Several British property owners and people thinking of buying a Gran Canaria property have asked us what the recent Brexit vote means for UK citizens in Gran Canaria.
Here’s a summary of the effects of Brexit to date and what it means in the future.
The effects of Brexit so far
The UK is still a full member of the EU and British property owners and buyers in Gran Canaria have all the same rights they had before the vote. This is unlikely to change in any way until the EU and UK agree exit terms. The earliest we can expect a UK exit is in 2019, or two years after the UK invokes Article 50 of the Lisbon Treaty.
Britain has also stated that one of its main negotiating goals is to guarantee the current legal status of all EU citizens living in the UK and of British citizens in the EU. Current legal consensus is that existing property owners in Europe have nothing to worry about as their current rights are guaranteed by international law.
This means that anyone British who buys a Gran Canaria property while the UK is still a member of the EU is very likely to keep the rights that they gain when they buy.
The effect of Brexit on the pound and the euro
The only thing that has changed so far is that the pound has lost some ground against the euro since the vote. It is currently 8-10% below where it was before the referendum.
However, the pound to euro exchange rate is still within the average range over the past 10 years.
The strong euro means that it costs a bit more to visit Gran Canaria if you exchange pounds for euros. However, if your property generates a rental income, the strong euro is actually a benefit.
3 upsides of a strong euro for Gran Canaria property owners
- Gran Canaria property owners from the UK who rent out their property and earn money in euros are actually benefiting from the strength of the local currency. Their rental income is worth more in pounds and they don’t need to worry about conversion rates when they travel to Gran Canaria. With rental demand high throughout the year, and Gran Canaria property prices expected to rise over the next decade, a Gran Canaria rental investment is attractive as a hedge against the value of the pound.
- A mortgage in euros can also be seen as an upside and not just for property owners that earn a rental yield; the consensus opinion amongst currency experts is that the pound will strengthen as the path to Brexit becomes clearer as it is the current uncertainty that is keeping its value lower. A mortgage in euros will, therefore, become cheaper over the long term for those earning pounds. When the pound rises, owners can transfer a large sum of pounds to their euro accounts in Spain to lock in the gains.
- Furthermore, when it comes to selling a Gran Canaria property, the strong euro means that UK owners earn more in pounds when they sell.
A brief history of the British in Gran Canaria
Britain joined the Common Market in 1973, but British people have bought property in the Canary Islands for centuries. Large areas of the capital city are named after notable Brits that contributed to island life (Miller Bajo, Alfred L. Jones Street, Thomas Miller Street). Even Playa del Inglés is said to be named after a British tomato farmer.
Since the Spanish tourism boom started in the 1960s, hundreds of thousands of British citizens have bought property in Spain and the Canary Islands and the two countries have firm and friendly relations. Even a decision like Brexit is highly unlikely to change this.
The long-term consequences of Brexit
What happens in the future depends on what type of Brexit the UK and the EU agree upon. Here are the most likely outcomes.
The UK leaves the EU but joins the EEA
A low-impact option that would leave British property owners in Gran Canaria and Spain as a whole with virtually the same rights as they have now. EEA citizens have almost exactly the same rights as EU citizens.
For example, Norway is part of the EEA and there are thousands of Norwegian property owners in south Gran Canaria: They enjoy all the same rights as full EU citizens.
The UK negotiates a separate treaty with Spain
This would put UK citizens on a par with the Swiss who are not part of the EU but have individual agreements with its member states. These agreements guarantee the Swiss similar rights to EU citizens.
If the UK leaves the European Common Market it will negotiate its own treaty with Spain. We can’t predict the exact terms, but we fully expect a treaty that guarantees property and legal rights for British citizens with an interest in Spain.
This outcome is likely because of the huge number of British people that live or own property in Spain. It is not in Spain’s interests to do anything to damage its recovering property market.
The UK and Spain do not agree a new treaty
This is the most unlikely scenario but would leave British citizens in a similar situation to other non-EU people like Americans and Australians. Citizens of these countries are free to spend 90 days in any Schengen Agreement country and get a Visa when they first enter the Schengen Region.
Non-EU citizens are allowed to buy property in Spain and the only differences are minor variations in tax and inheritance laws.
Other effects of Brexit
Tax and inheritance law
British citizens who live in Spain or own property here don’t need to worry about tax as the agreement between the UK and Spain has nothing to do with the EU. We would, therefore, expect little change in British people’s tax payments and inheritance rights once the UK leaves the EU.
In the worst case scenario, British people may have to pay slightly more capital gains tax on rental earnings and when they sell a property than they do at the moment as EU citizens.
British citizens are currently covered by the European Health Card when they visit Spain for less than 90 days at a time. Nobody knows whether they will still be able to use the EHC (EHIC) when the UK leaves the EU. If they can’t, travel insurance costs will rise somewhat for British holidaymakers in Spain and Gran Canaria.
British residents in Spain can currently use the Spanish healthcare system as EU citizens but a new treaty will need to be signed to guarantee these rights after Brexit.
Many foreign residents in Gran Canaria already pay for private healthcare and this is a simple option for all UK citizens. However, we fully expect Spain and the UK to come to an agreement over healthcare that maintains the current health benefits for British citizens visiting Spain.
Overall, we do not expect Brexit to have a significant impact on British property owners and buyers in Gran Canaria. If you have any questions on the subject, please feel free to get in touch via email or telephone, or to pop into one of our four offices in south Gran Canaria.
A Place in the Sun: Brexit: What Next For EU Property?