The Brexit Impact on Spanish Property Purchases to be Transitory say Real Capital Solutions

Costa del Sol property post-Brexit

Brexit may well bring complications but it should not spark a terminal decline in the popularity of Spain as the leading destinatation for British expats in Europe. 

The downturn in British buyers targeting the Costa del Sol will be transitory argues a specialist in the expat property investment sector.

Peter Wells, Managing Partner of Real Capital Solutions Spain believes that, “the referendum gives the UK a fresh start, and an opportunity for positive change.” And this will ultimately be reflected in Spanish property purchases by Britons.

Real Capital Solutions is an American fund with a highly analytical approach to the real estate investment markets.

The founding partners commenced regional real estate investments in the US in 1984, soon progressing into nationally-focused distressed assets.

The firm currently manages US$1.5 billion of global assets, including single-family residences, resort communities and high-rise condominiums.

Real Capital Solutions Spain commenced business in 2011.

The initial years brought sell-out success with the transformation of redundant buildings into €50,000,000 worth of sales (despite a widespread belief that the country was still suffering from economic uncertainty).

To date, 23% of the company's real estate sales has been to British buyers.

Now as Brexit is set to change the global real estate landscape, the company faces many changes and decisions to make.

Wells says, “Markets, buyers, sellers are perpetually in a state of flux. As one group of buyers may recede, they are quickly replaced by another group. The Costa del Sol has seen a downturn of buyers from the UK, a phenomenon that I believe is transitory, but the market has seen a marked increase in buyers from France, due in large part to an increased tax burden imposed in the country.”

But higher tax burdens overseas and a 17% devaluation of the pound has shifted the focus from Marbella to London, as the City rapidly experience a marked increase in consumers seeking luxury goods; with low prices attracting high end tourists.

But Wells isn’t worried about the attention turning away from the sunshine coast.

He says, “This phase will run its course, and will eventually re-balance. Our company will continue to grow both on the Costa del Sol and we will expand into other markets.”

Whilst the company has plans in place to weather any post-Brexit storm, Wells is pragmatic and understands that it may still impact on the demand for real estate abroad.

As tensions continue to run high and the UK separates from the EU, Wells is concerned over factions between ex-Pats and locals.  

He says, “I realise that their may be endless unintended consequences that could unfold as the Brexit negotiations get underway. It is extremely hard to predict these situations, so yes, I would anticipate further complications. It remains to be seen how the European community will react to the decision, and whether their decisions will be based on a sense of retaliation, or common sense for the general good for all. But we maintain an overriding sense of optimism.”

That’s not to say that the initial Brexit shock didn’t affect sales immediately, but buyer numbers seem to have remained stable after the dust settled in recent months.

Wells says, “The immediate aftermath of Brexit did indeed present an obvious disconnect between the number of incoming enquiries, which we sustained without any adverse effect, and the number of sales being confirmed. Therefore, whilst buyers were still interested in a Spanish property purchase, the confidence to commit during a time of uncertainty waived. Yet buyer statistics have now settled back to average numbers, with a notable increase in interest from the domestic Spanish market.”

As exchange rates have reacted to Brexit, properties in Spain for British buyers are notably more expensive, but Wells queries it, “We are still seeing demand outpace supply in the real estate market and therefore, prices continue to increase – not only with our own product but across the Costa del Sol.”

It is impossible to refute the fact that Spanish property is currently more expensive for the British buyer in comparison to pre-Brexit figures, due to euro-to-sterling exchange rates. But, in parallel, the Spanish economy is experiencing an up-turn and there is now a high demand for new-build property.

“Therefore, investors can still look to make a profit on today’s purchases as domestic prices increase. In addition, profits upon sale will be worth more once sterling recovers and the funds are repatriated,” says Wells.

It could be seen that the referendum result has helped Wells’s business to flourish, certainly with providing a more stable outlook for Spain in regards to its colonial Sister in the UK.

Overall, Spain is seeing an an increase in prices and demands for property, but with trade deals still to be negotiated, Wells believes the government should proceed with caution.

He says, “All buying decisions are based on confidence, confidence in the State, the stability of the economic situation, the currency and the product.  My advice would be to enact growth policies that enhance confidence overall. But the sun still shines on the Costa del Sol, and the clock has not stopped ticking.”