Brexit effect on European real estate markets 2020

France, Spain, Portugal, Greece

Brexit is now official! However there's still profound uncertainty about what will happen after transition period that will last until the end of 2020. What will the UK's future relationship with the European Union look like? And how will that affect the European property markets?

No one is quite sure. But one thing does look certain - British citizens will still be able to buy properties in the EU. And an increasing number of Brits are now looking to make their own 'Brexit' and go to live elsewhere. So, where can they go - and what's happening to the real estate markets in those countries? It’s important to understand the trend in order to buy on the right market for the right price. Though there is one year to go, so we might observe changes on specific markets later this year.

France

France has always a been a favourite country for British holiday home owners, and many plan to retire there (they target to seaside or rural properties). But now we can observe another trend – many bankers and those with the highest income are looking to secure their money in France with an option to stay here and work. Of course, it’s mostly about biggest cities like Paris or Toulouse. The market at the moment is quite buoyant - major cities are seeing prices continue to rise, especially Paris, and boomtown Bordeaux is taking a breather after four years of continuous price rises.

According to the Knight Frank Prime Global Cities Index, property prices in Paris have already observed 4.2% growth in 2019. The reasons for that are quite logical - economy stability, softening interest rates, lack of supply, strong buyers and tenants demand (due to Brexit as well). And they won't stop growing in 2020, we might expect 7% price growth (new factors to consider - US president elections 2020, Brexit deadline and trade relations between the US and China).

Yes, prices in Paris are high - over EUR 10,000 a square metre - and yields are below 4% (Yields in such cities like Lille, Marseille, Orleans, and Grenoble are above 6%). A 3 bed flat near Montparnasse in Paris is on the market for €1.2m at the moment - but by looking outside the centre, for instance in up-and-coming areas like the Canal Saint-Martin (10th arrondissement), you can reduce your costs and find a studio or one bed for just under €200,000.

However most foreign buyers are interested in rural houses. These can be a bargain - houses with restoration potential can be had for as little as €40,000 in rural departments such as Correze, Haute Vienne, or Indre, and in parts of Brittany, though prices are higher in more popular areas such as the Dordogne and Provence. You can still get a two bedroom house with large gardens in the Dordogne for EUR 61,000, and a little more could secure a villa in Charente or Deux-Sevres. Previosly smaller cities and towns have seen both population and businesses headed elsewhere. That has left rural properties in France particularly undervalued, so the prices are still affordable.

Spain

Like France, Spain has always been popular with British buyers. There is no surprise they head to this place under the sun in current circumstances to find their property bargain as well. Right now, house prices are stable and shouldn’t be compared with that bubble back in 2008, a Q2 2019 slowdown suggests the market could be about to pause for breath.

Major resorts are still popular places to purchase. Good thing is that buying in a resort like Las Colinas, a golf resort just south of Alicante, delivers a hassle free investment; each resort has a management company that will look after properties while you're away and even rent them out on your behalf. Resorts also offer facilities such as gyms, golf courses, bars, and beach clubs. Apartments at Las Colinas start at €279,000, while a villa with a private pool comes in just below €500,000.

Not everyone wants to stay on a resort. Buying an apartment in a city like Malaga, for instance, can deliver a vibrant city lifestyle with ready access to the beaches for as little as €80,000 - and that's move-in ready. On the other hand, one formerly popular option, Barcelona, now looks overvalued, particularly in the light of continued calls for independence and widespread civil unrest.

Bargain hunters and DIYers might probably want to look for renovation opportunities in Andalucian villages - there's a three bed house on the market right now for under €20,000! And there are a lot of apartments in Andalucia that are even cheaper. Make sure, though, that you work out your renovation budget before you buy - some of these houses are little more than four walls and a roof, and some don't even have the roof on.

In any case Spain is still affordable and Brexit is not affecting the market as much as the one of France.

Portugal

However, Spain now has competition from its Iberian neighbour Portugal.

Portugal has even lower living costs than both Spain and France - you'll save about 10% of your grocery shop, but even more on eating out. Property prices can be lower than in Spain, though a lot depends on where you're planning to buy. So, Brits can affect Portuguese property market by investing there. The youngest buyers will surely go to Lisbon for better working climate where they can easily find job in tech companies and startups. Retirees will most likely to choose some holiday destinations. And all of them can play an important role in prices rise.

