On December 31, 2020 everything changed for the United Kingdom and its economic ties with the European Union. The Brexit has left along the way a series of inconveniences for the British and their ties with Spain, and among them is residential investment. There are areas in Spain where in order to acquire a real estate asset or land, permission from the Ministry of Defense is required. These areas are the so-called military protection zones, and from now on, the British who want to buy a property in a location affected by this classification will have to carry out a series of procedures that will lengthen the whole process. In idealista/news we have talked to experts on this issue to find out how it may affect the real estate business.
According to Eduardo Crisenti, director of Barnes Madrid, “in certain areas of Spain, due to the special importance of national defense, authorization from the Ministry of Defense is required to buy a house or property, provided that the buyer is a non-EU citizen or even a Spanish company whose majority share capital (over 50%) is owned by non-EU companies or individuals”.
Among the areas affected, and with a strategic interest, would be Cartagena, the Strait of Gibraltar, the Bay of Cadiz, the border with Portugal, some areas of Torrevieja and Orihuela, part of the Galician coast, insular territories and territories of North Africa (such as Ceuta and Melilla). This is regulated in Law 8/1975 and its implementing Regulation 689/1978, which, despite its age, is still in force today.
“The problem of the additional requirements that the British are going to have for the purchase in military zone is very serious. Specifically, where it will have more impact is in the area of Torrevieja and Orihuela Costa, where the British buyer has always been the largest volume, even at this time. It also affects from the Guadiaro River to Sanlúcar, in the area of Sotogrande (Cádiz)”, explains Alfredo Millá, CEO of Sonneil, a Spanish ‘proptech’ specialized in the commercialization of second homes for national and foreign clients.
According to Millá, “the documentation has to be sent to Barcelona. Until Brexit, the response to the presentation of purchase applications took a couple of months, mainly from Russians, who are non-EU citizens. But Russians account for only 3% of purchases in Spain according to the Statistics of the Association of Registrars. Now with the incorporation of the British, who are 14% of the purchases in Spain (being at its lowest historical figure) will generate a very significant increase in the delay. This is going to affect the incentive to buy (and sell), therefore, the liquidity of the market, and the closing terms in the deeds of the properties. That is, time and money,” says Millá, who adds that he does not believe that “it makes sense to maintain this law, which dates back to 1978,” since “no one is going to buy a home for work that could endanger national security”.
The luxury real estate company Engel&Völkers, for its part, is already warning its non-EU clients about the permit. “We communicate to them that they need to spend enough time on their planning so that they start the application process as soon as possible. The most prudent thing to do is to do it with a lawyer specialized in urban planning issues to ensure that they have all the correct information when they do the permit process,” explains Hans Lenz, general manager of E&V Mallorca Suroeste and director of ABINI (Asociación Balear Inmobiliaria Inmobiliaria Nacional e Internacional).
As for the forecasts on the negative impact of this procedure on Spanish residential property, Lenz believes that “it is too early to say if there will be a negative impact”. “We believe that if the British investor wants to buy his dream home in the countryside, this permit would be a part of the overall process and all he has to do is to take it into account before making a final decision. Surely this matter will be regulated in bilateral agreements between Spain and the UK shortly as it must have been left pending in the last minute closing of the Brexit deal. The UK is too important a market for this aspect to be ignored.