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Londoner Joanne Connor may sell her holiday home in southern Spain as a falling currency drives up the cost in pounds of her household bills and mortgage payments following the U.K.’s decision to leave the European Union.
“The cost of living in Spain has shot up for us overnight,” the 39-year-old mother of two from London said in a phone interview. “If the pound stays this low or continues to drop we will end up having to sell.”
Sales in some coastal areas of Spain could tumble as much as 20 percent in the next 18 months as a sliding pound erodes the spending power of British buyers and owners following the vote to leave the EU, according to Aura Real Estate Experts, an independent advisory firm focused on Spanish property. Britons make up the largest contingent of overseas home buyers in Spain.
Connor has to change pounds into euros to meet the 400 euros ($445) a month mortgage payments on the two-bedroom home. The 9 percent decline in the pound’s value against the euro since the Brexit vote will limit her visits to Spain to just one this year, compared with six times in previous years.
“It’s not just the mortgage which is now more expensive; it’s the car hire, the utility bills, food,” Connor said.
Foreign and domestic home buying in Spain evaporated when the economy collapsed during the financial crisis, leading to an international bailout of its banks and the worst recession in the country’s democratic history. While overseas buyers have begun to return to the market, prices are still well below their pre-crisis peak.
Connor purchased her Spanish property in 2005 for 120,000 euros and says it may now be worth 75,000 euros, based on the price for which similar properties are selling in the Mazarron Country Club in the southern region of Murcia, where her holiday home is located.
U.K. citizens represented 21 percent of the 46,090 purchases made by overseas buyers last year, data from Spain’s College of Property Registrars show. Foreign buyers made up 13 percent of all Spanish house purchases in 2015. In Murcia and Andalusia, Britons account for 54 percent and 29 percent of transactions by foreigners respectively, according to the study by Aura Real Estate Experts.
Purchases on Hold
“We had 10 would-be buyers and two have put their plans on hold after Brexit,” said Mary Arro, partner at Mia Property Boutique in Alicante, which specializes in real estate deals along the Spanish Costa Blanca. “The concern is sterling — they want to know where the pound goes next.”
In the municipalities of Benitachell in Alicante and Benahavis in Malaga, sales could drop by around 20 percent and prices decline by around 9 percent in the next year-and-a-half as Britons sell or up or shun future purchases, according to Aura Real Estate Experts. The firm also identified 15 other towns in Alicante and Almeria where sales are expected to fall as much as 17 percent over the same period.
Spain attracted the largest number of British tourists in Europe with 16 million people arriving in 2015, according to data from Euromonitor. British visitors spent 14.1 billion euros on their Spanish travels last year, an increase of 10 percent on 2014.
Dario Fernandez Palacios, an agent a Marbella-based real estate broker Prime Invest, said home sales to British buyers had already slowed “noticeably” in the months leading up to the U.K. referendum on June 23. “Now they are totally paralyzed,” he said by phone.
“The coming months, and probably years, are expected to be marred by uncertainty in and outside the U.K.,” said Wouter Geerts, a travel analyst at Euromonitor International.
©2016 Bloomberg L.P.
This article was written by Maria Tadeo and Sharon Smyth from Bloomberg and was legally licensed through the NewsCred publisher network.