Final Comments from Industry on UK EU Referendum
With final campaigning underway in tomorrow’s UK European Union referendum, overseas property professionals have been giving OPP.Today their views on the likely outcome and effect on the sector.
Here’s what they had to say about how voters choosing to Remain or Leave the EU will affect Britons buying property abroad and foreign demand for UK real estate:
Final Comments from Industry on UK EU Referendum : Nikolas Xenofontos, Director of risk management at forex and trading specialist, easyMarkets:
“One of the triumphs of a united Europe is the freedom of movement and the ability to own businesses and property. Over 2million Britons have taken advantage and moved across various countries in the EU. So it comes as no surprise that expats, are paying close attention to the politics leading up to the referendum.
“If a Brexit actually plays out, there are a few scenarios that may affect expats living in Europe. The best case scenario, is that the UK stays in the European Economic Area (EEA) – an economic treaty between Europe, Norway, Lichtenstein and Iceland. It would mean that freedom of movement in Europe is retained but immigration and sovereignty policies the EU currently dictates would not apply.
“A more likely scenario is a special negotiation between Europe and the UK which accommodates freedom of movement in the EU but with less liberality than for EEA countries, meaning more bureaucratic headaches for expats with properties abroad to deal with. A third, and possibly less likely scenario is no agreement between the UK and EU making expats third-country nationals.
“For Europeans living in the UK it won’t hurt as much as the UK has already opted out of most of the EU immigration law. But expat Brits in Europe may be faced with having to apply for temporary visas. The benefits of health, tax, pensions, owning a business or home would all come into question. However, there are more than just EU treaties to consider – there is also the Vienna Convention on the Law of Treaties (1969) which protects ‘acquired rights’ that expats would have built up over time in their host country.
“How a Brexit would play out for expats is not yet clear. And as one of the groups that have the most to lose from a Brexit, it’s ironic that expats that have been outside the UK for more than 15 years, get no say in the matter.
“For expats living off their rental properties back home, just the discussions of a Brexit are having their effect. Fears of a Brexit has already sent the sterling tumbling against all 16 of its major trading peers. It hit a seven-year low against the US dollar on 21 February and is down a worrying 20% since its highs in July 2014. Many major banks are estimating anything from 10 to 20% more decreases for the pound if the vote on 23 June comes in favour of the UK leaving the European Union.
“The UK property market has been a robust and somewhat safe investment amongst Europeans. Fears are already playing out with both buyers and sellers becoming more cautious. European buyers represent a large percentage of international investors in central London real estate, and while some may look to take opportunity of a weakened Sterling, many will back off. Online realtors, eMoov.co.uk are predicting a 5% drop in house prices if a Brexit eventuates. In cash terms, that means the average UK homeowner may see their property reduce by £11,000.”
Final Comments from Industry on UK EU Referendum : Francois Marchand, Director of Erna Low Property, French Alpine property specialist:
“Brexit has hardly affected the level of sales this past ski season, when the Brexit campaign was already going full steam.
“Actually, we have sold more properties in the desirable French Alpine resorts than ever before. Saying this, the only worry that we are facing with an Exit vote would be linked to the currency exchange rate and the lower affordability linked to such a purchase from our UK clients.
“In order to counter-act this potential difficulty in making a move towards financing a family retreat or investment in the French Alps, buyers will need to minimise the risks linked to the exchange rates by borrowing €uros from the French banks. There might be further hurdles to go through as a non-EU member seeking a mortgage, but these will come much later down the line as regulations and new rules linked to mortgages to UK citizens won’t be applied straight away and will take months to be implemented.
“Loan to Value mortgages in France for UK citizens are currently up to 85% or sometimes more, with extremely good interest rates – as low as 1.4% fixed for 20 years – with some of Erna Low Property partners (repayment mortgages). This will secure a long financial planning for the acquisition of our clients’ dream houses in the French Alps.
“Although we would love to be confident that the vote will gear towards a Remain result, we do not have a crystal ball to guess what influence an Out vote will bring to our industry. One thing for sure, UK citizens bought properties in Europe before there was an European Union in place, and the desirability of the properties we are offering across the French Alps will remain strong and well located for a long term investment or family retreat, and we hope that the love of the mountains from our clients will not be affected by having the UK associated to an alliance of countries to which they belong or not.”
Final Comments from Industry on UK EU Referendum : Isobel Laing, of France Property Angels:
“While enquiries from British buyers for ski property in the French Alps have cooled in the last few weeks – with many “waiting” to see the outcome of the Referendum vote – there has been no change in requests from potential buyers in other countries, such as Belgium and Sweden. A ‘Leave’ vote is likely to keep the Brits away for now, due to the expected volatility of the Pound against the Euro. Requirements for a French mortgage may also change, which could reduce the affordability of ski property for some buyers.
“Ultimately ski property investment is a purchase driven by a passion for the mountains, be it skiing, climbing or other alpine sports. The Haute Savoie benefits from being close to Geneva in Switzerland and access in and out should remain the same. Long-term, the French Alps will still offer the best location for a property purchase from where you can enjoy the mountains year-round.”
