Several British property owners and people thinking of buying a Gran Canaria property have asked us what therecent Brexit vote means for UK citizens in Gran Canaria.
Here’s a summary of the eff ects 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 samerights they had before the vote. This is unlikely to change in any way until the EU and UK agree exit terms. Theearliest 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 EUcitizens living in the UK and of British citizens in the EU. Current legal consensus is that existing property owners inEurope 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 verylikely 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 iscurrently 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, ifyour property generates a rental income, the strong euro is actually a benefi t.
3 upsides of a strong euro for Gran Canaria propertyowners
- Gran Canaria property owners from the UK who rent out their property and earn money in euros are actuallybenefi ting from the strength of the local currency. Their rental income is worth more in pounds and they don’t needto 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 isattractive 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; theconsensus opinion amongst currency experts is that the pound will strengthen as the path to Brexit becomesclearer as it is the current uncertainty that is keeping its value lower. A mortgage in euros will, therefore, becomecheaper over the long term for those earning pounds. When the pound rises, owners can transfer a large sum ofpounds 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 morein 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 forcenturies. 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 tomatofarmer.
Since the Spanish tourism boom started in the 1960s, hundreds of thousands of British citizens have boughtproperty in Spain and the Canary Islands and the two countries have fi rm and friendly relations. Even a decision likeBrexit 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 mostlikely 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 virtuallythe 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 GranCanaria: 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 withits 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 exactterms, but we fully expect a treaty that guarantees property and legal rights for British citizens with an interest inSpain.
This outcome is likely because of the huge number of British people that live or own property in Spain. It is not inSpain’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 likeAmericans and Australians. Citizens of these countries are free to spend 90 days in any Schengen Agreementcountry and get a Visa when they fi rst enter the Schengen Region.
Non-EU citizens are allowed to buy property in Spain and the only diff erences are minor variations in tax andinheritance 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 theUK and Spain has nothing to do with the EU. We would, therefore, expect little change in British people’s taxpayments 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 andwhen 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 atime. 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 needto 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 UKcitizens. However, we fully expect Spain and the UK to come to an agreement over healthcare that maintains thecurrent health benefi ts for British citizens visiting Spain.
Overall, we do not expect Brexit to have a significant impact on British property owners and buyers in GranCanaria. If you have any questions on the subject, please feel free to get in touch via email or telephone, or topop into one of our four offices in south Gran Canaria.