REAL Exclusive Magazine Patricia Tan - Perspectives - International REAL Estate

What Does BREXIT Mean To Our Real Estate Market?

By Patricia Tan

I was born and raised in England and watched with interest as the United Kingdom decided its future – whether to remain in the European Union or leave and become autonomous again. While it was a very close vote, the majority of the British people did vote to exit the E.U. The exact details of BREXIT will be negotiated over the next two years, and its full impact will not be known for some time.

Many readers know that I make several trips each year to the United Kingdom, where I exhibit at international property shows and speak at seminars about buying real estate in Florida. As a result of these marketing efforts, I have helped many British citizens buy and sell homes here. In the weeks since the BREXIT vote I have had an opportunity to talk with many of our British customers and gauge their reaction as to how exiting the E.U. may impact their investment in Florida real estate.

Many British citizens purchase homes in Florida to enjoy during their vacations or retirement years. These buyers are still very active in the market. Some told me when they re-examined their plans in light of BREXIT, they asked themselves the question: “If not now, when?”. They still have a desire, or some would say a need, to enjoy a home in the sun, and many have decided to proceed with their plans to buy a home here in Florida.

The biggest concern for these so-called lifestyle buyers is the fall in the value of Sterling against the U.S. Dollar. The Pound is currently trading around 10% less than it was pre-BREXIT. This has caused some buyers to reduce their US$ budgets and look for lower priced homes.

Finding a value-priced home in a rising market can be a challenge. It may mean they buy a home that needs some updates, and many British buyers are prepared to put in renovation effort themselves – a very common approach when they buy property in their home country.

A value-priced home could be a home currently owned by a British citizen. British owners who purchased homes when the Pound was strong, and Florida home prices were low, stand to realize big gains if they sell their property now – not only from price appreciation, but also from the decline in Sterling. The weaker the Pound, the more money the seller makes when he repatriates funds back to England. Such sellers will be keen to secure a buyer while the Pound is weak and they may be open to accepting a lower offer on their property. A British buyer and a British seller can also agree that a property is paid for in Pounds rather than in U.S. Dollars, saving both parties bank fees in connection with currency exchange transactions.

To get more house for their money, British buyers may also be willing to compromise on location of the property. They may choose to buy the same size/quality home they had planned to, but perhaps the home is located a little further from the beach.

We are seeing that some buyers, even if they have cash available now, look to finance their purchases as a way to minimize the impact of a weaker Pound. They can put down a deposit of 30-35% and finance the remainder through an American mortgage. Once the Pound/Dollar exchange rate improves, buyers can repay the mortgage without penalty. This allows them to enjoy their place in the sun now, but minimizes the impact of a weaker Sterling.

Yes, we are seeing some British lifestyle buyers respond to BREXIT by reducing the price they are willing or able to pay for a home here, but they are still in the market.

It’s a different story however, for British investors. These are buyers of rental investment properties that they typically rent unfurnished on long leases. While these investors still like the high rental incomes they can achieve, they are concerned about their exit strategy and the need to repatriate funds to U.K. at what may be a much less favorable exchange rate when the time comes. The investor’s return from a rental property here has also been impacted by a recent change in U.K. tax regulations. Investors can no longer write-off mortgage interest on investment properties, further reducing rates of return.

There is, however, a school of thought that says BREXIT may actually increase the number of British citizens who buy homes in Florida. France, Spain and Portugal have long been favorite destinations for British retirees. Owning a home in another E.U. country, instead of Florida, has several advantages while U.K. remains a member of the E.U. British homeowners continue to benefit from free healthcare services while they are in their European homes, and they are afforded elements of fair property rights and tax treatment by governments in other E.U. countries. These benefits may no longer apply after BREXIT. This may “even the playing field” somewhat, and make Florida a more attractive location for Brits wishing to own homes here.

Now, if only we could offer British buyers full time residence here through a retirement visa and immigration reform, and if the Dollar would weaken, and Sterling would strengthen . . . . .

^[1]Patricia Tan was born in England, and her career in international sales and marketing led her to live and work in many countries around the world before moving to Sarasota in 1997. Patricia is a Certified International Property Specialist (CIPS), Graduate Realtor Institute (GRI), and Transnational Referral Certified (TRC). She is involved in global activities of the Sarasota, Florida and National Association of Realtors, and currently serves as NAR President’s Liaison to U.K. Her real estate business operates from Coldwell Banker on St Armands Key, where her focus is to bring international buyers to the local market. She regularly makes marketing trips to Canada, Asia and Europe, to promote Florida’s Gulf Coast and the Sarasota area in particular. Patricia may be reached at 941-504-9232 or Pat@PatriciaTan.com ^[2].

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