Final Comments from Industry on UK EU Referendum : Justine Stewart, Ski Property Analyst at nidski:
“Ski property, as a global property market, is largely resilient to the economic ups and downs of one country. However, alpine estate agents are reporting that the uncertainty surrounding the outcome of the EU Referendum has already caused many UK buyers – who make up a large chunk of the ski property market – to put on hold any plans to purchase in the French, Italian and Austrian Alps. A Leave vote would cool the market (of British buyers) further – at least in the short term if, as predicted, the Sterling weakens further. UK buyers changing Sterling to Euros will be put off by the increased cost of a purchase. Potential buyers may also continue to hold off to see what a Leave vote means for travel freedoms, extra admin and tax implications. There could be a knock-on effect from Brexit, creating uncertainty in the Europe as whole and making property there a less attractive investment until the dust settles.
“The Swiss ski property market is also unlikely to benefit from a Brexit, and a fall in the Pound, as it is already struggling with a strong Franc versus Sterling.
“A Remain vote should bring the Brits back to the ski property market and business as usual, as buyers can put the uncertainty behind them and secure their chalet or ski apartment in time for the next winter season.”
Final Comments from Industry on UK EU Referendum : John Russell, Marketing Director of YPC Group Holdings Ltd:
“Over the long term – we believe the best investment strategy is to buy in areas with good investment fundamentals. The truth is that no one can predict the future (not even the experts), and whether you lean towards putting your EU referendum ‘X’ in the stay-in or pull-out box there is plenty of helpful ‘advice’ that proves what you want to hear. Most of the ‘news’ and ‘facts’ about Brexit and the effects of a vote either way in the EU Referendum are no more than opinions – ‘coulds’; ‘mights’; and ‘ifs’ should all be treated sceptically. More important is to listen to real facts…
Ignore the Brexit arguments, and base your decisions on good property fundamentals, such as the huge demand for private rental property:
- Right now, there are 5 million households renting privately in the UK
- Growth in the market is being driven by the Generation Y market
- By 2025, nearly 60% of 20 to 39 year olds are expected to live in private rented accommodation
- At the current rate of growth, there will be more than 7 million households living in private rented accommodation within ten years.”
Final Comments from Industry on UK EU Referendum : Daniel Brewer, Director of French agent, Healey Fox Ltd:
“The relative strength of the UK economy and property market has been maintaining and fuelling the demand for overseas property in recent years and during the turbulent Brexit period. 10% of our clients are holding off for the result before making their decision, so a yes vote on Friday when the result comes in will lead to a flurry of sales that were being held back. A vote to leave will create a period of uncertainty for 3-6 months at least whilst we work out what our relationship with Europe will be. The pound will also drop in the short term which will subdue the overseas property market. Ultimately though, those who want to buy abroad will do so irrespective of Brexit as it’s been their lifelong dream.”
Martin Bikhit, Managing Director of London agent, Kay & Co:
“A vote for Brexit will immediately see the value of Sterling fall. This will, in turn, create a spike in demand as London property will be more attractive to opportunistic investors who will take advantage of the bigger spending power, but it is the wrong sort of demand that will ebb away as prices fall. Normally, the falling prices should spur the market into action, however, I can see that both domestic and foreign buyers will continue to wait and see how far prices can or do fall, to make the most of their money.
“When considering the wider economy, we can see that a fall in London house prices caused by a Brexit in the long run may not benefit many domestic buyers; for example if a Brexit causes (as predicted by many) wide-ranging job losses and a general slowdown in the economy.
“Further instability within the London property market, as always, will not benefit either vendors or buyers, though if interest rates are slashed then mortgages will be easier to obtain. Of course, we have to continue to balance this benefit with the wider detriment a Brexit would have on the whole.”
“A vote ‘in’ should help to stabilise a market that has been rocked by, among other things, the Stamp Duty Land Tax changes brought in at the end of 2015. The market within London at the moment is experiencing a general price resettlement; where vendor demands are beginning to reach a state of equilibrium with seller expectations. Once this natural resettlement is complete, this will tie in with the stability an ‘in’ vote has created to set the market up for a long period of low, sustainable growth.
“Throughout the rest of the summer months, this stability will bolster the traditional summer demand from Middle Eastern clients with both domestic buyers, buoyed by the result, and other overseas buyers, reassured with the newfound stability and optimism an ‘in’ vote has brought. This optimism should carry through to the usually busy autumn period, boosting demand and leading to more sales overall.”
Richard Deans, Sales Manager at MGM French Properties:
“Twenty per cent of our clientele are British, so the current uncertainty surrounding the EU Referendum is something we’re monitoring closely. The debate surrounding Brexit has led to a handful of investors postponing their purchase until the outcome is announced. That said, overall sales have remained strong, with completions near the same levels as this time last year. What has worked in our favour is the extended period of low mortgage interest rates in France, with some institutions offering as little as 2.5%. This has really helped fuel the market and negate some of the angst brought about by Brexit.
“Regardless of the outcome, people will still want to ski and to own their own luxury home in the Alps, so either way we still forecast strong interest from the UK moving forward and we don’t anticipate any changes that may come into play with a Brexit to have devastating effects on the market. However, with our French hats on, it goes without saying that it would be good to see Britain remain within the EU and continue to help make the region stronger.”