The UK's EU Referendum is not putting Brits off from buying homes in Europe - don't let speculation and uncertainty stop you from buying yours!
The UK's upcoming European Union (EU) Referendum, or Brexit, is big news at the moment. There are numerous theories being put forward about what may happen with either result but there isn't much information on what this could actually mean for people with property overseas.
For those currently thinking about buying property in an EU country the lack of clarity on the issue is a complicating factor. So we have decided to take a look at some of the facts about the referendum's impact on British buyers overseas.
Brits still want a place in the sun
It has become clear from our conversations with British people planning to buy property in Europe that the chance that Britain could leave the EU has not put them off their plans to find their European home.
Most want to buy a property in Europe for lifestyle reasons: to enjoy a better way of life, or a warmer climate. Those who have already gone to the trouble of researching and viewing properties, talking to agents and even negotiating on prices are keen to finalise with their plans to find and secure their dream home abroad in the face of ongoing uncertainty.
Will Brits still be able to buy property in Europe?
Considering how many European towns, villages and cities rely on the significant steam of income from British property buyers and expats to boost their economy, we would not expect there to be any changes that would affect the ability of Brits to purchase abroad, regardless of the outcome of the vote.
We can look to other countries for examples of what the changes may be if Britain were to leave the EU, but, while there may be different processes and administration work to complete, these are not cause for undue concern.
For example, US citizens or those of any other non EU countries buying a property in Europe are covered by the Schengen Agreement, signed by 25 EU countries, which means you do not need a visa or residency permit if you stay in the EU for no longer than 90 consecutive days within a six month period. This makes up almost half of the year, so for holiday home buyers or simple property investors, a restriction on the time they are allowed to spend there should have little to no impact.
For longer term and permanent residencies, we would expect a similar approach to that for non EU/EEA members, or citizens from Switzerland, Andorra, Algeria, Monaco, San Marino or the Vatican City, which, for popular European destinations like France and Spain, has a similar long term visa process.
The currency implications of the referendum
Charles Purdy, CEO at our online currency partner, Smart Currency Exchange, offers his thoughts on the potential currency implications of the referendum, and how those buying property in Europe can secure the price of their property and avoid losing money on their property 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. 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."
"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."
A currency specialist can secure a good exchange rate for up to a year
"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 in when you budget for their cost in sterling."
"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 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."
How to protect the price of your property
This shows how any changes to currency exchange rates make a very real difference to the price of your property overseas and is why we recommend using a Forward Contract to book your transfer in advance so you can secure your property at the price you expect.
A Forward Contract allows you to set a rate now for future transfers, protecting you from any adverse exchange rate movements and ensuring you know exactly how much you need to spend. It's a sensible move at a time when the sterling exchange rate is uncertain.