British Retirees Sell Their Spanish Homes After Brexit

British Retirees Sell Their Spanish Homes After Brexit

Last week, Mary came to a real estate agency in Torrevieja to sell her apartment where she had lived for 20 years. The British woman tearfully explained that she was selling the property because her husband had died, and his pension alone was barely enough to live on in Spain.

Moreover, after Brexit she has many doubts about whether the social security system will continue to cover medical expenses or if she will have to pay for private insurance. For this reason, she decided to sell the house and return to her village in the United Kingdom.

Similar examples occur every day in areas with a large presence of British residents. “In municipalities like Guardamar, Torrevieja and Orihuela Costa (Alicante province), as well as on the Murcia coast and in Almería province, the sale of homes by British residents is a sustained trend; it’s not a mass exodus, but a constant process,” explains Santiago Sanchez, director of Engel & Völkers in Torrevieja and Orihuela. This trend extends to Costa del Sol as well, according to agents in the region.

In the third quarter, UK citizens ceased to lead the list of foreign home buyers in Spain for the first time—since the Registrars have kept this statistic—and were displaced by Germans.

What Happened?

Mary’s case is not unique. While at first glance it looks like a personal story, behind it lies a context of uncertainty that arose after the United Kingdom’s exit from the European Union, layered on top of the pandemic and an unfavorable economic situation.

The uncertainty is fueled by the following factors: Brexit took effect on December 31, 2020. From that moment, the British lost many EU citizenship privileges, and bureaucratic procedures for obtaining, for example, residence permits to stay longer than three months became significantly more complicated. Moreover, these massive changes occurred in the midst of the Covid pandemic. This context prompted many British people to return home to their former lives. “This primarily affected elderly people, who felt unprotected outside their country and preferred to return to their families, coming to Spain only for holidays,” explains Setare Mohregi, international director of Gilmar for the Costa del Sol area.

“Although demand from the British has somewhat decreased, interest in buying remains among people aged 40-50,” she adds. Additionally, the agency observes a new trend: British people who already own property are looking for an additional property so that the total investment amount exceeds 500,000 euros and allows them to obtain a “golden visa.” This investor visa, in effect since 2013, allows residence in Spain for 2 years (renewable) and requires visiting the country only once a year (unlike other types of residency that require a minimum of 6 months of residence). In other words, it provides significantly more flexibility for entry and exit.

In addition to the political situation and COVID-19, the devaluation of the pound sterling against the euro plays a substantial role. This means many people cannot maintain their previous level of comfort. For example, if in 2000 1 euro cost 0.61 pounds, now the rate is 0.84 pounds—purchasing power has fallen by more than 27% due to currency fluctuations. Previously, retirees lived perfectly well in Spain on 1,000 pounds (1,639 euros in 2000), but today the cost of living has risen, and a pension of 1,000 pounds barely equals 1,190 euros.

“On the other hand, this situation is advantageous when selling a house for euros, since when exchanged for pounds they get more, so now might be a good time to enter the market,” explains Sanchez from Engel & Völkers.

It should also be considered that the British pension system is mixed. Among these retirees, the practice of capitalizing a private pension plan and then buying property in Spain with these funds was common. For this reason, “many of them live exclusively on the state pension, the maximum amount of which is about 210 euros per week, or approximately 890 euros per month,” adds the expert.

Although it is precisely British retirees who are most actively leaving the Spanish real estate market, any uncertainty generates fear, and fear leads to investment freezing. Brexit also became a serious brake for new buyers who were not residents of Spain before the UK’s exit from the EU and faced increased administrative requirements. As a result, Germans replaced the British for the first time as the foreigners buying the most housing in Spain. This change led to the emergence of a buyer profile with higher purchasing power: Germans are looking for homes in the price range of 250,000 – 500,000 euros.