With Brexit in the news so much at the moment, what could the Brexit effect be for overseas property investors? Here we look at what changes could happen.
Cheap property, low travel costs and easy-to-access mortgages over the past few decades have meant that there are now around half a million British overseas property investors with a property in Europe, and thousands more looking to purchase one.
However continued uncertainty surrounding Britain’s withdrawal from the EU has left many fearing they’ll be left in financial and legal limbo with their property from the Brexit effect.
Though Britain’s official departure date from the European Union is set for March 29, a transition period will last until the start of 2021, leaving politicians time to iron out the details.
Buying EU Property
Under the current rules, European Union nationals are able to purchase a home in any member state and live in it for as much of the year as they wish. If after March 29 Britons lose this right due to the Brexit effect, they will find themselves in the same position as non-EU nationals, requiring a visa or permit to buy a home.
There may also be restrictions on working and access to healthcare in the country in which the property is located.
EU countries may also impose a limit on the number of days a year you are able to spend there – much like if you were to stay in a property in the United States or Canada.
Currently British overseas property investors are able to apply for a mortgage on a European property at either a UK or a local bank. The latter sometimes offer more competitive rates than those in the country where the buyer is from – particularly if the buyer is an EU national.
If no deal is done, then the Brexit effect could mean that banks may be unwilling to lend to British buyers after March 29, creating difficulties for those who are not cash buyers. It also may become more difficult to open a bank account in European countries.
After the Brexit effect, it could be that investors should transfer money from a British bank account abroad to pay for legal and valuation fees, and mortgage repayments.
Letting Out Your Property
For those thinking about buying a property in Europe post-Brexit, choosing somewhere with strong rental potential is important.
If overseas property investors are no longer able to stay in their properties as often after the Brexit effect, it’s likely that there will be many more Brits wanting to rent out homes in Europe. So it is worth making sure yours is in a popular spot and stands out from the rest.
In the event of a no-deal Brexit, holiday home owners may also face issues with insurance on their property abroad. Make sure to contact your insurer to find out whether there will be any changes to your cover.
The Brexit effect may also mark an end to the tax relief currently enjoyed by those holding property in the European Union. If you rent out a property in Europe, you must pay tax in both Britain and in the country in which the property is located. However, under current rules, you are able to claim back the tax paid in Britain by offsetting it against that incurred abroad to avoid being charged twice.
Another benefit British people have enjoyed while being part of the single market is the guarantee for those retiring abroad that their pensions will continue to rise in line with inflation. Retired expats in non-EU countries, such as America and Canada, do not have this benefit meaning that their pensions are frozen.
Anyone with a holiday home abroad thinking of moving out there permanently in retirement should consider the possible implications on their future income.
It should be made clear that most of the above are only likely to come to pass if the UK leaves the EU without a deal. Should a reasonable Brexit deal be negotiated, then the Brexit effect will be negligible, and little is likely to change. But it is always worth being prepared.