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European property and Brexit: does it pay to invest now?

With the UK’s official departure from the European Union due to take place on December 31, Chris Nye, editor at Property Guides, offers his insight into the effect of Brexit on the international property market.

There are a number of factors that impact the price of international property, and therefore the return on investment that it presents. The general state of the economy, both in the UK and in the country you are buying in can have a huge effect on the price you pay for a home, as well as the expected resale price.

Supply and demand, the availability of mortgages and the political climate will also impact the investment potential in any given location.

2020 has been a turbulent year and the end of the Brexit transition period, along with the ongoing effects of the Covid-19 pandemic, are expected to cause a global recession, which will inevitably affect property prices, both at home and abroad.

This doesn’t necessarily mean that it’s a bad time to invest. In fact, the opposite can be true. Our research suggests that nearly half of those looking to purchase a property abroad post-lockdown are cash buyers, meaning they are unlikely to be impacted by volatile markets and could stand to benefit as the pound continues to regain its strength against the Euro.

Here, I discuss some key considerations for those looking to invest overseas, both before and after Brexit.

The autumn rush

Our research suggests that there will be an international property rush this autumn as British buyers try to beat the Brexit deadline and their right to free residency, healthcare, and the other perks that being an EU citizen provides. Early indicators suggest that this could be a manic time, which could potentially lead to higher property prices on the continent between now and December.

To avoid this, do your research before viewing properties to ensure you are not paying over the odds for a home you might have bought at a cheaper price either earlier this year or in the spring of 2021.

The transition period

The end of the official transition period will require a kind of transition of its own, and we expect it to take some time for schemes to be worked out and for officials and buyers to get used to the new systems. For example, health insurance schemes for retirees.

These are vital but complex and there will be a period of adjustment as the details around these are finalised. Similarly, both Greece and Portugal are encouraging British retirees to move there with favourable tax schemes. It’s possible that others will also try to appeal to this lucrative market, circumventing potential freedom of movement restrictions.

We expect there to be a shock to the system throughout the spring as these details are ironed out and Brits familiarise themselves with the new processes and procedures required for buying property abroad post-Brexit.

However, this temporary disruption to the market is likely to ease off by the autumn of 2021 as buyers begin to adjust and confidence grows again. Therefore, for those looking for an investment bargain, we would suggest that the first few months of the year will present an opportunity not to be missed.

The effect of Covid-19

The impact of the coronavirus will also inevitably have an impact on overseas property. Our research shows that 35% of those looking to buy in Europe are looking for a holiday home.

However, ongoing travel restrictions and nervousness amongst Brits to go abroad is having a huge knock-on effect on the holiday homes market as many opt for UK holidays for 2020 and 2021 instead.

Coronavirus has also caused a reduction in the number of Brits who are looking to retire abroad, a group which makes up the other 65% of overseas buyers. This is likely to have a huge impact on property prices in Europe’s most popular retirement locations, such as the Costa Blanca, where British retirees make up the biggest international market.

This, combined with ongoing nervousness around Brexit, will inevitably affect the price of certain accommodation in the region, presenting buyers with the opportunity to benefit from reduced asking prices over the winter months.

Those hoping to capitalise on this dip in property prices will need to act quickly, though, as they are likely to creep back up throughout next year as the Covid-19 pandemic subsides and holidaymakers realise that the only impact of Brexit is likely to be the cost of travel insurance.

Popular property types

Both Covid-19 and Brexit are also likely to have an influence on the types of properties that present the best investment opportunities right now. The pandemic is driving demand for detached properties with private facilities, as opposed to those with communal pools and gyms.

When considering Brexit, developers may choose to build more modern, minimalist style properties to appeal to the Scandinavian and German markets in a bid to fill any potential gaps left by British buyers. 

European estate agents are also often bemused by Brits’ attraction to semi-derelict ‘doer upper’ homes – a trend that is not echoed by buyers from anywhere else in the continent. So, without demand from British investors for this type of property, it’s possible that they will fall in price even further over the coming months.

Similarly, we expect to see severe consequences for the ski property market this year as a result of Brexit and coronavirus. After all, it was a ski resort in Northern Italy where the European outbreak of the pandemic is said to have started. 

As a result, property prices in this type of resort should remain uncharacteristically low for some time, offering discerning investors the chance to bag a bargain on chalets and lodges.

Conclusion

Whilst the impending EU departure date, combined with the ongoing ramifications of the Covid-19 pandemic are likely to affect the international property market for some time, this does present British buyers with the opportunity to secure strong investment opportunities in locations where prices are low. 

For more advice on investing in property overseas in 2020 and 2021, you can visit https://www.propertyguides.com/.

Christopher Nye has been writing about British and overseas property since 2003. Property Guides, created by the Overseas Guides Company (OGC), is a free, impartial resource to help people buy property and move abroad safely and risk-free.

Poll: Will Brexit have a bearing on your investment strategy for the rest of this year?

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