A ‘pied a terre’ in the centre of Lisbon is not any longer a budget choice, though €200,000 will get you a small flat in one of the more sought-after areas (Properstar has offers in various barrios under €130K indeed), and rental yields are still strong at up to 5.7% (smaller apartments getting the highest returns).

However, seaside towns close to Lisbon are still very affordable (and that should see no change for some time); €190,000 will get a spacious two-bed in Cascais, for instance, a town that's as popular with Portuguese commuters as it is with foreign buyers. In the Algarve - the most popular area with foreign buyers, and Portugal's priciest real estate market - you can still get a two-bed flat in a small town like Albufeira for well below €100,000. The Algarve also has a number of major golf and beach resorts such as Quinta do Lago for those looking for an all-in package.

Northern metropolis Porto doesn't have the sun, sea, sand appeal of the Algarve, but it's become a huge tourist draw and offers high culture as well as viticulture (you can easily spend a week visiting the various port cellars). The city is definitely a seller's market right now, with prices starting around €100,000 depending on neighbourhood. There's a strong rental market, with some central properties making excellent yields on AirBNB as well as good student demand (which is a new trend now).

If Brexit all goes badly wrong, it will make life of Brits more complicated, however they will be able to use available visa options - Portugal's or Spanish golden visa programmes. So, we could expect higher demand on the properties meeting that requirement – property at €500,000 or several properties within that joint value.

Greece

Let's look a bit further afield; what about Greece? Here again, the cost of living is substantially lower than in the UK, but the crisis following the credit crunch deterred many foreign buyers from heading out here post-2008.

It's been a tough few years, but Greek property prices are finally heading back up again as the economy gradually improves. Residential construction is also on the up, though it's still far lower than during the boom times of the early 2000s. New developments on Corfu, and Crete are going ahead, for instance, as well as new hotels and apartments on Mykonos and a marina on Santorini. That should help boost the market and provide a choice of new properties in a market that for some years has been mainly resale-only. So, part of Brits will definitely decide for moving to Greece or investing here. It’s mostly related to some retirees or families with small children, because career opportunities outside of the main European metropoles are limited. And prices shouldn’t go up dramatically, since it’s not the closest destination for Britons.

The one place that might feel Brexit effect is Central Athens, which is enjoying a bubble at the moment. Demand has been driven by foreign investment buying, with domestic buyers sidelined owing to lack of affordability. You won't find much below €250,000 in the centre, and yields have taken a dive. There are better places to invest.

By the way, Greece, like Portugal, offers a golden visa scheme for an investment of €250,000. Well worth considering if you want to reside there permanently or get an EU passport after 7 years.

But there's one market that's hardly ever mentioned. And that's odd, because unlike the rest of the EU, it gives British citizens a right to live and work here, and stay as long as they like, with no conditions. Even better, they speak English over there and you'll find many facets of the culture remarkably familiar.

Where else but Ireland?

True, Ireland has some disadvantages. The cost of living is 10% higher than in Britain, and the weather isn't any better. Plus, if you want to live in Dublin, you'll need to be flush with cash - even studio flats in the centre sell for €250,000, and a detached house will cost €1m. The market has stabilised after several years of speculative price increases, but many observers are still concerned that prices are higher than the economy will support. Besides, no one knows whether Brexit will result in London businesses moving jobs to Dublin, which would be good, or Dublin companies seeing their UK exports falter, which could hurt the local economy badly.

If you look outside the capital, prices aren't so bad. In many areas, you can buy land relatively cheaply and get a house built to suit your own style and budget - in West Cork, for instance, €50,000 would buy you the site and you might spend €100,000 or so on the build.

Look around Dingle, County Kerry and you can find apartments for less than €100,000; the town is full of art galleries and cafes, with a fishing harbour and access to the beaches, coves and hills of the Dingle Peninsula. That's a great place for a holiday or retirement home. Small cottages can sell for €130,000 or so, less if you're prepared to take on a fixer-upper.

And if you're planning to move to Ireland permanently, after 5 years you'll be able to apply for an Irish passport. That's one way round Brexit!

Wherever you're tempted to buy, though, you'll need to think carefully about currency movements. Brits have already seen their buying power cut by nearly a quarter since the Referendum, and any further decline in sterling could cut it even more. So you might see more Brits buying property in neighbor countries, but in some time the demand can get balanced. But let's look at it later, when we have more outcomes from Brexit.

Properties in Irish cities