A post-Brexit guide for buyers and sellers
As the dust begins to settle after the historic vote for the UK to leave the EU, a lot of clients have been asking, what now?
You may be worried about your rights as a buyer or concerned about the current exchange rates. You may be concerned as a seller that taxes will be imposed, or that selling will become a difficult task due to the level of uncertainty and risk. The following guide is designed to give you all the information required to make a decision, putting to bed the misconceptions surrounded Brexit.
Will you lose your rights to live in EU countries?
A popular question amongst clients, as it stands, your rights remain completely intact until article 50 is invoked and re-negotiations are formalised, this process could take 2 years to complete, although many have speculated this could be extended for as long as 10 years.
The relationship between the UK and EU is complex, once the new Prime Minister is appointed in September, article 50 does not even need to be triggered immediately. It will be in the countries best Interest to maintain as much of the existing agreements, equally, the EU would like to maintain existing levels of financial contribution from the UK.
During this period of renegotiations your rights remain untouched, this means you could realistically be looking at 3-5 years before any potential changes occur, possibly longer.
What are the options?
There are many possibilities for the UK to explore, although unlikely a second Referendum could be sanctioned after the British public have had time to digest the outcome. If not, there are a number lesser memberships which allow for free trade with the bloc, but also preserve free movement of people.
If the UK opted for EEA membership (European Economic Area), similarly to Norway, the UK would have free open access to the market whilst preserving the rights of European citizens. Although not too dissimilar to current agreements, the UK would be excluded from fishing and agricultural policies from the EU.
This option would require the least changes and would likely be the most ideal choice amongst economists, businesses and of course, expats. This does raise questions as to how the public will respond to this arrangement, as this form of membership is little different to full membership. The UK would lose its seat in decision making and would still have to contribute to the EU budget.
Another option for the UK would to be join as a member of the EFTA, and negotiate bilateral treaties similarly to Switzerland. This option will likely take much longer to negotiate and could see article 50 extended well beyond the 2-year period.
This would allow the UK to trade with non-EFTA members and set trade tariffs for individual members.
Similarly to the EEA, if the UK were to opt for free trade, they would need to accept free movement of people, Switzerland is no exception to the rule.
This outcome would likely have little impact on expats, similarly to EEA membership, free movement of people will likely be a necessity.
The UK could opt for no membership which would force them back under the WTO (world trade organisation). The UK would look to avoid this option for a number of reasons;
- The UK would have to impose tariffs on exported goods, and would likely have to pay for imported goods from other nations. This would be bad business and would make products more expensive.
- The UK would then have to look at creating free trade agreements with other nations, adding further to the period of uncertainty
- The UK’s bargaining power could be significantly lower outside of a trade bloc, the economy could shrink leading to lower spending and a recession.
It’s likely that the UK would negotiate arrangements with some level of membership with the EU, I therefore expect free movement to some degree, to remain intact.
The Pound is weaker, will it recover?
If you’re looking to purchase abroad, it’s unlikely that the Pound will recover until article 50 is triggered and negotiations begin to shape investor confidence. Uncertainty will likely put pressure on the Pound in months to come with a likely domino effect to impact the Euro.
As is stands, current exchange rates are well above the lowest levels of 1.03, therefore if you are looking to make a purchase, buying your currency now could save you from further losses. This period of uncertainty will continue into 2017 with a potential for rates to fall into the low teens, possibly lower.
On the other hand, if you’re looking to sell property in Europe, selling Euros for Pounds sits at a 3-year high. You may be tempted by the current exchange rates.
You are currently £20,000 better off selling your €200,000 property now compared to before the results, this could well be a tempting opportunity to return to the UK whilst the uncertainty continues.
Whatever you decide, do not let current circumstances put you off from buying your dream home. Expats were living in the likes of France and Spain well before the EU formalised and will continue to do so regardless of the outcome. We hope logic will prevail and that existing agreements between EU and UK citizens remain the same.
This article was provided by currencies