ARCHIVED - Property in Murcia after Article 50: reasons to be cheerful after Brexit

How Brexit could be positive for the Murcia property market

This week, as Theresa May finally pushed the exit button and triggered Brexit, concerns resurfaced in the Spanish property market over what the effects might be caused of the UK’s withdrawal from the European Union, and although it might seem paradoxical there are ways in which the Region of Murcia could conceivably benefit from what at first seems to be a discouraging development.

The great worry among property professionals in the Costa Cálida is that British buyers could feel insecure about purchasing in Spain for two reasons: firstly, those looking for retirement homes in the sun are understandably worried about what their rights to public health care in this country will be once the terms of Brexit have been finally, and secondly, the pounds in their pockets are now worth less than a year ago in terms of euros. 

Since June last year the devaluation of the pound against the euro has not been as sharp as some analysts forecast nine months ago. Instead of dropping by 20%, the purchasing power of UK nationals in the Eurozone has actually been reduced by “only” around 10%, with the rate currently hovering at around 1.15 euros to the pound, and this has meant that the initial effect on property sales to British buyers has not been as negative as many feared in the wake of the referendum last year. Some speculate that the worst might be yet to come.

Nonetheless, there has been a noticeable slowdown in the rate at which properties on the Costas are being snapped up by the British, and in provinces such as Málaga and Alicante this has been especially significant. Data produced by Spain’s property registrars and notaries suggest that whereas in the last quarter of 2015 between 20% and 25% of all property sales to non-Spaniards were accounted for by British buyers, by the last three months of 2016 that proportion had fallen to around 16 or 17 per cent. 

And yet, in the province of Alicante, where Brits acquiring retirement or holiday homes on the Costa Blanca account for a very high proportion of the market, sales figures are still continuing their recovery after the slump which began in late 2007, and this January the monthly total was the highest for eight and a half years. How can this be explained, and how is it relevant to the market in the Region of Murcia?

The first factor to bear in mind is that the divorce of the UK from the EU, the love affair between the British and the Costa Blanca is still ongoing. There may be doubts over the continuing availability of public health care for British expats in Spain, and purchasing capacity may have fallen, but it appears that these factors are acting as a deterrent to only a minority of potential UK buyers, and interest is high. Sales to the British have fallen, certainly, but property portals report that the number of people making enquiries from the UK has remained steady: the interest is still there, in other words, although some buyers are adopting a more cautious “wait and see” attitude than in the past. 

At the same time, tourism statistics in Alicante show that the numbers of Brits holidaying in the Costa Blanca still continues to rise: the popularity of the area, far from diminishing, is actually increasing.

Secondly, it has to be borne in mind that a reduction in the euro budget of British buyers does not necessarily mean that they won’t buy at all. What it implies is that they may be drawn to slightly cheaper properties than was the case before the Brexit vote, or indeed to cheaper areas. 

In other words, more prestigious and pricier locations in the Balearic Islands and parts of the Costa del Sol may be out of range for British buyers who are stretching their budget, but this could actually turn out to be beneficial for the property markets in some of the lower-priced Mediterranean provinces, such as Almería, Murcia and parts of Alicante. 

It has traditionally been the case that among the UK nationals buying property in Spain there is a far greater proportion of people looking for “cheap and cheerful” homes than among, say, Germans and Scandinavians, and although for some of those buyers the drop in the value of the pound may be enough to make buying impossible, for others it will simply make it necessary to swap the Costa del Sol for the Costa Cálida or the Costa de Almería, for example.

A third factor to bear in mind is that in many parts of Spain the “bounce-back” effect in property prices is now a reality after seven years of falling real estate values. In Marbella it is reported that the average price per square metre is now around 20% higher than three years ago, and for UK nationals this, coupled with the decreased value of the pound, is making purchasing more difficult. 

But again, this bounce-back is far less pronounced in other parts of the country, and once again, although it might seem paradoxical, the Region of Murcia and the province of Almería could benefit from the relative lack of buoyancy in holiday home prices along their coasts. 

(It should be remembered that over 90% of the 260,000 UK nationals officially living in Spain are in Mediterranean coastal regions, the Balearics and the Canaries: another 9,000 are in Madrid, while in inland and northern coastal regions the numbers are so low as to be practically insignificant.)

However, perhaps the most important contributing factor to the fact that in the Costa Blanca the initial effect of Brexit has not been as great as in the Costa del Sol has been the ability to attract buyers from other markets. If the British are currently cautious as they wait to discover the realities of post-Brexit Europe, the attitude of forward-thinking agents and promoters has been to diversify and search for interested purchasers in other parts of Europe, particularly Scandinavia, the Netherlands, Germany and Belgium. Perhaps surprisingly, Italy is also proving to be a lucrative market. 

After all, if one in five non-Spanish buyers are British, and this is an important sector of the market, then the four out of five who are not British represent an even more important source of purchasers, and while the number of sales reported by the notaries and registrars to UK nationals has fallen, the figures for these other nationalities have risen.

Attracting customers from other countries is a challenge for estate agents in Spain, but if they are successful their rewards are two-fold: not only will they make more sales, but they will also earn greater commission, as the typical budget of buyers from Scandinavia (for example) is higher than that of the British. 

In short, then, as the process of separating the UK from the EU moves forward, there is still much uncertainty over what the end result will be regarding UK nationals who live or own property in Spain (and in other EU States). The negative effects are already being felt in the property markets of Mallorca and Málaga, where higher prices act as an added deterrent and there is traditionally been a high proportion of British buyers.

But on the other hand, there is still a wealth of opportunities in the field of holiday and retirement properties in Murcia and other parts of Spain for non-Spanish nationals, both British and of other nationalities. The budget of the British may be slightly lower than a year ago, but it appears that they will continue to buy, and at the same time Brexit fears have motivated agents to identify different markets: for these reasons, despite the clear reasons for nervousness over the process initiated by Theresa May on Tuesday, there is still a strong element of optimism in the property market along much of the Mediterranean coast of Spain.

To view a wide range of properties for sale across Spain consult www.spanishpropertypage.com.