Five things you need to know about Brexit and residential property markets before 1 January 2021
The status of UK residents looking to live or purchase a residential property in the European Union (EU) changes on 1 January 2021 as the UK’s transition period comes to an end. Kate Everett-Allen explores some of the more pressing questions being asked by clients with second homes in the EU and those looking to relocate on a permanent basis.
6 minutes to read
1. Golden Visas: What will be the status of UK citizens from 1 January 2021?
As non-EU citizens, UK buyers will be permitted to apply for Golden Visa residency permits from 1 January 2021.
These initiatives, currently being offered by countries such as Portugal, Spain, Malta, Cyprus and Greece grant residency in return for a form of investment, either the purchase of a property, the creation of new jobs or the payment of a capital sum.
The visa also enables non-EU nationals to travel within the Schengen area which consists of 26 EU member state, for a maximum of 90 days in any 180-day period. The Golden Visa scheme can provide a route from temporary residency to permanent residency and ultimately citizenship.
2. Permanent moves: Will it be harder for UK nationals to relocate permanently to an EU country after 1 January 2021?
Yes. This could potentially be the biggest challenge for UK citizens after 1 January 2021 as the process will become more complicated.
For those that wish to purchase a home before this date there is still time but with the homebuying process taking 8-12 weeks on average the window is narrowing.
In the coming months reciprocal agreements are being finalised between the UK and EU countries. These agreements will allow UK nationals already living in EU countries to remain in their country of choice for five years after 1 January 2021 provided they register under a settlement scheme before this date. During this five-year period, UK nationals will be permitted to spend up to six months of every 12-month period outside their country of residence.
UK nationals looking to relocate permanently to an EU country after 1 January 2021 will be subject to the immigration rules of that country and can no longer exercise free movement.
UK nationals will need to apply for a visa, to demonstrate that they have the right to reside and work. Whilst a UK national doesn’t have to be a resident to purchase a home, on a practical level they will need a bank account and for that they will require a permanent address and therefore a visa.
For UK citizens with dual nationalities many have applied for a second passport since the Brexit referendum in 2016, enabling them to work and study in the EU post 1 January 2021. Ireland saw a record-breaking 900,000 passports issued in 2019, up more than 63,000 in 2018.
3. Second Homes: Will there be limits on the amount of time you can spend at your second home in the EU post-Brexit?
For UK citizens that own a second home in the European Union, the number of days they can visit will vary from country to country but it’s unlikely limits will be less than six months per annum.
For short-term visits, individuals travelling to the EU are likely to require an electronic travel authorisation (similar to an ESTA for the US) and they will need to obtain this before travelling. The final details for the ESTA have yet to be published but it’s likely it will be valid for a set period of time and will allow unlimited visits during this time, as long as they do not exceed six months in total.
According to Katie Good, an associate at immigration specialists Fragomen: 'Under the terms of the Brexit deal, each EU country can choose to honour existing registrations or require UK nationals to take some additional steps, so UK nationals should be familiar with the rules in the country where they live or own a second home. In reality, it means overhauling 27 immigration systems in a short period of time. Many countries have delayed announcements due to Covid-19 but each country should publish the finer details of their revised terms for visa applications by 1 January 2021. We expect to see more activity from Autumn 2020 onwards'.
For UK citizens with second homes in the EU there are suggestions that larger mortgage deposits will be required, and potentially higher taxes imposed on rental income for non-EU residents. The likelihood is this will form part of a wider post Covid-19 debate about how to balance much needed inward investment with revenue generation.
4. Moving to the UK: Are the rules around investment visas changing?
For non-UK nationals looking to move to the UK, the UK government has introduced its proposed visa changes and according to the latest White Paper and July’s updated policy paper, there are no plans to change the Tier 1 Investment Visa (the equivalent of Europe’s Golden Visa schemes). This means non-UK nationals can apply to settle after two years for an investment of £10 million, after three years for an investment of £5 million, and after five years for an investment of £2 million.
5. Currency: What impact will Brexit have on the pound?
For UK citizens looking to buy abroad in 2021, many are hoping that sterling will strengthen against the Euro post-Brexit to enable an overnight discount on their holiday home. However, this is more likely if a trade deal is agreed with the EU, making the UK a more attractive investment proposition and as a result boosting sterling. A no-deal Brexit could potentially see the pound reach almost parity with the Euro as it almost did in 2008 when it hit €1.02.
Capital Economics believes there is a 30% probability of the transition period ending without a trade deal, and in this case, it expects the pound will slump against the dollar and the euro to $1.15 and €1.00 respectively. However, the fortunes of the pound in the interim period will be closely tied to the ups and downs of the negotiations suggesting heightened volatility as we enter the final quarter of 2020.
Mark Harvey, Knight Frank’s Head of International Sales, offers some guidance and practical tips for those looking to buy a second home or relocate in the next few months.
- For those planning to relocate permanently from the UK to the EU - act now to complete your transaction ahead of 1 January 2021
- For those looking to take advantage of the Golden Visa route to residency in 2021, research your market and be aware rules and thresholds for investment can change
- If you have dual nationality and qualify for a second passport it is worth applying as soon as possible
- Keep a close eye on currency markets in the next few months given we expect heightened volatility
- Do your research on your chosen market and don’t overlook the importance of good legal and tax advice
To discuss any property requirement you may have in Europe, the UK or globally do get in touch, we’d be happy to help.