When is the best time to buy or sell a property post-Brexit?
Expert insight into the factors affecting major financial decisions for expats in the aftermath of the EU Referendum result
Written by Jonathan Watson on 14 July 2016
Now that the results of the Referendum begin to soak in, we’re left wondering what might happen amidst the uncertainty that’s likely to dominate the news for the foreseeable.
As a buyer the uncertainty has likely stunned your decision to move forward, the drop in exchange rates now makes your currency transfer more expensive, possibly in the tens of thousands. You may also question what will happen to your rights as a non EU member.
As a seller, you may be worried about further taxation or the inability to sell. Like the buyer, the uncertainty post-Brexit is making you consider the option of repatriating to the UK.
Let us explore an array of outcomes and timelines to try and mitigate any potential losses as a result of the EU Referendum.
Brexit - A timeline of events
As it happened, David Cameron announced his resignation stating that the UK needs fresh leadership. Boris Johnson followed suit which left a number of potential candidates to fill Cameron’s position. In the space of a week, most candidates fell by the wayside leaving Theresa May alone to assume the position of Prime Minister has already managed to restructure the Cabinet.
She has promised to make Brexit a “success” which has boosted the Pound above the 1.18 mark.
Bank of England’s Mark Carney has put in place measures to limit the impact of Brexit on markets by boosting liquidity. We are yet to see whether Brexit will cause a recession in the UK, we wait with anticipation for the latest GDP figures.
Article 50, the formal process of withdrawing from the EU is yet to be invoked, and this is where timelines become very difficult to predict.
May has said on previous occasions that she will not trigger Article 50 this year, her argument is that Britain needs to secure their own position of negotiation before Article 50 can be sanctioned. Despite her clear message that “Brexit means Brexit”, this message gives no indication as to when it will occur.
Once Article 50 happens the countdown to withdrawing from the EU begins. During this 2-year period all existing agreements with the EU remain intact. If after the 2-year period negotiations require further ratification, Article 50 could be extended indefinitely.
What does this mean for expats?
As previously mentioned, until Article 50 begins, all existing arrangements with the EU remain. This gives buyers or sellers the ability to make the transition without concerns. Given that this period could be prolonged for more than 3 years, it makes sense to make the transition sooner rather than later.
What about exchange rates?
Current GBPEUR rates of 1.19 are not that unfavourable for the buyer. if we look at rates over the last 10 years, the average sits at 1.25 whilst the lowest dipped to 1.03. Current rates have been witnessed through every year dating back to the financial crisis.
If you’re waiting for rates to go back up to 1.30, you may find yourself disappointed as it is unlikely that these rates will be tested for quite some time. The uncertainty surrounding Brexit will likely continue until negotiations come to light. If anything, rates could fall further as it’s likely that the Bank of England will cut Interest rates in attempt to tackle economic slowdown. The last time the BoE cut Interest rates the Pound fell to almost parity with the Euro.
As a seller, EURGBP exchange rates are at a 2 ½ year high making a transfer back into Sterling favourable. As it stands, making a €200,000 transfer prior to the referendum would have equated to £152,000, whereas now the same transfer is equivalent to £168,000, making you £16,000 better off.
Given how difficult it is to predict which way rates will go, making the best of these exchange rates for both buyers and sellers could save you from further losses.
What is the likely outcome of Brexit?
Given the complexities between the UK-EU relationship, it’s likely that the UK will accept a lesser membership from the EU.
The UK exports between 40-50% of its goods and services to the EU, of which it enjoys zero tariff arrangements. On the other hand, the EU receives from the UK a net contribution of £8.5bn. The UK could look to set up free trade agreements with other nations post-Brexit, but this will likely take time to implement in the framework of Article 50.
The UK could take the EEA (European Economic Area) route which maintains most of the existing agreements with the EU, but removes the UK from farming and agricultural policies.
This outcome would be good for a number of reasons, it would allow the UK access to the single market and remove a lot of the uncertainty surrounding Brexit. It would be relatively quick and simple to implement but most importantly, the rights of expats would remain intact.
Free movement of goods has to allow for free movement of persons, this is one of the 4 fundamental principles of the EU and none of its members are excluded from these values. Joining as a member of the EEA would therefore allow expats to continue living in their country of choice without concerns for rights or further taxation.
But even in the unlikely outcome the UK has no single market access after Brexit, it’s highly unlikely the millions of French, Spanish and German citizens alike living in the UK will be made illegal immigrants, or subject to further taxes. The same is true for British expats living in Europe, it would be in neither parties favour to impose penalties on foreign citizens and would just create further unnecessary headaches.
There is no time better than now to buy or sell a property
News around Brexit should not prevent you from buying your dream property abroad, and neither should the slightly less than favourable exchange rates. British expats living in Australia or the US do not have the luxury of free movement and yet have still made the decision to move overseas, this is no different.
For sellers, the Pound will likely remain on the weaker side for the foreseeable, banking you more Sterling for your Euros, it is advised that you speak with a currency broker, such as the team at currencies.co.uk, who would be able to get you the best possible exchange rate on the market.
What could Brexit mean for Sterling and Euro exchange rates? >