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Posted May 12th, 2016 by Charles Purdy

Protect yourself against the Top Five risks posed by the EU Referendum

In our conversations with British people planning to buy property in Europe, it seems that the possibility of a Brexit has not put them off their plans to find their European home. Most potential homeowners have told us want to buy a property in Europe for lifestyle reasons: to enjoy a better way of life, or a warmer climate. Those who have already gone to the trouble of researching and viewing properties, talking to agents and even negotiating on prices, are keen to finalise with their plans to find and secure their dream home abroad in the face of ongoing uncertainty. Many people we have spoken with are trying to secure their property before the referendum vote takes place, in light of the uncertainty about its outcome.

We have discussed the Top Five concerns raised by our clients with our professional partners and industry experts to provide some thoughts on how you can address these concerns and take steps to secure your property and European lifestyle, regardless of the outcome of the Referendum.

1. Currency Exchange – how does ongoing uncertainty affect what I can get for my money?

Exchange rate volatility has a considerable effect on the affordability of EU properties. Exchange rate movements could take properties beyond your reach when you budget for their cost in sterling. This is where we recommend utilising the services of Smart Currency Exchange to protect you from future exchange rate fluctuations, such as securing the price of your property in pounds at the current rate with a Forward Contract by booking a rate for up to 12 months in advance. Your trader can keep you up to date on market movements and protect your budget by locking in a rate when it suits your needs. Don’t leave the price of your overseas property to chance, at the mercy of uncertain markets and exchange rates.

How exchange rates affect European property prices
When purchasing a holiday villa in Spain, Elizabeth Lowry was introduced to Smart Currency Exchange through her estate agent. She was understandably apprehensive about the idea of using a currency specialist at first – something she had never heard about before – but once she had used them to transfer the deposit for her Spanish property, she soon saw how simple and easy the process was.

Elizabeth and her husband were let down by their bank over their mortgage plans, so by the time they could transfer the full amount to buy their Spanish home, the exchange rate they received was much lower than they had expected – they had received a GBP/EUR rate of 1.38 for their deposit, but sterling had fallen down to 1.30 – so they had to spend around £18,000 more than they had budgeted.

Elizabeth now knows first-hand the importance of currency exchange rates. “I now use Smart Currency Exchange to regularly transfer funds into Spain to maintain my property, with a standing order set up so I don’t have to worry about it.”

Exchange rates are unlikely to improve immediately in the run up to and after the referendum vote.
If you choose to leave the property price in the hands of exchange rates and wait for the rate to improve, you may be waiting for some time: if the outcome of the referendum is a “Brexit”, the sterling-euro rate may potentially fall – we predict that this could be a dramatic drop – and if we remain in the EU, there is likely to be continued uncertainty in exchange rates as everything settles down.

Good news if you are repatriating money to the UK
A falling sterling-euro rate is good news in the short term for those considering selling their European property, repatriating the proceeds, or planning to return to the UK, as they can benefit from sterling’s current relative weakness against the euro and the currency market uncertainty.

2. Do I wait until after the Referendum to buy my property?

It’s a good idea to act now to secure your dream property – property prices in many European destinations are currently considered the lowest they will be, with prices increasing in some countries, such as Spain and Portugal.

Cheap mortgages
Mortgage rates are currently low in Spain and France, but could change with a Brexit, so it makes sense to get a cheap mortgage if you are already in a financial position to do so and to budget accordingly.

Uncertain sterling-euro exchange rate
Sterling has fallen against the euro and may continue to fall in the run up to and after the referendum vote – this poses the very real risk of increasing the price of your overseas property. However, although the exchange rate is lower now than it was at its peak last summer, it is still better than it was as recently as 2014, as sterling suffered during the years after the economic crisis. If you are already looking for or have found your dream overseas home, now is the time to protect the price of your property with a currency specialist. Why wait and take the risk?

EU assets could be of real benefit
It’s also worth noting that, if the decision was made to leave the EU, and if sterling fell even further against the euro, it may be a positive step to hold euro assets, such as property, so this is something to bear in mind in your plans.

3. Living in the EU

We anticipate that life will be much the same for expats, whether the final decision is “In” or “Out”. It will still be possible to buy a property in France, Spain, Portugal, or elsewhere in the EU.

Many countries rely on the significant stream of income from overseas property buyers and expats to boost their economy, so overseas property ownership will still be actively encouraged.

4. Visas

For holiday home buyers or simple property investors, any restrictions on the time t allowed in an EU county should have little to no impact.

If visas were to be brought in as a requirement, they would most likely follow a similar format to the system in France and Spain, where you apply for a long stay visa if you plan to live there for more than 12 months.

5. Healthcare

One of the biggest concerns raised is the impact of a Brexit on the current agreement in place covering healthcare for British pensioners.

We do not know what form any agreements will take if the UK were to leave the EU, but experts believe that any policy changes would take at least two years to implement – with many now believing it could take five to seven years – so the existing policies that are in place to protect British expats will not end suddenly once a decision has been reached. Good healthcare services are available in popular countries for both residents and non-residents, EU or non-EU members. There is also the option of setting up private healthcare cover, for peace of mind, although you will have to ensure you have sufficient budget allocated to this.

If you are worried about the impact of the EU referendum on your European property plans, speak to our experts today on +44 (0)20 3170 6064.

We are here to help, Monday to Friday, 8:30am to 6:00pm (UK Time).

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