is unclear what will happen if the UK leaves the EU in terms of overseas property, the referendum is still big news, with many speculating about the impacts of a Brexit on holiday home owners.
If you had previously planned to purchase an overseas property in Europe this year, your ideas may have been complicated by the upcoming vote. We look at some of the factors affecting British overseas buyers ahead of the referendum:
Britons are still looking for holiday homes
Despite confusion about the changes that could affect us after the vote, it is clear that we are still keen to find homes in Europe.
Most people looking to buy property in Europe are seeking a lifestyle change: a better quality of life, a warmer climate, etc. Those who have already begun the search for either a holiday home or permanent home abroad are keen to finalise their plans and secure their dream home abroad. This is one thing that we can be sure will continue.
Buying an overseas property should remain simple
Many towns, villages and cities in Europe rely on the huge number of British property buyers to boost their economy, so it would be surprising if any changes are introduced that would make it difficult for Brits to buy abroad, whatever the outcome of the vote.
If we consider other countries that are not part of the EU, while there may be other processes and admin work to complete, buying a property in Europe should still remain fairly simple.
For example, buyers from non-EU countries are covered by the Schengen Agreement, which was signed by 25 EU countries to enable visitors to stay in the EU for no longer than 90 consecutive days within a six-month period without a visa or residency permit. For holiday home buyers or property investors, this time limit should have little or no impact.
For longer term visitors and expats, it is expected that a similar approach to that for non-EU/EEA members would be adopted. Citizens from Switzerland, Andorra, Algeria, Monaco, San Marino and the Vatican City all have similar long-term visa processes.
Exchange rates could change, however
Political uncertainty can often cause changes in the finance market, which will hit you if you’re planning to buy a property in a foreign country. Charles Purdy of Smart Currency Exchange explains how you can avoid losing money on your purchase, regardless of the referendum outcome…
“Sterling’s weakness against the euro, initially caused by unexpected actions by the European Central Bank at the end of 2015, has been exacerbated by speculation around the referendum,” he says. “We would expect the pound to continue to struggle in the face of uncertain markets, guesswork about the outcomes of the referendum and in response to other economic data.”
He continues: “It is important to remember, however, that although the sterling-euro exchange rate soared in the summer of 2015, the rates available now are still considerably better than those available until as recently as 2014, in the wake of the financial crisis.
“Of course, this exchange rate volatility has a considerable effect on the affordability of European properties. When you take into account the exchange rate movements, any fluctuations could take properties beyond your reach when you budget for their cost in sterling.”
He urges: “This is where we recommend utilising our services and property buyer solutions, such as the opportunity to secure the price of your property in pounds at the current rate with a forward contract, booking a rate for up to 12 months in advance to protect you from future exchange rate fluctuations.
“After all, if you choose to leave the property price in the hands of the exchange rates and wait for the rate to improve, you may be waiting for some time: if the outcome of the referendum is a Brexit, the sterling-euro rate may potentially fall – we predict that this could be a dramatic drop – and even if the decision is made to remain in the EU, there is likely to be some continued uncertainty in exchange rates. Don’t leave the price of your overseas property to chance at the mercy of uncertain markets and exchange rates.”1
Secure the price of your property
It is advised that you use a forward contract when booking your finance transfer in advance so that you can secure your property at the price you expect. This allows you to set a rate now for future transfers, which protects you from any negative exchange rate changes and ensures you know exactly how much you will spend. This is particularly sensible at a time when the future exchange rate is uncertain. Some finance experts have, however, given their estimations of where the exchange rate will be in the second half of this year: https://insuremyvilla.com/blog/what-will-happen-to-exchange-rates-this-year/
Look after your investment
If you do take the leap and purchase an overseas property this year, it is vital that you look after your investment. Overseas Property Insurance will protect your holiday home or new permanent residence abroad, giving you peace of mind at this confusing time.